What else is new in this market? As you can see from Dave Fry's SPY chart, the pattern is holding up of high-volume (relatively) sell-offs following low-volume run-ups. This is how the Institutional Investors manipulate the markets to dump unwanted shares on retail investors. I've been telling you all week how it works and now we can see it in action.
Of course, it's nice to have this knowledge ahead of time – that's the edge we strive to give to our Members at Philstockworld. Even if you are just reading us for free and don't have access to our Live Member Chat Room, you would have done very well to follow our advice on Tuesday and go with the DIA puts at $166.80 and the DXD longs at $26.20 – it was right there on top of the morning post (which you can have mailed to you every day, pre-market by SUBSCRIBING HERE)! In our Member Chat, the previous day, our trade ideas were:
A 5% pullback on DIA is 8.3 points (830 Dow points), back to $158.40 from here. The June $161 puts are .95 so, if you have $100K to protect against a 10% drop, you can buy $5K worth of the June $161 puts and a 5% drop pays you back $8,000 and a 10% drop to $150 (15,000) would net you $11 per contract so a 10x return is $55,000 back – that's overhedged actually!
On DXD, the July $25/28 spread is $1.10 and is $1.25 in the money so you get all the upside on DXD up to a 140% profit on a very small move down in the Dow. We already have July $28 calls in the STP and it's a little too soon to roll but we will.
On a new trade – you can just get out if the S&P holds 1,900 for more than a day – that's not too far from here.
The front month on the SP futures has now switched from March to June as a part of the Quad Witching Expiration. (Technically it switched last week, but for charting purposes I made the switch last night.) The June Futures have essentially the same formations as did March, it’s just that the earlier months have few trades to mark them.
This is the first serious test for US equities since mid-February, as it has been on a spectacular rally streak, no doubt fueled by excess liquidity applied to a selling exhaustion in the funds. Curiously not among corporate insiders who were selling at a rate of 57 to 1 in this latest rally, no doubt for diversification purposes.
The extent of this correction will be determined on the amount of actual selling that starts to occur. For now what we are seeing is more of a trading correction in response to an outsized rise in price, or as the Street likes to say, the market was getting ahead of itself.
Key levels to watch are 1135 and 1120. If we break those I would look for a consolidation around the 1080-1100 level.
“Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
For those of you not keeping track, tomorrow is option expiration for the US stock exchanges. This normally precipitates an unusual amount of gaming and painting on the tape, as the writers and holders of puts and calls shove the prices around to inflict the most pain on anyone foolish enough to play their game.
Intel reports after the bell tonight and the market is expecting great things from them.
Tomorrow the US reports CPI, and then heads into a three day weekend, as Monday is Martin Luther King day in the US. Marin Luther King had a dream; and this may not be it.
The SP 500 futures have been the lead sled dog in this rally with the banks carrying the water. The daily chart has a rising wedge on it that is quite ominous, but we recall the rising trend in the 2003-7 stock reflation that never broke, and kept rising on light volumes to the bubble peak. And the of course it collapses with the other bubbles of which it was a symptom.
Here is the last reflationary bubble that the Treasury and the Fed created. Remember that one?
This is just an opinion, and it could be wrong, as all opinions may be.
To be long US equities at this point seems risky, bordering on reckless, for anything but a daytrade. And there is plenty of that going on.
The US markets in general have every mark of a maturing Ponzi scheme in the steady run ups on weakness, and the ramps into the close with the selling after hours on weak volumes.
Thursday is option expiration, a quadruple witch as we recall. September is one of the big ones, often setting up declines in the month of October. Further, we have Rosh Hoshanah beginning at sundown on Friday September 18. As the saying goes, Sell Rosh HaShana and Buy Yom Kippur.
The government is anxious to encourage ‘confidence’ to the extent of skewing the statistics to create hope in the public, the consumers. The banks are flush with liquidity, but really have no place to put it but for a minimal return at Treasury, or in some hot money trades.
