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Thursday, October 6, 2022

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Thursday Thump – Europe Takes a Dive, US Futures Follow

SPX WEEKLYIt's going to be another wild one! 

As you can see from Dave Fry's S&P chart, we dropped all the way to 1,820 on the S&P yesterday, before recovering just after 1pm on an report from Bloomberg that indicated:

Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth and turbulent financial markets at a closed-door meeting in Washington last weekend, according to two people familiar with her comments. 

That's TWO people who were familiar with her comments from LAST WEEKEND – that's certainly worth 40 points (2%) on the S&P isn't it?  The people, who asked not to be named because the meeting was private, said Yellen told the Group of 30 that the economy looked to be on track to achieve growth of around 3 percent going forward. She also saw inflation eventually rising back up to the Fed’s 2 percent target as unemployment falls further, according to the people.

SPY  5  MINUTEWell, as long as the people say so, that's good enough for us, right?  It seemed good enough that we began to cash out out short positions in our aggressively bearish Short-Term Portfolio but this morning it seems we may have gotten a bit ahead of ourselves as the Futures are right back to yesterday's lows, dragged down by another massive sell-off in Europe.

As we caught a great bounce from 1,040 on /TF (Russell Futures) back to 1,070 (+$3,000 per contract) on yesterday's rally we've been going back to that well at 1,050 this morning but, so far, only picking up $200-400 as /TF bounces between 1,050 and 1,054.  Still, as long as that line holds – I like it for bounces and, if that fails, we tightly stop out and go back to 1,040 BUT, if that fails – RUN AWAY!!!

VIX WEEKLYThere are no bonus points for bravery in the stock market.  If you are losing money in your portfolio and you are not sure how to adjust – GET OUT!!!  There's nothing wrong with being in cash – especially in a declining market.  In yesterday's portfolio reviews, we didn't find a lot of things we wanted to buy but we haven't gotten to our aggressive Long-Term Portfolio or the Buy List (though we did review it in Tuesday's Live Webinar) yet.  

While there SEEM to be a lot of buying opportunities – as I warned yesterday, this is a CORRECTION – which means the prices you are starting to see are CORRECT, not low…  There's a huge difference there and there should be a huge difference in your attitude towards the trades.  

We are rolling our long-term positions lower and longer and lowering our expectations for making profits over the long-term.  Our combined long and short-term gains have dropped down to just over 20% for the year and, if we don't get a handle on this turn, we'll probably cash out as 20% is good for a year, so there's no reason to blow that.  As I mentioned, we took a risk and flipped bullish yesterday – expecting a bounce but, so far, the Global Markets are not cooperating.  

Meanwhile, we're still watching our bounce levels but we came very close to failing 15,824 on the Dow yesterday and that would have been – BAD!  

  • Dow – 15,480 should hold.  Weak bounce 15,824, strong bounce 16,168.
  • S&P – 1,800 should hold.  1,840 (weak) and 1,880 (strong).  
  • Nasdaq – 4,140 should hold.  4,232 (weak) and 4,324 (strong).
  • NYSE – 9,900 should hold.  10,120 (weak) and 10,340 (strong)
  • Russell – 1,050 MUST HOLD.  1,080 (weak) and 1,110 (strong) 

As you can see from the Big Chart – so far, all we really have is a bounce off almost perfect tests of the lows we predicted for the week on Tuesday morning, which were just the already predicted lows using our 5% Rule™ and the lines we established almost 2 years ago.  Not bad for long-term predictions.  

On that basis, we've been playing for a bounce off our 10% lines but, if we don't get over those weak bounce lines by tomorrow.  Losing the weak bounce lines on EITHER the Dow or the S&P would be BAD! – so let's watch that this morning as the S&P already looks like it will open below it. 

With the Dow still the relative outperformer, DXD still makes a nice hedge and we highlighted that spread in yesterday's post, which hit $1.25 on yesterday's bottoming action – up 50% from the morning post and up 100% since we called it on Monday.  We'll also have a big winner on our NFLX spread, where we took a $2,250 credit to short it in our Live Member Chat Room on the 9th.  NFLX fell over $100 on poor earnings last night (as expected) and we should make a lot more than $2,125 on that trade!  

NFLX earnings are 10/15 (pre 17th expiration) and we can sell 5 of the Nov $475 calls for $17.50 ($8,750) and buy 5 of the March $470/500 bull call spreads for $13 ($6,500) to cover in the STP.  That's a net $2,250 credit and we have $30 of upside coverage on our short calls.  Hopefully, NFLX stays below $475 and the short calls expire worthless and we get whatever is left on the long spread as a bonus.  As long as they stay below $490, we should have a nice winner.

It's earnings season and we'll have lots of opportunities to make quick trades like these around earnings – it's one of the fun things we can do when we are in CASH!!!  NFLX is going to be a drag on the Nasdaq and we'll see if 4,140 does indeed hold today or if, perhaps, we should start adding more SQQQ hedges.  

