Igor

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June 6, 2020 at 1:54 pm in reply to: June 5 Closing thoughts #17064

Anonymous

Up, Up, and Away

In a world where talk is increasingly cheap while real action is an endangered species, the equity market has put its money where its mouth is, surging 40%+ in the last 50 trading days capped off with a massive rally this week. This week’s 5% gain marked the third straight week that the S&P 500 was up over 3%. The last time that happened? September 1982. And before that you have to go back to 1940 and then a few other occurrences in the 1930s. Between the low on March 23rd through Wednesday (6/3) the S&P 500 rallied more than 39%. That’s the strongest 50-day move for the index since 1952
when the US stock market went to the five-day trading week. (Prior to 1952, the NYSE was open on weekends as well, and our historical daily data
pre-1952 for the major indices lumps the weekend’s move into Monday’s change. Thus, the 50-trading day rate of change prior to 1952 is not necessarily an apples to apples comparison with the same data post 1952.)

As you can see above, there have only been two prior 50-day moves of 30%+ since 1952, and those came in October 1982 and May 2009. Those two short-term massive spikes turned out to be just the first inning of multi-year bull markets. Given the lack of 30%+ 50-day surges, we broadened the filter to find all 50-day rallies of 20%+ for the S&P since 1952. Below are the seven prior occurrences, with the date shown being the first time the 20%+ threshold was crossed. During the current surge, the 20%+ threshold was reached last Wednesday, May 27th. Prior 50-day surges of 20%+ for the S&P have historically been met with further buying. In the month after 50-day rallies of 20%+, the S&P has averaged a gain of 4.63% with positive returns 100% of the time. Over the next three months, the S&P has averaged a gain of 7.6% with positive returns six out of seven times. The only time the S&P was negative over the three-month time frame was following the 1991 surge, but the decline was minimal at just 1.5%. Finally, over the next six months, the S&P has averaged a gain of 10.08% with positive returns 100% of the time. You cannot get better than 100%!

Not surprisingly, after the best 50-day rally for the S&P 500 in at least 75 years, the S&P 500 has reached levels that most would consider to be ‘extended’ in the short-term.
• Relative to its 50-day moving average, the S&P 500 traded more than 10% above its 50-day moving average late last week and into this week.
• These kinds of overbought readings have been extremely uncommon since 1952.
• The last occurrence was in April 2009, which like the current period, quickly followed a time where the index traded down more than 20% below its 50-day moving average.

Forward returns following prior periods where the S&P 500 traded more than 10% above its 50-day moving average have generally been positive.
• One month later, the S&P 500 averaged a gain of 2.19% (median: 2.16%) with positive returns two thirds of the time.
• Three months later, the S&P 500 was up an average 7.5% (median: 9.73%) with gains all but once, and the only time it was down was in 1955 when it dropped just 1.1%.
• Six and twelve months later, the S&P 500 was up all six times with average gains of 14.6% and 24.3%, respectively.

Given the huge rally in such a short period of time, investors might expect a pullback in the coming months for the Nasdaq 100. Historically, though, the rally continued. Below are the seven prior instances in which the Nasdaq 100 gained 30%+ in a 50-trading day period. For each instance, we show the first date that the 30%+ threshold was crossed (which in the current period was on 5/27).
• Historically, the Nasdaq 100 has gained an average of 5.19% in the month after these huge 50-day moves higher. That’s much stronger than the average gain of 1.27% for all one-month periods throughout the Nasdaq 100’s history.
• Over the next three months, the average gain has been huge at +12.58% with positive returns six out of seven times.
• Over the next six months, the index has again averaged a gain of 11.2% and a median gain of 13.73%. The only time the Nasdaq 100 failed to rally over the next three and six months following a 30%+ 50-day move was back in November 2001.

Watch list of Strong Stocks

——————————————————————————————————————

Are Investors Too Bullish or just Not Bearish?
The chart below demonstrates some of the conflict between analysts’ perceptions and investor behavior. It is a weekly chart of the CBOE put-call ratio (PCC) over the last 13 years. During that period of time, this index has only closed this low on three other occasions. Two of those were untimely peaks associated with the 2008-2009 financial market market crash. Analysts who reference those times and the current readings may now insist that things are going to end badly as a result.

However, a third such indication occurred near the beginning of the year in 2011. In the two months that followed, the markets lifted higher. Though 2011 had a lot of volatility, no one remembers it as the beginning of a crash. What this index actually indicates is not that a crash is coming, but that investors don’t feel the need to buy as many put options as they had previously. A simple thought about the current circumstances suggests why this might be so: things are less uncertain now than they were two months ago. Nevertheless, experienced chart watchers know they’ll need to keep an eye on how the indexes respond to the resistance inevitable as the S&P 500 reaches former highs.

