Monday, October 15, 2018
A lot of back and forth today but when we closed the Dow was off 89 points on light volume. The advance/declines were positive. The summation index continues lower and is through the zero line. The overall market was weaker than the Dow but RUT did close higher. I thought about trades both ways today but I think that the wise thing to do here would be to let this expiration week pass and go from there. Volatility was less today and the short term technical indicators here have rolled over. But that doesn't mean we couldn't see a spike at some point this week and a drop in prices. I'll try not to attempt a trade this week unless there is a valid signal. At this rate I doubt we'll get one. GE was off over 1/8 as volume contracted but is still above average. Gold added eight bucks on the futures as the US dollar was slightly lower. The XAU rose 1 1/8, while GDX gained 1/3. Volume was good. The daily GDX chart shows a valid head and shoulders bottom with a breakout. If we wander back to the neckline at 19, that would be the spot to try the GDX calls. I'm keeping an eye on it as that could be the next trade. Mentally I'm feeling OK. Completely oversold on the short term technical indicators for most of the major averages. That doesn't mean that we can't stay that way as the chart of RUT proves that. But I have to believe that we're getting to some kind of washout point here within the next few days. Look for heavy volume and you'll know that we're there. I do think that we'll be choppy now for a while as big breaks usually work out that way. I'm not looking for any new all time highs. What we are seeing now could be a repeat of a week ago when the market sold off a bit but did not bounce. If so we'll soon see lower prices and perhaps a completion of the five wave down pattern that appears to be forming on the S&P 500. If that is the case a look at the calls before the end of the week could be in order. But we haven't figured out anything just yet. As always, the market will go where it wants. Asia sold off again and Europe was slightly higher. We'll keep an eye on the overnight trading.
Friday, October 12, 2018
Finally some upside to finish out the week as the Dow rose 287 points on good volume. The advance/declines were positive. The summation index is still moving down and through the zero line. The overall market was stronger than the Dow and that is a plus. But the breadth remains weak and I don't think we are out of the woods just yet. I canceled my open order for the SPY October calls. With only a week to go any trade here would be very risky as time and the volatility premium will be sucked out on both sides of the options. That doesn't mean that I won't attempt a trade next week. It does mean that if I do it will have to be lined up pretty good. The VIX looks like it has topped out here in the short term. Of course it looked like that three days ago as well. RUT may have put in a bottom today and if that is the case we'll stop the decline for now. But we'll have to see how it goes in the beginning of next week too. GE dropped 3/8 and the volume remains very heavy. Gold dropped six bucks as the US dollar was a bit higher. The XAU and GDX had slight fractional losses on good volume. They did finish well off of the lows for the session. Mentally I'm feeling OK. Quite a week for stocks and missing the SPY puts here was painful. But the truth of the matter is the market doesn't care and keeps on going. The bounce today was weak and I would not be surprised to see another leg down to complete a five wave pattern for the S&P 500 hourly chart. But that's a guess as usual. Maybe somewhere in the 2675 area. What I don't expect is a run back up to new all time highs anytime soon. Probably the best course of action here will be to wait for a valid signal and trade it either way. Looking back when the market has behaved like this in the recent past, shows a sideways trading pattern for at least a few months. That is probably what we can expect here. We are beginning a positive seasonal area for the stock market but you wouldn't know that looking at the past week. Plenty to ponder over the weekend. Asia was higher and Europe mixed overnight. It's Friday afternoon and time for a rest.
