Monday, June 27, 2016
Downside follow through today as the Dow shed another 260 points on very heavy volume. The advance/declines were over 4 to 1 negative. The summation index is heading down. Not completely oversold on the daily technical indicators for the S&P 500 but just about. There is some support at the 1950 level and more at 1850. I suppose you could try and play a bounce at those levels or simply wait for a bounce and then try some puts. Premiums are elevated and they move fast in a market like this. There will be opportunities but taking advantage of them is another matter. The VIX was lower today despite a huge drop and I have no explanation for that. Perhaps because the decline was not as steep. But we're still heading down. GE was off 1/2 and the volume was heavy. We're at the 200 day moving average here. Gold was up $5 on the futures but was higher early. The US dollar had another good day. The haven trade is on. The XAU and GDX rose 1/3. Volume was a bit above average. In times like these everything gets sold to meet margin calls. Mentally I'm feeling OK. Still dealing with the fall out from the vote in England and I don't know when this will be fully priced in. The trend is down and we've dropped over 100 S&P points in 2 days. Treacherous times. I think the next trade will be to wait for some kind of bounce and then try the SPY July puts. When that bounce will come, I have no idea. Indices in Asia stopped dropping last night but that didn't mean anything in the US. European markets were clobbered again. I don't want to completely throw out the technical indicators but we're in an extreme event driven environment. The prudent thing to do is probably wait until we see some kind of washout. When that will happen, I have no idea. It could be sometime this week but it could take even longer. There is no point in trying to be a hero and pick the bottom. What I will be looking for though is a sharp short covering rally that comes out of nowhere. That is the opportunity that will give you a chance to try the SPY July puts. In downtrends like this these rallies spring up out of nowhere and just as quickly disappear. That will the trade that I am looking for. We'll keep an eye on the action overnight and see if we just keep dropping tomorrow.
Friday, June 24, 2016
Crash. That's about all I can say here as everything that was thought to be true yesterday wasn't. The market voted wrong for a change as England did decide to leave the European Union. This had repercussions around the world and a stock market bloodbath ensued. The technicals don't matter in a headline driven situation that we find ourselves in at the moment. The Dow got clobbered and lost 611 points on blowout heavy volume. The advance/declines were 5 to 1 negative. The is no underlying support in the S&P so it is hard to tell how low this thing will go. Usually it's a lot lower than you think. I'm on the sidelines but I do have some ideas. GE lost 1 1/3 on extremely heavy volume. Gold rallied along with the US dollar. The flight to safety trade that I thought was being taken off yesterday returned with a vengeance. The precious metal futures were up over $50, while the US dollar added more than 2 points. Incredible moves in one day. The XAU rose 3 1/3 and GDX climbed 1 1/2. Volume was heavy. The gold shares are trying to break out of their trading range. Another day like today should do it. Mentally I'm feeling OK. I suppose in hindsight the best move today would have been to simply buy some SPY July puts at the open. It's probably too late for any kind of trade like that going forward. We'll get follow through to the downside on Monday morning and then perhaps some type of rally attempt. That is usually the case in market panic attacks like the on today. We have seen this before. Perhaps I'll take another stab at a short term bounce trade next week. But the timing would have to be impeccable and the risk is now extremely elevated. Not to mention the option premiums are very inflated due to the massive amount of volatility that we are now seeing. Well, you don't make any money on the sidelines but you don't lose any either. Today at the open there was a gap down and then a feeble rally attempt. That feeble rally provided the opportunity to buy some index puts. I simply was not ready to take advantage of that when I should have. Three weeks left in the July option cycle and it looks like there won't be any summer doldrums anytime soon. Traders will have all weekend to think about the ramifications of what happened today. Stocks got crushed and it could just be the beginning. Charts look ugly around the globe. I'm going to have to take a very close look at what happened and try to come up with some kind of idea on how to trade it. One thing for sure is that you will have to be very nimble and not get attached to any trade. Take profits quick because we are still in store for some wild swings in the days ahead. The European markets actually started to come back from the brink before they closed today. Not so here in the United States and that should carry over to Monday morning. Plenty to ponder in the next couple of days. For now it's Friday afternoon and time for a break.
Thursday, June 23, 2016
I thought today would be a wait and see type of market on the vote in England. Wrong again. The market has already voted. The Dow soared 230 points today on light volume. The advance/declines were 5 to 1 positive. This should turn the summation index back to the upside. The short term technical indicators are now all pointing higher for the major stock indices. Could this be the beginning of a thrust that takes us to new all time highs? Time will tell but it appears so to me. The only caveat again is the light volume. Markets in Europe rallied as well so it seems those in the know are pretty sure that England will be staying in the European Union. GE was up 3/8 and the volume was good. The recent gravestone doji on the daily candlestick charts isn't panning out. Gold fell $10 on the futures and the US dollar was lower as well. Is this the flight to safety trade being taken off? Could be. The XAU and GDX had slight fractional losses on light volume. The gold shares remain in a trading range. Mentally I'm feeling OK. It appears that we are seeing a worldwide money flow into stocks. Indicators have turned and some of the foreign stock indexes are approaching overbought. The indicators for the S&P 500 still have some room to move higher. It appears that the vote is over before even being counted if we look to the markets for the answer. The VIX had a sharp move lower today as well. There is room to move lower there as well. So unless there is some kind of surprise overnight, higher equity prices are in the near future. I don't have any trades in mind for the S&P at the moment. Perhaps if we get overbought I could try the SPY July puts. But that trade would be at least a week away in my opinion. If the volume remains light, that idea may be worth it. Europe and Japan rallied overnight and I'd expect more of the same tomorrow. They will be counting the votes overnight but it already seems to be a done deal. We'll close out the week tomorrow.