June 6, 2020 at 4:52 pm in reply to: Checklist for Buying or Selling Naked Calls or Puts #17066

Anonymous

Checklist for Buying or Selling Naked Calls or Puts

Step One: Analysis
❏ I am somewhat familiar with the stock or ETF I am currently watching and analyzing.
❏ Price is showing a continuation or reversal in trend (above or below Ichimoku cloud; crossing above or under Ichimoku cloud; Squeeze firing, moving average crossover or support; ADX showing positive or negative direction and continuation; positive or negative price patterns; positive or negative candlestick patterns; up trending or down trending channels; large buy or sell volume; break above resistance, break below support, bounce off of support, and pullback from resistance; etc.). Any other technical indicator that you can get comfortable with.

Step Two: Choosing an Option Contract to Enter
❏ Expiration is not too close and correlates with my risk tolerance.
❏ Strike price is not too far out (Delta over 35), and it also correlates with my risk tolerance.
❏ There is enough open interest (300+) and volume (100+).
❏ The implied volatility is not too high or too low (5%-75%). This depends on your risk tolerance. Earnings for example.
❏ Theta is not too high compared to the contract premium.
❏ The contract is not worth more than 1-3% of my portfolio.

Step Three: Entering & Exiting the Trade
❏ I am not emotionally attached to this stock or ETF or feel emotional from a recent trade. Every trade is a new trade. Market does not have any memory.
❏ I have an exit strategy planned out and will follow it without getting emotional.
❏ Enter in at overbought or oversold levels or right at reversals (above or below Bollinger band; overbought or oversold on MFI (Money Flow Index) or RSI; cross in ADX from + to – or vice versa; MACD golden cross or death cross; at or break of resistance or support; etc.).
❏ Follow through with my exit strategy when the premium hits my S/L or P/T.

June 7, 2020 at 12:36 am in reply to: Checklist for Buying or Selling Naked Calls or Puts #17072

Joshua B
Participant

Thank you for posting this!

June 7, 2020 at 1:42 am in reply to: Quick Terminology Check for New Traders #17073

Anonymous

Quick Terminology Check for New Traders

Stock Terms
SS – Short Sale
Blue Chip – Large Companies, Usually $50BN+ in Size
OTC – Over the counter, shit stocks, penny stocks that are not registered
Support – Where there is more buying
Resistance – Where there is more selling
SL – Stop Loss
VWAP – Volume weighted average price
MACD – Moving Average Convergence Divergence
RSI – Relative Strength Index
EMA – Exponential Moving Average
SMA – Simple Moving Average
MA – Moving average

Options Terms
BTO – Buy to Open
STC – Sell to Close
STO – Sell to Open
BTC – Buy to Close
Expiration Date – The date in which my contract will become worthless if not exercised by (Why Options are Higher Risk and Reward)
Strike Price – The price in which I can buy or sell the stock if I choose to exercise my contract
Debit – You are paying the money, meaning you are buying something
Credit – You are receiving the money, meaning you are selling something of value
MID – Middle price between the bid and the ask
Market – Market Order means there is no guarantee of the price you will pay or receive (as the case may be)

The bid price refers to the highest price a buyer will pay for a security. The ask price refers to the lowest price a seller will accept for a security. The difference between these two prices is known as the spread; the smaller the spread, the greater the liquidity of the given security

June 7, 2020 at 11:35 pm in reply to: My Trading Plan – Anya Sheth #17084
Anonymous
1) Risk Management.

Never risk more than 2% of my total portfolio on any new trade setups (1% for day trades). If I must ever ask whether I should be in the trade or not, then it is better to get out of that trade. I get into a trade assuming that I am going to lose the amount invested. Never go into a trade where I am looking at profits first. Look at the potential losses first and size accordingly. I will never have more then 50-60% of my total portfolio invested at any given time. That means I will always have at least 40% cash on hand. Ideal number of positions differ per account, but no more then 10 in any one account and never more then a total of 25 over my 5 separate accounts. If I want to buy a new position, then I will prune one of my existing positions. (Sell the loser or the non-performer first, unless you can justify selling something else-very rare).

If a trade is moving in my direction, I will add to my position for a maximum portfolio size of 5% (in extremely rare cases – even up 10%). Never average down but add to winning positions on a lower volume pullback to the moving averages and where I have a good profit cushion.

