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Fallback Thursday – Reality Hits the Markets

Wheeee, down we go!

In yesterday's Live Trading Webinar we discussed the merits of shorting Oil (/CL) Futures at the $41 mark.  We had already made a quick $500 shorting oil in our Live Member Chat Room early yesterday morning (and it was in our Top Trade Alert) but we're not sy about betting on the same horse twice and at 4:26 I said to our Members:

/CL back at $41 is back to being a short again below the line now that it's calmed down as I can't see EIA being exciting enough to justify – last week certainly didn't and Columbus Day is not much of a driving/travel holiday, is it?

As you can see, we're back to test $39.50 this morning and we'll take the money and run there as it's the 2nd green S2 support level so it's bound to be bouncy in the very least – should be a $3,000 gain for all our hard work!  

Remember:  I can only tell you what is likely to happen in the market and how to profit from it – the rest is up to you!  

I noted another way to play for our Members as well:

Another reason I like shorting oil here is we're not far away from the rollover on the November contracts and December is very crowded with fake orders that NO ONE is going to want delivered so we could be heading for a nasty crash like we had in March, when there were way too many May contracts to roll into.

Click for

Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Cash - 40.19 40.19 40.19 00:00

Oct 13



Nov'20 40.19 41.15 39.82 41.03 15:12

Oct 14

0.83 294677 40.20 132930 Call Put
Dec'20 40.49 41.43 40.12 41.31 15:12

Oct 14

0.82 243237 40.49 392158 Call Put
Jan'21 40.84 41.74 40.48 41.62 15:12

Oct 14

0.77 72402 40.85 208129 Call Put
Feb'21 41.15 42.04 40.83 41.91 15:06

Oct 14

0.72 20792 41.19 113984 Call Put
Mar'21 41.42 42.32 41.15 42.18 15:07

Oct 14

0.66 29218 41.52 149666 Call Put
Apr'21 41.77 42.53 41.44 42.42 15:05

Oct 14

0.62 9881 41.80 60370 Call Put
May'21 41.95 42.75 41.82 42.64 13:46

Oct 14

0.60 4670 42.04 47188 Call Put
Jun'21 42.19 42.93 41.90 42.81 15:08

Oct 14

0.56 32660 42.25 205297 Call Put

Look at that turnover today, 132,930 contracts were traded 294,677 times!  

SCO (2x short oil) could be fun to play as it popped 200% in March/April.  Figure $30 as a target and the Jan $22 calls are $1 so let's buy 50 ($5,000) for fun in the STP and risk $2,500.

If for some reason we get a quick double, we take half off and it's a free ride on the rest.

We'll see how that trade develops with oil down 4% this morning.  Stock futures are dropping with dimming stimulus hopes and the prospect of fresh restrictions across Europe casting a shadow over the Global Economic outlook.  Uncertainty surrounding the coming elections and the on-again off-again stimulus talks, as well as risks of a second wave of coronavirus infections, the timeline for Covid-19 vaccines and treatments, and questions about how companies are weathering the recession are pushing more and more investors to the sidelines.

London became the latest European capital to tighten lockdown measures, with restrictions set to come into force this weekend. On Wednesday, France declared a state of emergency and imposed a nightly curfew for the Paris region and eight other metropolitan areas across the country.  “We have done the easy bit of the economic recovery, the initial rebound. Now we have got to do the hard yards of getting economies back to where they were before lockdown, before Covid,” said EMEA's Altaf Kassam. “These rolling lockdowns are going to crimp that recovery and make it so much harder,” he said.

As I pointed out to our Members on Tuesday:

Meanwhile, over in the not-as-stimulated reality of Europe:

3,750 to 2,250  is down 1,500 points (40%) on the nose and that makes for 200-point bounce lines to 2,450, 2,850 (strong) and 3,250 is the 60% line, which is very significant for Fibonacci so over that is good and under it is not and I'll take Europe's word for it over our manipulated markets.

Failing that level since then has sent the Euro Stoxx into a sharp dive, quickly falling 2.5% below the line this morning.  3,168 is exactly 2.5% below 3,250 – if you are keeping score.  This is why the 5% Rule™ is better than TA – the 5% Rule™ is just math – TA is just bullshit…

On the S&P 500, we're back to test the 3,420 line, which is the Strong Bounce Line as well as the 20% Line on our S&P Chart, which we've been using all summer to track our trading range (recently, see: "The Weak Ahead in the Markets" for a good explanation of how we got that number).  In the grand scheme of things, there is nothign happening here that wasn't completely predictable as we're still inside the same trading range but notice how the MACD indicators are rolling down – that's a very dangerous sign for the markets and that's why we added hedges to our Short-Term Portfolio on Tuesday (see: "Toppy Tuesday – $2Tn Stimulus Talks Buys Us a Trip back to the Highs"). 

