Thursday, May 25, 2017
The rally continues as the Dow climbed 70 points on average volume. The advance/declines were slightly positive. The summation index is still moving up. The overall market was stronger than the Dow. We've broken through the resistance on the S&P 500. There appears to be nowhere to go but up. I did place an order for the SPY June puts today but canceled it later on. However I also decided to leave in an open order overnight for the SPY June puts as well. We're short term overbought here but could stay that way because we are in rally mode. I do however, want to attempt this trade. The overnight order will only be filled if we get a decent rally tomorrow morning. Now this could absolutely be the wrong strategy here but I think it is worth a shot. GE dropped another 1/3 and the volume was good. GE certainly has not participated in the rally since the election. Gold was up a couple bucks and the US dollar was a bit higher as well. The XAU and GDX had fractional losses on light volume. Mentally I'm feeling OK. We'll get the GDP revision tomorrow along with durable goods. It's a Friday before a holiday weekend. I'm thinking that the players will be leaving early. We do have some major stock indices at new all time highs with some potential negative RSI divergences. They are only potential though. I'm not sure that the SPY June put idea is the best thing to do here but I will be sure to put the stop loss order in if it gets filled. Early next week could be another time to try this trade if it doesn't get filled tomorrow. I do have a sell signal on one of my short term indicators. However these signals can be unreliable in up trends. RUT is under performing here and that could be a clue. It did lead the way up but has since stalled. Perhaps I'm only looking at the indicators that would make the put trade seem feasible. Certainly a case can be made that we'll simply continue to rally from here. The theory that we sold out last Wednesday on the Trump headline has proven to be valid so far. So maybe my idea here is wrong. We'll see what happens tomorrow and go from there. Asia was higher and Europe mixed overnight. We'll finish up the trading week tomorrow.
Wednesday, May 24, 2017
It's as if last Wednesday never happened as the Dow gained 74 points on light volume. The advance/declines were positive. The summation index is heading up. The S&P 500 closed at a record high. The small stocks are acting OK but the RUT is lagging. We're back to short term overbought for the major stock indices. I did place an order for the SPY June puts but it wasn't filled. I may be early on this trade but could try again tomorrow. The volume here is light, so I do not really trust the rise. However if we break out tomorrow with good volume, the rally could be on. GE continues to struggle as it lost almost 1/2 today on heavy volume. Gold did find a bid after the Fed minutes but the futures only rose a couple bucks. The US dollar was lower. The XAU gained a point and GDX added 1/3. Volume was average. Mentally I'm feeling OK. I'm looking for the next trade here but certainly there is no rush. Both short and medium term overbought but in bull markets we simply stay that way. We've also got a holiday week coming up so I may want to let that go by as well. That said, if I see another light volume levitation tomorrow I may do the trade. We're at the top of the sideways channel that's 3 1/2 months old. The VIX has now calmed back down and is almost back under 10 again. It's also possible that I want to put on a trade since I haven't done one in so long. That must be guarded against at all costs. I have my reasons for trying the SPY puts here but I could be wrong as well. The way the market came right back after dropping hard last week tells me there are still buyers out there. I'll reconsider things overnight and go from there. Asia was higher and Europe lower overnight but both had small moves. We'll keep an eye on what transpires in overseas trading tonight.
Tuesday, May 23, 2017
Up another 43 points today for the Dow on light volume. The advance/declines were positive. The summation index is heading back up but not with any conviction just yet. Approaching new all time highs again for some of the major stock indices. However the volume here is light and that is a concern. The small stocks were under performers again and that is another problem. I've been bullish for quite a while but that is beginning to change. If we do continue higher for the next couple of days on light volume, I'll be looking for the SPY June puts. GE was up a dime and the volume was light. Gold was lower as the US dollar got a bounce. The precious metal futures lost $10. The XAU shed 2 1/3, while GDX lost 1/2. Volume was average. I'm still considering a gold share call trade with an extended time period in the coming weeks. However for now I have to wait for an oversold condition and we are not close to that yet. Perhaps in June. Mentally I'm feeling OK. Nothing but higher prices since the Trump debacle of last week. It is appearing to be a one day wonder but the upside volume seems to be drying up to me. Who knows? Maybe we'll get the high volume breakout that I've been looking for. The problem for me is I do not see where that would come from. We've got the Fed minutes tomorrow and the GDP revision on Friday. Will that be enough to move us forward in a big way? I don't think so. The S&P 500 has been sideways since mid-February. It looks like a distribution top to me now, since it has taken so long to form and really nothing has happened to break prices higher. The market has ignored a lot of bad news. But unless price bursts higher soon, I'll be looking to get some puts. June is not the kindest month for stocks either. Asia was mixed and Europe generally higher overnight despite yet another terrorist attack in England. We'll see what tomorrow brings.