Getting back in is just another trade away. Remember that holding on to a position overnight is the same thing as buying that stock or option at the end of the day. My plan is simple. Do not bet more than you can lose and when you’re at a loss don’t renegotiate the plan. Stick to it

Hedge by doing pairs trades. For example, buy NVDA long and short AMD or buy Gold and short Silver in equal amounts to create Alpha.
Hedge using beta weighting against SPX, SPY,NDX and QQQ

2) Daily, Weekly and Monthly Goals

Day Trading Futures: Daily Goal is to risk $ x to make 2x
Day Trading Stocks: Daily Goal is to risk $ x to make 2x
Weekly Goal: Make at least 2.5-4% of my portfolio while investing no more then 40-50% of my Total portfolio
Monthly Goal: Go over my total portfolio and prune the laggards and the losers and add to the winners.

3) Trade Setups for Longer term trades

Follow Investors.com style of investing to look for stocks that are just coming out of good bases. The chart setups I like are cup with handle, high tight flags, W shaped patterns and bounces of the 50 day on huge volume. Always consider the market conditions (whether the market is in an uptrend, consolidation or if it is in a downtrend). Remember that about 80% of the stocks will follow the market trend.
Comb through the various watch lists using MarketSmith (monthly subscription of $147), Customized scans in TOS, investors.com (Yearly subscription), “stocktwits” and many other paid sites to find stocks that are in a base and are ready to break out. I use Moving Averages (cross over, support at 8 EMA, 21 EMA, 34 EMA and 50 SMA), price and volume. I also incorporate Fibonacci levels to predetermine support and resistance levels. Also use Voodoo lines (a Simpler Trading proprietary tool) for the same. I am also a big fan of TTM_Squeeze_Pro (the free version is the TTM_Squeeze). I also love the multiple time frame squeeze indicator and the 10X indicator. I also use the RAF and MTF indicator. These are all proprietary tools and too expensive for about 80% of the regular traders.
If a chart does not excite me in 15-20 second’s then it is not worth spending any more time. There are lots of fish in the pond. Move on to the next ticker.

4) Seasonal Analysis

Have my own database of every stock’s closing price for the last 20+ years. I like to buy stocks with a strong seasonal trend (I incorporate market conditions, open interest, market sentiment (overall market and individual stock sentiment) and the stocks chart characteristics (moving averages). These trades are usually 50 delta calls or higher and the typical hold period is 2-3 months. Sell near dated upside calls to reduce cost, trade around core positions to reduce overall cost of trade every week.
In an up-trending or down-trendling market, I like to play weekly and 2 and 3-week seasonality also.
Example: Netflix. The best time to buy Netflix is middle of December. Netflix has gone up by 25% over the next 3 months 83% of the time over the last 17 years.

5) Types of trades I will do and will not do.

• Long Calls– weekly, monthly, and longer term 3-8 months out (never below 30 Delta)
• Butterflies – weekly, monthly, and longer term 1-3 months out.
• Pre-earning trades 1 day to 4 weeks out.
• Vertical spreads (Calls and Puts)
• Long Puts – weekly and monthly only
• SPX, NDX and IWM trades. Never Dow Jones.
• Never sell Naked Puts
• Never buy anything in the first 15-30 minutes unless it is at a price level I cannot ignore (lower never higher).
• Straddles
• Strangles
• Iron Condors
• Risk Twist Spreads
• Unusual Options Activity from my sources.
• Unbalanced Butterflies for a credit where I expect a certain price level to be maintained.
• Calendars

6) Intraday Setups

Use the 5/13 EMA crossover for day trading futures and options for anything less than a 15- minute trade.
Use the 8/21 EMA crossover for day trading futures and options for anything between a 15 minute – one-hour trade.
Use the 10/20 EMA crossover for trading for anything over an hour to few day (no longer then the end of the trading week).
Look for stocks gapping up pre-market and buy them on the first pullback to key support levels and then trail the stops and take profits in chunks to reduce cost.
Opening Range breakout trades. Look for stocks that break out of the opening 30- minute range (long or short)
Use market direction to trade key stocks like AMZN, AAPL, MSFT, GOOGL, JPM, FB, BA, NFLX etc. that move with the market (up or down)

7) Expected Move

Use Expected move to find good trade ideas to trade butterflies, unbalanced butterflies, Iron Condors, credit and put spreads for weekly and monthly expiration’s. Also use Open interest to help determine key price levels.