Again, TA is BS but enough people follow that BS to make it a Fundamental Factor we do pay attention to (and yes, I know that's a confusing concept).  Still, as I said in the Webinar, Santa Claus is BS but that doesn't mean I can't predict that it's likely that cookies will be placed by the fireplace on Christmas Eve, does it?  Our job is to predict what is going to happen and pedicting that millions of idiots will react to chart "signals" is often easy money – like betting a Trump voter can't name 5 European capitals, 3 hybrid cars or the President of Mexico...

Getting support at the Strong Bounce Line (3,420) would actually be a bullish sign for the markets as we'd be consolidating in the top of our range but failing that line gives us a clear shot to revisit the 15% line at 3,280 and, failing that, back to the 10% line at 3,140 and THAT is where we might be on election day – just 3 weeks from Tuesday.

Be careful out there and vote wisely!  


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  1. Good Morning.

  2. hello

  3. Or name 3 hybrid cars? Love it!

  4. PLTR is making around $1B and has a $13B Market cap.  Trading @ $9. Government defense data contracts etc.  i suppose it was a pretty highly anticipated IPO that didn't really do much.  All that being said the 2023 $10/$20s are $1.85.  The $5/$15s are $3.30.  
    i know we don't gamble but might be worth a dice toss given how quickly these momo stocks take off – if they do 

  5. Phil / UPRO,

    Did you manage to get the Jan 22 $70/50 UPRO put spread at 8$? I have been trying for the past 2 days but the spreads are above the 10$ range. Any suggestions around how to enter UPRO today?

  6. Monk…Ive got an acquaintence that worked for PLTR.  He was allowed to sell 20 percent of his shares on the direct listing.  The lockup period is 18 months out from here.  I would think there will be a tremendous amount of shares that could possibly hit the market then.  It could hit the stock pretty hard or not.  Just my 2 cents to ponder.

  7. How QAnon uses religion to lure unsuspecting Christians

  8. Wilsons – very interesting. I appreciate the inside baseball. When I think about the dumb things Id likely do with $1800 between now and 2023, risking it on a 10k spread actually seems pretty responsible haha

  9. Good morning!

    Getting a quick bounce of S2 lines – we'll see if it holds.  

    Walgreens Boots Tops Q4 Earnings Forecast, Sees 2021 Profit Growth Despite Pandemic; Shares Jump

    PLTR/Monk – Looks like $20bn but that's not bad.  Not a bargain either so not something I'd jump on (too new) but you can sell 2023 $7.50 puts for $3 to net in for $4.50 so why not if you want to establish a long-term position?

    UPRO/Jij – The 2022 $70 puts were $20 right at the open on Tuesday:

    The $50 puts were more like $11, so a bit higher than we planned but not terrible and the Jan $50 puts are now $4.70, so that makes up for 0.50 of the difference if you still haven't done it.  

    The trick is to offer your $20 for the 2022 $70 puts as we KNOW we want to be bearish on UPRO and, once you fill a few of those, THEN wait for a dip and ask for $12 for the short $50 puts and, of course, the same goes for the other short puts you are selling.  If you can't get your prices, don't bother.  

  10. Phil:  I posted this yesterday, but did not see answer.  In reviewing my hedges, I noticed this.


    October 14th, 2020 at 5:20 pm | Permalink | Tweet thisIgnore this user

    Phil:  I am trying to understand your SQQQ play. On your 9/18 ST portfolio review, you said:

    I think what would make me happy is rolling our 100 SQQQ $25 calls at $73,000 to 200 of the June 2021 $15 ($13.50)/30 ($8.50) bull call spreads for net $5 ($100,000), using some of the TQQQ money we just cashed.


    But on your portfolio review, you show that you bought  the calls for $13.50, but sold the 30s for $11.70 .. or $3.20 more than above ($60,000 difference in profitability).  I am confused how that happened.  Please explain.  


