Friday, February 17, 2017
The beat goes on as the Dow rose 4 points on about average volume. The advance/declines were negative. The overall market was stronger than the Dow. The summation index is still trending higher. Quite a week we just saw as the market is severely overbought and needs to take some kind of break in my opinion. The breadth on the rise hasn't been good and I really do not think that this levitation has much more room on the upside for now. Some type of consolidation or decline is way overdue. I'll wait for the next signal before entering the next trade. A negative divergence at some point would be the ideal scenario. GE was off a few cents on lighter volume. Gold was off around $5 on the futures as the US dollar bounced back. The XAU lost 1 7/8, while GDX shed 3/8. Volume was a little less than average. Mentally I'm feeling OK. A losing trade this week with mistakes both getting in and getting out. Not much money lost but the mental capital decline is always more important. I suppose that perhaps I'll just stay away from the short term trades for now. Looking back on the radar, there is no denying that this has been quite a nice move higher in the past couple of weeks. The market was able to run up all the way to the end of expiration week. There were no sellers. The problem for the bulls going forward is the extreme overbought nature of things today and the poor breadth that accompanied this move higher. That doesn't mean that we can't go a bit higher in the near term. However a repeat of the roughly 500 or so point move in the Dow for the past week and a half probably won't be repeated. I'll be looking at the SPY March puts at some point in the coming days. Money is flowing into US assets though as the major foreign markets have yet to break out above their near term resistance. Asia was lower overnight and Europe mixed. A long holiday weekend is upon us and that will give me plenty of time to come up with some type of game plan for the next trade. For now it's Friday afternoon and time for a break.
Thursday, February 16, 2017
A pause in the run up as the Dow gained 7 points today on average volume. The advance/declines were negative. The overall market was weaker than the Dow. The summation index is still moving up. We were negative for much of the session. I sold my SPY February puts for a 65% loss. My exit today was horrible as well. I could have cut the loss at least in half had I better tactics. But it was not to be as this trade was a disaster from the beginning. A day early on the entry and it never recovered. The short term trades are just not in my wheel house so it seems. We're still very overbought any way you look at it and some decline or consolidation is in order. I'll be looking out to the March option cycle. GE was up a dime and the volume was light. Another missed trade here for me. Gold added $7 on the futures as the US dollar was lower today. The XAU rose a point and GDX gained 1/4 on light volume. Mentally I'm feeling disappointed after another losing trade. Nobody to blame but myself there as the risk was pretty high due to the lack of time remaining. I should have just passed. Once again I think that leaving all the money on the table in the previous trade influenced what I did there. You can't let that happen in the game. But you move on. The next trade in my mind will be the SPY puts again but the timing will have to be spot on. Perhaps waiting for a negative divergence in the indicators would be the best idea for now. We have had quite a straight line up and that will not last. It should end sooner rather than later. Asia was mixed and Europe lower last night. We'll close out the week tomorrow.
Wednesday, February 15, 2017
Overbought to the extreme at this point as the Dow climbed 107 points on good volume. The advance/declines were positive. The summation index continues higher. The positive expiration week bias is in full effect and there is still no overhead resistance as we continue to hit new all time highs day after day. My SPY February puts are losers and I'll be lucky to get out tomorrow without any further damage. This was a trade that in retrospect was best let undone. Not a lot of money but not a low risk trade either. We are powering ahead like a freight train and you should not try and step in front of that. There will be better opportunities down the road. Selling the SPY calls too early was my biggest mistake though. GE was up a few cents on lighter volume. Gold rose $8 on the futures as the US dollar was lower. The XAU was off 7/8, with GDX unchanged. Volume was very light. Not a positive for gold to rise and the gold shares lag. Mentally I'm feeling a bit tired. The market continues to soar as the shorts get squeezed and there are no sellers. This should continue into Friday I expect. After that I would think that things would settle down as the breadth on the rise hasn't been good at all. You cannot argue with price though. Taking a losing trade here will not help my confidence level but the trading will go on. Perhaps I should simply forget about the short term trades since they really are not what I'm successful with. I think that my wrong tactics on the SPY February call trade contributed to me trying this other SPY put trade. The battle in this game seems to always be with oneself. As I've said before the markets can be irrational longer than most can remain solvent. 2 days left in the February option cycle and a long weekend on the way as well. Europe and Asia were higher overnight. However none can match the gains in the US stock market lately. We'll probably continue the overbought ride higher tomorrow.