Monday, May 22, 2017
The bounce from last Wednesdays debacle continues as the Dow gained 90 points on light volume. The advance/declines were 2 to 1 positive. This should turn the summation index back up. The overall market was stronger than the Dow and that's a plus. The small stocks acted better too. I looked for some ideas all weekend but came up empty. I'm waiting for the next technical signal now and will trade it either way. If we approach the resistance again on light volume, I'll look towards the SPY June puts. If we pull back from here and get oversold, I'll try the SPY June calls. Patience is the idea for now and it isn't a bad one since we just rolled into the June option cycle. GE was up 1/8 and the volume was light. Gold rose six bucks on the futures as the US dollar was lower. The XAU gained a point and GDX added 1/3. Volume was light. I'm also considering some gold share calls in the coming weeks but with the expiration in the fall. Septembers or Octobers are what I'm looking at if they get oversold in the coming weeks. Just a thought for now. Mentally I'm feeling OK. Volume continues to lighten as we move higher and that is not a positive. However the price action since the huge one day drop is. Perhaps if we back off from here and retest the low it will give me a chance to get some SPY June calls. But even that scenario could go wrong if we don't get oversold as well. I will say that we've had plenty of chances to break out higher through the overhead resistance and continue to fail. That's not a good sign. A breakout with volume will be the clue to buy some SPY calls because there won't be any overhead resistance. But we haven't been able to get there yet. Asia was higher and Europe generally lower in last nights trade. We'll keep an eye on the overnight developments.
Friday, May 19, 2017
Still moving up but we did finish off of the highs for the day. The Dow gained 141 points on good volume. The advance/declines were 3 to 1 positive. That should stop the decline in the summation index. The small stocks are not out performing here and that is a concern. They are however, oversold. Not sure what we've seen this week as I thought that we have a distribution top in place after Wednesdays debacle. But when the market goes down it simply goes down. It doesn't really rally like it has in the past two days. The problem there is that it simply could be expiration related and not the start of a new trend higher. So many questions and so few answers. GE finally came to life. It gained more than 1/2 on good volume. Gold was up a couple bucks on the futures which was disappointing considering the drop today in the US dollar. The XAU and GDX had fractional gains on light volume. Mentally I'm feeling OK. Quite a volatile weeks for stocks as we were shaken out of complacency, courtesy of Trump. Perhaps the worst is over for now but you never know when another surprise in the headlines might come up. Some will argue that it's always the case but I do think the odds go up when you've got a guy like Trump to deal with. The market did ignore most of the noise up until this week. As always, the market knows more than you and me. Sticking with the technical indicators for the S&P, they've already turned back up. One of the problems now is that by rolling into the June option cycle the premiums are already pretty high. Add in the recent volatility and prices are more than they normally would be. So any trade here had better be right because volatility premium will be coming out of the options as we move forward. I'm now more inclined to believe that Wednesday was an aberration. However I will spend the weekend trying to determine where we go from here and how to trade it. There's no rush to trade. I do think that the lack of small stock leadership puts a lid on any upside going out from here. I could be wrong and I'll have a couple of days to assess the situation before moving ahead. There's plenty of work to do. For now it's Friday afternoon and time for a rest.
Thursday, May 18, 2017
Got a bounce today as the Dow came back 56 points on good volume. The advance/declines were barely positive. The summation index is heading lower. Not the greatest move up in the world but at least we've stopped going down. There's probably more to go on the downside but how much is the question. Yesterday certainly got the attention of all the players so we'll see where we go from here. Getting short term oversold for the S&P 500 but not there yet. I think the best thing to do now is let Friday pass and try and figure out what to do over the weekend. That way you can take the time to go over possible scenarios and be ready for next week. GE was up a few cents on heavy volume. If GE is putting in a bottom here, that would be a positive for the overall picture in my view. Gold was off over ten bucks on the futures as the US dollar had a bounce as well. The XAU lost 2 1/4, while GDX shed 3/4. Volume was good. That's probably it for the recent bounce in gold. Mentally I'm feeling OK. The shock from yesterday is wearing off but we are still in an event driven theme for the market until this calms down. The thing with Trump is that he never really does calm down but the market usually doesn't pay attention. So we'll have to see if all the fuss is for real or not. I'm still thinking that we just had a distribution top put in and it will be a while before we attempt new all time highs again. But maybe I'm wrong. Maybe this is the last of the sellers getting out of the way before we get a good volume break out to the upside. There's always two sides to the story but I'm leaning towards the negative one at this point. So we'll see. Europe and Asia were both lower overnight. We'll close out the week tomorrow.
Wednesday, May 17, 2017
Well that should be it for new all time highs for a while as the Dow got clobbered today on Trump drama. The most watched index fell 372 points on good volume. The advance/declines were almost 4 to 1 negative. The summation index will be heading down. We're now at the mercy of headline risk and that is a tough environment to trade. I'm not sure how low we'll go here but this probably isn't just a one day wonder. I could be wrong. It now appears that we just had a multi-month distribution and are falling away from that. If so, support looks to come in for the S&P at 2330 and then 2280. Trump has been in the headlines since the election but this is the first time he's had a real negative influence. GE lost almost 2/3 on heavy volume. Perhaps GE had the right idea all along. Look for at least some support at 26 which is the 200 day moving average. Gold found a bid on safe haven activity. The precious metal futures rose $24. The dollar continues to fall due to the uncertainty now in Washington. The XAU and GDX had fractional gains on OK volume but the gains were not that great considering the circumstances. Mentally I'm feeling OK. Volatility returned today with a vengeance. How long this lasts is unknown. It should provide some trading opportunities though. With only a couple of days left in the May option cycle, looking out to June makes sense. If and when we get to support, I'll take a look at the June SPY calls. But it really is too early to tell what will happen from here. The VIX is overbought here but not extremely so. Most of the short term indicators for the major stock indices have rolled over but are not oversold. That tells me that we probably have more downside to go. Tomorrow should be interesting as well. We practically closed on the low for today. I'd advise to simply sit back and watch for the rest of this week. Europe and Asia were lower overnight but not as much as the US. We'll see how they fare overnight.