 

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EW…crystal balls? No, just following along.  First set of targets are meet.  From Pretzel…

SGEN – So many different reasons…..I was watching the price and volume, also the chart going way back (Tech Analysis does work most of the time!!)  Was it a WAG?  No, just a technical place that made me want to get in there.  Opts 5d MA flattened out and started to turn.  The company is sound.  They are still my favorite mid-tier company in biotech, and for $4B, they could be scooped up b'f you can go pee…

So I need some help/advice from the experienced members and/or Phil himself on this data management question.  I have several accounts divided between TD Ameritrade and Fidelity.  I keep spreadsheets that I update manually every once in a while, but it struck me today that it is RIDICULOUS to have to do that when the brokerage houses have all the data and lots of compute power, so maybe there are reports that already do what I do manually.  The two pieces of data that I want to keep a handle on are:

1) If a stock that I hold option positions in is exactly at the current price at expiration, what are my positions worth for each security and for the portfolio in total.  In other words, I guess, how much premium is in each position and in total?

2) For each position, what is the breakeven price (from TODAY, not from when I purchased it) at expiration, and more importantly, what percent down from today's price is that?

So if I am short 10 CCJ $17 puts worth $3.50 with CCJ at $16, that position has $2,500 of premium and CCJ would have to drop to $13.5 (16%) at expiration before that position would be worth less than it is today. 

I calculate this info myself for each position in each account.  Is there a report in TOS or a tool that can extract the data to create a spreadsheet like this?  Seems like I am not the only person who might want this!

Now, for SGEN you have a choice.  Sell for a nice 50% gain.  Or, sell a higher strike for $1, and pocket 10c, letting the rest ride to see if you can collect the spread…..decisions decisions.

Another question.  My accounts are getting hammered partially due to the higher VIX, in spite of hedges. Is there a rule of thumb that translates how an increase in the VIX translates to higher option premiums?  And the inverse, how a drop of the VIX from 26 to 16, say,  would affect an account with $50K in net option premium? I understand that this isn't anb exact science, but there is a relationship because the VIX is calculated from option premiums, right?  Thanks in advance!

so what's the deal with chicken, do the get Ebola

TSN, PPC and SAFM  all "fried"

jelutuck –  Check out Tradelog  http://www.tradelogsoftware

Pharm- Thanks for the answer. I will be curious as to what your decision is, so please let us know when you make it. I also must admit that I can't really follow your SPY chart. Too much going on for me to follow and I can't seem to figure out what all the lines are on here. Probably because it is so compressed on this site. 

Jelutuck, you can use the analyze tab to calculate the value of each position at varying times and volatilities.

craig – SPY Chart….1900ish is the key, if it makes it there. 

Since it's after hours I'm going to disagree on the politics part St Jean. Democrats are shooting themselves in the foot. They could've just nominated someone else, someone OLDER for the surgeon general post. What has this guy done at 36 to earn the title of surgeon general (besides being president of drs for Obama)? Further, I don't buy their reasoning for limiting/stopping people from travel to/from Liberia? Or, at least limit it to citizens who are trying to fight the disease- not random Liberians like the guy who brought it over here. 

Trading dangerous terrorists for a deserter?  A lack of clear policy on fighting IS…..giving more aid to Syrian insurgent groups who oh by the way happen to be terrorists? The lack of support for Israel. these are just a few things causing me to rethink my automatic vote for democrats next election. If the repubs put forth a more progressive candidate who didn't make his millions dismantling companies I will strongly consider voting for them. 

Jrom – Actually, I was talking about the request for funds that Congress turned down earlier this year. The administration had requested $800M and it was deemed too much so they proposed something like 1/2 of that… A bit short sighted it seems. Like also cutting funding for research. Or cutting funding for embassy protection. These types of policy mistakes.

Jobless claims chart looking like stock charts:

http://www.bespokeinvest.com/thinkbig/2014/10/16/jobless-claims-hit-a-14-year-low.html

After some poor economic data relative to expectations on Wednesday, Thursday started off on a positive note with jobless claims coming in much lower than expected.  While economists were expecting first time claims to rise slightly to 290K from last week's level of 287K, they actually declined by 23K to 264K.  This represents the lowest weekly reading since April 2000.

SPY—highest volume day of the year. Strether

Long Russell, Short Dow works again…

jromeha/ candidate from the DARK SIDE(at least on this site)

I like your comments.  Let me know if you find this person! 

I am trying to forget party affiliation and vote for someone who tells the truth, has common sense, communicates well, follows the Constitution, and understands that they serve the Office of The Presidency and all the american people.  We need statesmen, not more ideologues. 

Trade Tracking – if you are using TOS, the TD Ameritrade website has a pretty good tool called GainsKeeper (under the My Account > Gains/Loss tab) that can be exported into excel and, granted, you need to work with it a little more, but the bulk of info is there.  You can pull it on a weekly (or daily) basis to stay up-close-and-personal with your positions..

Hi Phil,

If you have time please see this article;

http://www.institutionalinvestor.com/blogarticle/3389830/blog/what-the-fk-should-investors-do-part-2.html#.VEDafBY0-Jl

From the points on the article do you still think that Stock Markets should be in a short to medium rising trajectory?  Thanks.

GT/ Phil

Would you look at Goodyear here at 20 levels…..Rubber prices are at multi year lows, makes me feel GT would be a good bet over next 6-12 months?

Ebola -http://www.nytimes.com/2014/10/15/opinion/frank-bruni-scarier-than-ebola.html

 

As Bruni says, get your flu shot and wash your hands.  3000 will die of flu at a minimum from the flu this year.  If 30,000 gun deaths a year is acceptable collateral damage to the NRA, what is the worry about Ebola?

Here you go again Rev, trying to use fact to combat ideology…

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