Tuesday, February 14, 2017
The rally moves on as the Dow gained 92 points on about average volume. The advance/declines were slightly positive. The summation index is moving up. Overbought, staying that way and no overhead resistance. We also closed on the high of the session and that's bullish. I did buy some SPY February puts today and they are already in the red. I may be a day early on this trade but there isn't any room for error with only 3 days to go in the February option cycle. So we'll see what happens. We'll get plenty of economic data to trade off of tomorrow. Yellen spoke today and the market shrugged. GE was up 1/4 and the volume was good. We now have GE and the market moving in tandem and that is a positive as well. Gold was up a few bucks on the futures and the US dollar was a bit higher as well. The XAU and GDX had slight fractional losses on average volume. Mentally I'm feeling OK. There appears to be no stopping this market as we are setting new all time highs session after session. Why try the SPY puts here then? I am getting a signal to get short here. I do not think that it is the beginning of a huge move down but the indicators do say that we'll see something to the downside and soon. I'm trying not to be subjective and taking the signals as they come. I do think that perhaps I want to put on another trade after selling out the SPY February calls way too soon. That is my risk here. There is not a lot of money in this trade so to me it was worth taking a shot. You should go with the signals when they occur but yes, you can use your own discretion. It would not be a surprise if we're higher tomorrow but this certainly won't last in a straight line up much longer. Enjoy the ride if you're long. Asia was lower and Europe mixed last night. The moves were slight. We'll see how things go tomorrow.
Monday, February 13, 2017
Powering higher to begin expiration week as the Dow was up 142 points on lighter volume. The advance/declines were positive. The summation index is moving higher. Overbought on all time frames now and the next logical trade would be the SPY puts. The timing is the issue as usual because things can stay overbought for quite a while. That is the dilemma we face at the moment. My thinking is that the SPY February puts will be a winning trade at some point this week. Trying to determine when will be the task. GE was up 1/3 on good volume and it appears that the call trade here has been missed. Maybe we could try it if we get a retest of the recent low. But I think the opportune time has passed. Gold fell $10 on the futures as the US dollar was a bit higher. The XAU and GDX had fractional losses on light volume. Mentally I'm feeling OK. Stocks are in rally mode as there is no overhead resistance. The questions that remain is just how high will they go and how long can this last. Usually higher and longer than you think. Only 4 days to go in the February option cycle but I do think that pursuing an option trade on the put side will work at some point this week. Every time frame is overextended to the upside for the S&P. I may leave an open order in overnight. This would be an extremely short term trade and that is usually not my best scenario. Not to mention that I just left an awful lot of money on the table with my last trade. I have got to make sure that the SPY February put trade is actually worth taking the risk and not just something to try and get back the missed money. I don't expect the market to just turn around and start to head convincingly lower but I do expect some kind of short term weakness going forward. Could we just keep moving higher for the remainder of the week? We could but the odds suggest something lower at some point this week. Europe and Asia were higher in overnight trade. We'll see what tomorrow brings.
Friday, February 10, 2017
Continuing higher to finish the trading week as the Dow added 96 points on about average volume. The advance/declines were better than 2 to 1 positive. The summation index is moving higher. Short term overbought remains the condition for the Dow and the S&P. Looking back it would have been better for me to let the SPY February call trade go another day. That is money left on the table. Expiration week is upon us and the usual positive bias could be in effect since there really is no overhead resistance here. However we are due for some type of pause and I'll consider the SPY February puts for a short term trade on Monday. GE was up 1/8 on light volume. I'll also considering the March calls here but this issue has been a laggard lately. Gold was off a couple bucks on the futures. The US dollar was a bit higher today. The XAU rose 1 3/8, while GDX added 3/8. Volume was average. The gold shares have moved higher since the middle of December but there doesn't seem to be any conviction to the move in my opinion. Mentally I'm feeling OK. Kicking myself for not holding on to the SPY call trade another day will get me nowhere. There was a case to be made for hanging on another day but I took the profit instead. Holding on could have doubled the gain if the exit was right today. The thing about this game is that you've got to keep moving on regardless. With a week to go in the February option cycle, any trade from here will have even more risk than usual. The case can be made for some weakness early next week. However we've seen in the past that the market can remain overbought for quite some time. If the usual positive expiration bias shows up next week, the extended overbought condition will remain. I'll have to check the technicals over the weekend and decide from there. Timing. as usual, will be the key. Europe and Asia were positive overnight. It's Friday afternoon and time for a break.
Thursday, February 09, 2017
Finally the breakout to the upside that we've been waiting for as the Dow rose 118 points on average volume. The advance/declines were just shy of 2 to 1 positive. This should turn the summation index back up. I do think that we could see another day of upside but I had to simply sell my position in the SPY February calls today. I did not want to take the risk of a down open in the morning and then lose some of the todays profit. My exit wasn't great but the trade did manage a 55% gain. We did come off of the highs for the session in the final hour. I'm still overall positive on things here but we may have to see some downside first before moving higher again. GE was up over 1/8 on light volume. Gold lost $7 on the futures as the US dollar was stronger on the day. The XAU lost 2 3/4, while GDX shed 2/3. Volume was good. The gold shares are due for a rest. Mentally I'm feeling OK. It was nice to see the work pay off today but I do think that perhaps I could have held on for another day. We're still short term overbought on the technical indicators for the S&P 500. I think that if we can get the RUT and NYA to break through resistance that this thing could have legs. But it hasn't happened yet. I expect some weakness in the coming days and I do not know if there will be another set up before expiration. I am still of the thought that the market will be moving higher in the medium term. Europe and Asia were higher overnight. We'll close out the week tomorrow.