The phrase “Highway to the Danger Zone“ (theme song here) became popular due to the movie “Top Gun,” starring Tom Cruise.
I share information with several types of investors…long-term (retirement/401k plans) that don’t move monies often, (which “harvested” at the April highs). Medium term investors, that feel comfortable moving monies once a month/6 weeks and shorter-term investors that are open to adjustments frequently, yet are NOT day traders. I am not interested in day trading!!!
This post would be for the shorter-term audience, that are aggressive and open to “attempting to score on defense!”
The NDX 100 is at the top of its trading range and the VXN has created a falling wedge. During this trading channel, when the NDX is at the top of the range, wedges have formed, followed by lower prices in the NDX.
For any medium-term investors that are long the NDX, stay long and keep the 3% stop in play! For those aggressive short-term investors that are comfortable attempting to score on defense, take the inverse position here (Buy PSQ). Momentum and trends remain a positive so far. This is totally a “Power of the Pattern” play for short-term investors.
If this pattern really forces the NDX lower and changes it momentum, I will follow-up with more suggestions per scoring on defense.
Except for perhaps some hedging or a daily ‘skin’ this is not a market to be shorted until the uptrend is broken. It is drifting higher on a steady short squeeze and light volumes in the kind of artificial action that is reminiscent of the 2004-2006 reflationary stock market rally fueled by Fed easy money.
An event can bring it down and quickly. But one can burn a lot of cash trying to pick a top ahead of the market signal that it has gone far enough. I do think that the two gaps will be filled, and that this market will retest its lows again. The timing is problematic, especially given the upcoming November elections. No president or Congress wishes to go into an important general election on the heels of a stock market crash. But this could serve the desires of those on Wall Street. So a continued rally is hardly a ‘sure thing’ despite the statistical profile of the SP 500 in the second year of a presidential term.
The SP 500 is up against resistance but the NDX has broken out cleanly. With relatively few risk-comparable productive outlets the excess of the easy money being fed to the Wall Street banks by the Fed is flowing into the higher yielding ‘risk trades’ like junk bonds and equities. In the absence of a strongly directive fiscal policy and honest price discovery this is what happens when monetary stimulus is applied without a broader policy support. It is hard for real economic proposals to compete with a Ponzi scheme that insiders control and that has a de facto sanction and subsidy from the governing authority. And this then is the basis for Obama’s failure most likely sourced in his Wall Street friendly advisors, Summers and Geithner, and his own natural tendency to ‘go along to get along’ and sacrifice principle to expediency. This potential strength, the ability to find and form a consensus, can become a tragic flaw when carried to excess.
The NDX is a more obvious example of this reflationary risk trade.
Peter D has a long-running and very successful system of selling premiums on a regular basis that’s well worth learning.
Investors selling a short strangle are expecting the underlying stock to not move much in either direction. The strategy is accomplished by selling a call option at a higher price than the current stock or ETF price and by selling a put option at a lower price than the current stock or ETF price. Both of the options will have the same expiration month. The investor in a short strangle benefits from the underlying moving within the spread between the call strike and the put strike.
There are two reasons we like this strategy a lot at PSW:
1) It’s boring! Unless the market is MUCH more volatile than normal, taking sensible, NON-GREEDY, out-of-the-money short option positions is a fairly market-neutral way to place our bets. While the risk/reward ratio may seem inverted, statistically it’s a winning play over time.
2) It’s perfect for our "be the house, not the sucker" philosophy of trading. We are always looking to SELL volatility. The idea behind this trade is that front-month volatility is relatively expensive compared to historical long-term volatility and we take advantage of selling a very high cumulative volatility over the course of the year.
Economists were shocked by the plunge in the Conference Board Consumer Confidence Index this morning, well below the any economist's guess in Bloomberg's Econoday Forecast. The consensus estimate was 99.6. The consensus range was 97.0 to 102.0. And the actual result ... 90.9.
Consumer confidence has weakened substantially this month, to 90.9 which is more than 6 points below Econoday's low estimate. Weakness is centered in the expectations component which is down nearly 13 points to 79.9 and reflects sudden pessimism in the jobs outlook where an unusually large percentage, at 20 percent even, see fewer jobs opening up six months from now.
A striking negative in the report is a drop in buying plans for autos which conf...
Big gains and a strong reversal in the Russell 2000 puts a potential bottom in play. The Russell 2000 started the day below the 200-day MA, but then rallied to claim a spike low and a close above this key moving average. Small Caps are a key driver in trend cycles. The 'bull trap' from June is still dominant. and a push above 1,280 looks a tall order. but reversing the breakdown of the rising trendline at 1,240 is a different proposition. If it fails at this, then a swift return below the 200-day MA, and then some, opens up. And the long awaited intermediate term decline begins.
The S&P gained over 1% with a second bounce off the 200-d...
The dollar advanced against the yen on Tuesday as worries about China’s stock selloff abated somewhat, but the buck fell against the pound after the latest reading on U.K. economic growth matched expectations.
Some stabilization by Asian stocks prompted nervous investors to loosen their grip on the perceived safety of the Japanese currency.
The dollar USDJPY, -0.01% was up at ¥123.73, compared with ¥123.24 late Monday in New York.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.
Corporate earnings reports have been mixed at best, interspersed with the occasional spectacular report -- primarily from mega-caps like Google (GOOGL), Facebook (FB), or Amazon (AMZN). Some of the bul...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Note: The material presented in this commentary is provided for
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considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
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warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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