Where is Goldman Sachs business revenue and profit coming from now? How much real investment banking is being done? How much M&A activity and IPOs are there to sustain it at this size, unscathed by the recent market downturns?
Obama and his team have NO credibility for reform on Wall Street after their handling of Goldman Sachs and the AIG payouts. We hear that Goldman had shopped the idea of those derivatives to them, became their biggest customer, and then managed the 100 cents on the dollar payouts from the government even as AIG became hopelessly insolvent.
Bonds, stocks, metals, sugar, cocoa, and oil are all moving higher, while the dollar sinks. Is the dollar funding a new carry trade?
The markets are increasingly the flavor of choice, and if the markets do not show a way, they will make one. Volatility is a screaming buy. Put vertical spreads are remarkably cheap.
Be careful. October looks to be the stormiest of months, if we hold out until then. The market is overdue for a correction, which can be up to 20%. Given the distance we have come on thin volume, what may make this correction shocking is the speed with which it will come.
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.
While the preliminary terms of Europe's Russian sanctions were leaked yesterday, moments ago it was reported that EU ambassadors have reached an agreement on what the "hard-hitting" economic sanctions against Russia would look like even as details remain to still be ironed out ahead of a formal announcement of the final terms next week. According to Reuters, key measures suggested by the Commission include:
President Obama was beating the drums on Thursday in Los Angeles regarding corporate tax deserters, companies that move headquarters or tax shields to another country in order to escape high US tax rates.
An affiliated company of Advanced Semiconductor Engineering (NYSE: ASX), Universal Scientific Industrial, has reportedly received SiP module orders from Apple (NASDAQ: AAPL) for the iWatch according to industry sources, as reported by DigiTimes. Each SiP module costs approximately $60, which is 20% of the iWatch's rumored $300 price tag.
Divergence with small cap stocks and junk bonds persists.
Credit spreads widening suggests building short-term financial stress.
Markets oversold and how risk areas react will be telling.
One of the most widely followed market theories is Dow Theory, which has been around for more than 100 years. The essence of Dow Theory is to focus on confirmations or non-confirmations between the Dow Jones Transportation Average and the Dow Jones Industrial Average for assessing market trends and reversals. If one of the indexes breaks out to a new high while the other does not, we have a non-confirmation and the potential for a market reversal.
Similar to Dow Theory I like to look for confirmation between the stock market and the credit markets. When one market does not confirm the other, caution is ...
Volume in Starbucks options is running approximately three times the average daily level for the stock as of 1:15 p.m. ET ahead of the company’s third-quarter earnings report after the close. Shares in the name are up roughly 1.0% just before midday to stand at $79.95. Traders of SBUX options today are more active in calls than puts, with the call/put ratio hovering near 2.0 as of the time of this writing. Much of the volume is in 25Jul’14 expiry options contracts, most notably in the $80 and $83 strike calls which have traded roughly 3,350 and 2,550 times respectively and in excess of existing open interest levels in both strikes. A portion of the volume in the $80 and $83 calls appears to be part of a spread trade.
Despite a highly eventful week in the news, not much has changed from a stock market perspective. No doubt, investors have grown immune to the daily reports of geopolitical turmoil, including Ukraine vs. Russia for control of the eastern regions, Japan’s dispute with China over territorial waters, Sunni vs. Shiite for control of Iraq, Christians being driven out by Islamists, and other religious conflicts in places like Nigeria and Central African Republic. But last Thursday’s news of the Malaysian airliner tragically getting shot down over Ukraine, coupled with Israel’s ground incursion into Gaza, had the makings of a potential Black Swan event, which in my view is the only thing that could derail the relentless bull march higher in stocks.
Nevertheless, when it became clear that the airline...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither MaddJack Enterprises, LLC
d/b/a PhilStockWorld (PSW) nor its affiliates
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.