  11. SQQQ/Nom – You're right, I have no idea where that came from – I think it was the put price. 

    Meanwhile, indexes are all over the place, especially the Russell:

    S&P and Nas are just weak bouncing:

    • President Donald Trump reiterates his call to "go big or go home" on a fiscal stimulus, but Senate Majority Leader Mitch McConnell still isn't on the same page.
    • In a interview with Fox Business, Trump acknowledges his previous calls that a relief package can go higher than the $1.8T Treasury Secretary Steve Mnuchin has proposed in negotiations, saying: "I would say more. I would go higher. Go big or go home."
    • But just as Trump was speaking, McConnell was holding to his targeted $500B stimulus bill, Politico reports.
    • “What I will put on the floor is a highly targeted half a trillion dollars, that's a lot of money," McConnell says, adding he's "putting on the floor what we think is appropriate to tackle the disease.”
    • Trump said in his interview a deal would be difficult, but possible if there is pressure on House Speaker Nancy Pelosi and that so far Mnuchin hasn't "come home with the bacon".
    • Mnuchin and Pelosi are expected to keep talking today.
    • Is Donald Trump OK? Erratic behaviour raises mental health questions | The  StarTrump also suggested that the size of a stimulus package doesn't matter to the federal budget because all the money will come back and "we're going to take it from China."
    • When pressed on how, he added that he's already figured out ways to take the money from China, but did not elaborate.
    • EIA Petroleum Inventories: Crude -3.8M barrels vs. -2.8M consensus, +0.5M last week.
    • EIA Gasoline -1.6barrels vs. -1.6M consensus, -1.4M last week.
    • EIA Distillates -7.2M barrels vs. -2.1M consensus -1.0M last week.
    • Futures (CL1:COM -3.1%)

    Distillates dropped hard.  Nothing like API data.  Odd because the other two were perfect matches.

  12. Phil// I had executed partly the BNN trade on IBM $120/$140 BCS.  I know you had rolled the $120 long calls to $110 when the market tanked in March but unfortunately I didn't do it.  Now I'd like to know your suggestion on that $120/$140 BCS.  I am profitable on the short call but loosing money on the long calls.

    My Position

    Bought 8 contracts of Long $120 calls at $21.xx each (loosing on this)

    Sold 8 short $140 calls at $11.xx each.  (profitable on this)

    Leave this position alone or any other suggestions?


  13. phil – is that an exit on the SCO position? 

  14. Triggered order question – with IB I was able to create alert-based orders, this seemed to be a good way to hide them from the bots. I don't see a way to do this in ToS, does anyone know if it's possible? The bots have been just killing me lately, no matter where you put an overnight stop they find it.

  15. IBM/Rookie – Target is the same $140 in 2022, we just took advantage of the dip to widen the spread.  Earnings are Monday so we'll see then but I wouldn't do anything at the moment.  

    SCO/Monk – It's just a fun play in case the next rollover causes a catastrophe like the one we had in April.  As I've said, I'd take half off the table with a double.
     Stops/Mr M – That's why I don't do them.  Call TOS tech support, those guys are great.
    Republican Judges Are Quietly Upending Public Health Laws
    A catastrophic sequence of decisions has blocked states from responding to the pandemic.

    Trump advisers made line-by-line edits to official health guidance, altering language written by scientists on church choirs and social distancing.63

    Some people have grown tired of restrictions on their movements and might be taking more risks than they did in the spring, while mixed messaging over preventive measures has sowed confusion.24

    Senate to Subpoena Twitter CEO Over Blocking of Disputed Biden Articles

    GOP senators said the Judiciary Committee would subpoena Jack Dorsey after his social-media company limited sharing of New York Post articles about Democratic presidential nominee Joe Biden and his son Hunter Biden.

    A lawsuit against a former Melania Trump aide is the latest in a series of cases in which the administration has moved against the president’s critics, raising questions about whether the White House is inappropriately using the department to protect President Trump’s personal interests, current and former officials said.

    First-Year College Enrollment Down 16%

    Undergraduate enrollment tumbled this fall at many colleges and universities as first-year students’ plans were upended by the coronavirus pandemic.


  16. T as low as $27.11 today.  There must be real concern about earnings.  Right now the yield is 7.62%

  17. Well the recovery was good so a strong day where we didn't even get to 3,420 in the end.  Also, was a strong Dollar day so even more impressive that we came back:

    Oil back at $41 too – nothing stops this market from re-setting each day.

    T got clobbered, could be a flush ahead of earnings.  

  18. Here is a link to the replay of this week's webinar. It is not trimmed (for some reason) enjoy the blooper reel..