Thursday, October 11, 2018
No buyers just yet as the Dow fell 545 points on heavy volume. The advance/declines were about 4 to 1 negative. The summation index is driving down lower and we are about to pass through the zero line, hence the falling apart. The S&P 500 has now closed below its 200 day moving average. RUT continues to drop below its 200 day so the selling probably isn't completely done yet. Oversold, staying that way and that is about all you can say. I did try the SPY October calls today but my order wasn't filled and I could be early as well. This is a very risky trade at this point because we are heading straight down. I do see that the futures are coming back after the close though. I did leave in an open order for some of the SPY October calls but I'll consider what to do here overnight. A bounce is way overdue but I don't expect any long lasting rally at this point. We are as oversold as we've been since the drop in the beginning of the year. GE was off 1/2 on very heavy volume. Gold got the flight to safety today as the futures climbed over $30. The XAU jumped 4 1/2, while GDX added 1 1/4. Volume was extremely heavy. Looks like another missed trade here. Mentally I'm feeling OK. Both big and small caps are now below their 200 day moving averages. RUT has led the way here folks and it is far below its 200 day. There will be more downside in the weeks to come at this rate. However the extreme oversold short term condition should lend its way for a profitable call trade before expiration. The problem here will be the timing, which will have to spot on. This trade may be too late as well, with the positive futures after the bell. But we are overdone to the downside in my opinion. Crazy week so far and we just have to get through Friday now. Asia and Europe got crushed as well overnight. We'll close out the week tomorrow.
Wednesday, October 10, 2018
The market fell apart today as the Dow got clobbered and lost 831 points on heavy volume. The advance/declines were about 8 to 1 negative. The summation index is falling rapidly. We are approaching the zero line in the summation index and that is the crash zone. It appears like we're already there after today price action. Oversold and staying there as the market has no buyers. RUT is well below its 200 day moving average and has led us lower. The TRAN sliced through its 200 day moving average as well. I tried to get the SPY October puts but failed. In retrospect, I should have just gotten some on the first drop last week but just wasn't quick enough again. Of course I did not expect the drop to occur so quickly this week. We never did get a bounce back to get short. I'm now looking at the SPY October calls for a bounce as we are way overdone to the downside. This could simply be a catch the falling knife attempt but some of the technical indicators are so blown out that the market has to find a bit of relief. I think that weakness tomorrow can be bought but I'm not exactly sure from what level. The S&P 500 is at the near term support right now. Of course staying on the sidelines is a choice here as well. GE was off 1/4 and the volume was heavy. Gold was up a few bucks on the futures as the US dollar was a bit lower. Not a real flight to safety here yet. The XAU and GDX had slight fractional gains on good volume. I'm still considering the GDX January calls if and when it gets oversold on a daily basis. Mentally I'm feeling frustrated as I waited for this decline to take shape yet do not own any SPY puts. However I do feel now that we are in a sell the rally market. I also think that the original thesis of the bull market being over with the A-B-C-D-E rally from the 2009 lows is now in place. RUT has broken its up trend line from the 2016 lows and the S&P 500 did the same today. The TRAN as well. We'll have to see where we close out the week on those but if the RUT is already far away from that line, the others should follow. The Dow has yet to break that up trend from 2016. Today did seem like a panic though, so a bounce could be in the offing soon. Whether or not I give the calls a try is the question. So we've entered a crazy time in October again. It's usually a good buying opportunity longer term. But we can't say where the ultimate low will be just yet. If the bull market is over, buying here won't matter because there will be lower prices coming down the road. The volume today was about 10 to 1 negative and that could be a blow off to the downside in the short term. We'll have to see how the market opens tomorrow and go from there. The 200 day moving average for the SPY comes in at 274. That would be a spot to try the SPY October calls if you so desire. I may take a shot there myself. We'll see. Overseas market were weak. The trading tonight could get ugly. We'll see what tomorrow brings.
Tuesday, October 09, 2018
Still waiting for a bounce as the Dow fell 56 points on average volume. the advance/declines were slightly negative. The summation index continues lower. Oversold now and staying there as the market has a definite lack of buyers. The NASDAQ did manage to eek out a small gain but it wasn't anything the bulls can be proud of. The VIX had another spike and retreat. This indicator looks like it will head back down and that could produce a bounce or rally if it occurs. Hasn't happened yet. I did adjust my open order for the SPY October puts. But as I said before this may simply be another missed trade. I'm still looking for some kind of short term upside but it isn't happening yet. GE lost a few cents on heavy volume. Gold rose almost $5 on the futures as the US dollar finished little changed. The XAU lost a point and GDX fell 1/3. Volume was average. Mentally I'm feeling OK. So where do we go from here? Weakness has taken over for sure. But we are short term oversold and due for some upside. The question is will that be the chance to get short or will it be the beginning of a new up trend? The correct answer to that question will bring profits. I'm leaving in my open order for the SPY October puts as time winds down in the October option cycle. RUT is trying to hold on to its 200 day moving average and what happens there will be telling. I'm expecting at least a bounce here as well. Asia was mixed and Europe lower overnight. We'll see if we get some bounce tomorrow.