Wednesday, June 22, 2016
It was a one day reversal to the downside as the market opened higher and closed lower. The Dow shed 49 points on light volume. The advance/declines were negative. The summation index is trending sideways. The technical condition of the market hasn't changed. We are still awaiting the vote in England on Thursday. That will make for some interesting trading for Friday. But really this is just a market held hostage to headline risk and it gets a bit ridiculous. I would not be making any substantial trades one way or the other ahead of the results. Regardless of the voting outcome, I'll be glad when it is out of the way. GE was off 1/8 or so on OK volume. The short term technicals here are starting to roll over. Gold was off a few bucks on the futures and the US dollar was lower as well. The XAU rose 1 2/3, while GDX gained 1/2. Volume was average. The gold shares remain in a long trading range that began in the beginning of April. Mentally I'm feeling OK. The small stocks continue to be under performers and that isn't bullish in my view. Something else that I've noticed recently is the elevated level of the VIX. The thing is the VIX has been higher but we really haven't seen any huge price moves. I do not know what that implies but it isn't the usual action. The European markets have had a nice run up over the past 5 trading sessions. Maybe they know something we don't. My feeling is that tomorrow will be a waiting game around the world. I'll be trying my best not to make any stupid moves ahead of the English vote.
Tuesday, June 21, 2016
Basically a drift higher as we remain held hostage by the vote in England on Thursday. The Dow rose 24 points on light volume. The advance/declines were positive. The summation index is trying to turn back up. The small stocks are still lagging. It is a wait and see market in my opinion. We had Yellen in Washington today and the market yawned. More of the same tomorrow I suspect. The technical indicators remain weak for the NASDAQ and better looking for the bigger cap indices. I will try my best not to do anything stupid ahead of the vote in the UK. GE was up 1/8 and the volume was average. The short term technical indicators here are overbought. Gold fell $20 on the futures as the US dollar was higher. The XAU lost 1 3/4, while GDX shed 3/4. Volume was average. Gold seems to be telegraphing that England with remain in the European Union but that's just another guess on my part. Mentally I'm feeling OK. Plenty of time in the July option cycle to put on a trade if a decent signal appears. What needs to be answered is after the results of the vote on Thursday, then what? We'll get the initial knee jerk reaction but what will be the trading driver after that? The S&P 500 short term technical indicators are mid-range, so you can make a case for either way. I'm pretty sure that I will remain on the sidelines this week and let the event driven market environment take care of itself. But who knows? Maybe I'll try something after Thursdays voting results are in. Foreign markets were generally higher but not by much in Europe. We'll keep an eye on what transpires overnight but it really is simply a waiting game for now.
Monday, June 20, 2016
The Dow did manage a gain today but we finished well off of the highs. It gained 129 points on light volume. The advance/declines were 3 to 1 positive. We were up well over 250 points in the first half hour. It was a steady erosion from there until the close. That was not exactly positive price action. The summation index may start to go sideways after today. Better news about England and the European Union over the weekend was the cause for the spike this morning. We are still driven by that event for now. It makes for more guesswork than usual. The short term technical indicators have turned back up for the major big cap averages. The small stocks remain oversold. GE was up 1/4 on good volume but finished way off of the highs. The daily candlestick here looks bearish like a gravestone doji. Gold was off a couple bucks on the futures but came off of its lows. The US dollar was lower. The XAU was up 2/3, GDX lost 1/8. Volume was light. Mentally I'm feeling OK. The price action today could have been very positive but instead we are left in the lurch. Trying to trade an event driven environment adds even more than the ordinary trading risk. The rewards could be substantial. But so could the losses. I have yet to make up my mind if I am going to put on a position ahead of Thursdays English vote. Perhaps the prudent course of action will be to stay on the sidelines and wait until we get back to a regularly traded market. Maybe if we get a light volume rally this week it will set up for the SPY July puts. The small stocks are lagging here and that is not a positive sign. There were decent gains in Asia and huge gains in Europe overnight. The fact that the US couldn't follow that is cause for concern. We'll keep an eye on the overnight developments and go from there.
Friday, June 17, 2016
Back to the downside today as the Dow fell 58 points on expiration heavy volume. The advance/declines were positive. Getting a mixed bag here with the breadth. The NASDAQ was relatively weaker. The summation index continues lower. There is a positive RSI divergence on the S&P hourly charts. Plus the short term technical indicators remain oversold. But we are still held hostage with the headline risk out of England. Perhaps the wise choice will be to let that pass and go from there. GE was off a few cents and the volume was lighter. The gold futures came back today and we are making another run at $1300 there. The US dollar dropped today. The XAU and GDX had slight fractional gains on light volume. Gold will probably move off of the vote in England as well. The short term technicals here remain overbought. Still in a trading range for the gold shares is my view. Mentally I'm feeling OK. Hard to tell which way to go here and careful study will be required over the weekend. High option premiums don't help things at this point with the July option cycle just beginning. I do not think that England will vote itself out of the European Union but I certainly don't know for sure. How can we profit from this event is the more important question. The summation index is still moving down and I do not want to go against that. But I will have to take a look at everything over the next 2 days to decide what course of action or inaction to take. Once we get England out of the way, things could slow down with the beginning of summer and the July 4th holiday coming up. That would not be helpful for the options game unless you are writing them. So we'll see. Plenty of things to ponder. For now it's Friday afternoon and time for a break.