Monday, October 08, 2018
It was a one day reversal to the upside as the Dow opened lower and closed higher. The most watched index gained 40 points on light volume. The advance/declines were even. The summation index continues lower. The overall market was weaker than the Dow with the small stocks heading lower by far. I'm still interested in getting some SPY October puts on a snap back rally. But the timing will have to be spot on. Today feels like some kind of at least short term bottom in my view. The VIX spiked up above 18, where past declines have stopped in the past few months. If we do see some upside tomorrow, perhaps Wednesday will be the day to try the puts. The bond market was closed today so we'll have to see what happens tomorrow. The S&P 500 is trying to hold at the 50 day moving average and the short term technical indicators are trying to turn back up. RUT is holding on to its 200 day moving average for now as well. The question here being is this the end of the decline or simply a spot for a dead cat bounce? I'm guessing it's the latter. But the market will go where it wants and could continue to decline tomorrow. GE has had quite a turnaround and was up 3/8 on very heavy volume. Gold dropped over a dozen on the futures as the US dollar was a bit higher. The XAU and GDX had slight fractional gains after being lower much of the session. Volume was average. The gold shares have shown good relative strength vs. gold lately and that is a plus for the precious metal bulls. Mentally I'm feeling OK. So here we are with today possibly being the opportunity to try the SPY calls for a bounce trade. It is simply too late now to attempt this idea. Because if it is just a bounce, it won't last long. That is what I'm counting on with respect to attempting the SPY October puts. If we rally from here into sometime on Wednesday, I will try the SPY put trade. If not it will be back to the drawing board. I am of the belief that the market will run lower into the expiration a week from Friday but not without some upside first. If that is correct we should see some positive prices action in the indices tomorrow. If not, all bets are off. Obviously the ideal time for the SPY puts has passed. But that doesn't mean a profitable trade there can't happen with good timing from here. We'll just have to see where the market goes from here. One drawback is that time is not as plentiful as it was for the October option cycle. Europe and Asia were lower overnight. We'll look for some upside in US equities tomorrow.
Friday, October 05, 2018
Still to the downside as the market is oversold and staying there. The Dow fell 180 points on about average volume. The advance/declines were 2 to 1 negative. The summation index is heading lower. The McClellan oscillator should be in the minus 200 level or so. A bounce is due. I would use that bounce to establish a short position as I believe that we are not done with the selling by any means. The S&P 500 did hold on to its 50 day moving average but the short term technical indicators are not completely oversold yet. The RUT bounced off of its 200 day moving average and is very oversold. Could things hold up here? Perhaps but I don't think so. What I'd look for is a rally next week out of nowhere of about 200 points on the Dow. Rallies from nowhere are hallmarks of a down trend. Such a rally would give you a chance to purchase some index puts for the next move lower. If the rally lasted more than a couple of days you would know that the scenario wouldn't work. I'll be looking for such a rally. GE bucked the tend again and gained 1/2 on very heavy volume. Gold rose $5 on the futures as the US dollar was a bit lower. The XAU and GDX again had slight fractional losses on light volume. Mentally I'm feeling OK. The jobs report was a bit weaker than expected but it wasn't the market mover I thought it would be. We just hung around after today open and then started to fall. The market did come off of its worst levels but the trend is clearly down. The Dow was off 325 points intra-day. The NASDAQ has broken below its 50 day moving average as well. This is a move worth chasing in my humble opinion. My work has been off here lately but I'm a firm believer that we'll most likely see lower prices going into the expiration in two weeks. The trick will be to find a quick rally to establish a short position. The market doesn't usually cooperate and it may not this time as well. We could simply keep dropping. If that is the case we'll simply have to change direction and look for a spot to get long. But we certainly aren't there yet. Plenty to ponder over the weekend. Europe and the Asian market that were open closed lower. It's Friday afternoon and time for a break.