8) Earnings and event driven trades

Use CMLViz pro to come up with pre-earning price run up trades, with my own custom-built strategies. I never take their suggested trade ideas as almost all their trade ideas are public, and most hedge funds know about these.
Example is Buy MSFT 14 – day 50 delta calls bought 14 day prior to earnings date has an 85%-win rate if sold 1 day before earnings and if MSFT is over its 50 day and if the market is not in a correction.
Play for a move within the expected move or if bullish then a price moves up above the expected price and vice versa for bearish strategies.
9) High Short interest plays (Honey Badgers)
Use FinViz or other sources to find stocks that have an extremely high short interest and defying the market and are very close to 52-week highs or in a squeeze. These are also called honey badger stocks and really do not care what the market is doing.
Examples are TSLA, BYND, WORK, AMD, ZM, etc.
https://finviz.com/screener.ashx?v=111&f=cap_midover,sh_avgvol_o500,sh_curvol_o500,sh_price_o10,sh_short_o15,ta_highlow52w_a80h&ft=4&o=-price

10) Pin Action plays

Use news or squeezes to find stocks that will benefit from people chasing stocks that benefit from another stock going up
Examples are ROKU based on good news in Netflix, AMD based on good news in NVDA, BJ ‘s based off good news in COST.

11) Position Sizing

Always position size so that even if I lose my whole investment, I live to fight another day. Never risk more than 2% on any one new trade (1 % for day trades). Take profits at regular intervals and my first goal is to always bring back the original capital risked.
Roll the deltas to lock profits, sell an upside call to lock in profits or sell the near dated calls to get into a longer dated call.

12) Entries
Wait for the trade to come to you rather then chase it or get in earlier than the price level you have determined in your research and analysis (homework).

Plan your trade and then trade your plan. Do not take the market’s personally. They are not out to get you and learn to accept defeat graciously and sell when your original thesis is proved wrong. Do not challenge the market or try to justify holding on to something. Never fight the market by holding on to one’s beliefs. Opinions should change if the market changes.

13) Daily, Weekly and Seasonal Watch list

Do your research and analysis (homework) to set up a list of 15 stocks to trade on a daily basis, 15 stocks for a weekly trade and 5-10 stocks for day trading and seasonality trades. Then prepare levels of entries, exits and alerts based on Fib levels, Moving averages, Volume, Voodoo lines.
Update this list daily. Spend time analyzing the markets every day and rethink your strategy if charts or facts change. Try to summarize the day’s activity to reinforce. At least 2 hours of homework every day and 5 hours on a weekend.

14) Unusual Options activity and chatter

This is my fun or indulgent money (never more than 1% of my portfolio) to trade stocks or options with very unusual volume in shares or options or any unusual chatter. I have my sources to alert me to such opportunities. These are very high-risk high reward trades and position sizing is critical with the full knowledge and understanding that only about 1 in 3 trades work. But the 1 trade that works is usually enough to offset the losses in the 2 losing trades. Pay special attention to UOA on Monday mornings, or Friday afternoon, because someone always knows something and is eager to cash in.

15) Butterflies.

I love to play Butterflies. I look for certain criteria to determine what the closing price of a stock will be at the end of the weekly cycle. I play both weekly and longer- term butterflies. Some of my butterflies are 2-4 months out. These are low risk and very-high reward strategies. I usually play about 3-5 a week and my aim is to be profitable on 40% of them.

16) Target

Take profits in chunks (usually 1/3 position at a time) and my first goal is to always bring back the capital risked. No hard targets. Have levels in mind but if market dictates hold on for more or get out before target is hit. Never let a winning trade become a losing trade if gains are over 20%
Differentiate between dollar (price level targets) vs. a certain percentage gain target.
For options I like taking profits on 1/3 position at 30-40% profits, second 1/3 position at 80-100% and let the last 1/3 position run.

17) Stops

Anticipate losing all the money in the trade unless price levels dictate setting stops at 50% loss or if original gain target is 50%. I try to lose no more then ½ of what I was trying to gain for a ratio of 1:2 winning %
In any stock position sell at 7-8% loss no matter what. In Options I am more lenient and am ready to absorb at least a 50% stop loss or up to 1.5 times the daily ATR (Actual True Range) of the underlying stock. But it depends, if market conditions change, I change my stops and might take a loss much earlier or might let the options go down by even 60% – 70%.

18) Rules I will not break

1. Never Revenge trade. I do not want to double down or add to a losing position or show the market that it is wrong. No need to justify your logic or research. Accept the fact that the market and price action is always right.
2. If I have 2 losing trades in a row in a day, then I give myself a 1-hour timeout by going to the gym or take a nap. Reenergize, refocus, and start fresh with a new trade. Start fresh. If I have more than 4 losing trades in a day, then I stop trading for the day and look to fight another day.
3. Never take a trade just because you are bored. Play with the dog, walk, go to the gym, watch a movie.
4. Will not lose more than 2% of my total portfolio on any one trade.
5. Sell if I ever must question the trade or if the facts change. Getting back is just another trade away. First loss is always the best loss.
6. Never sell Naked puts, always sell a put spread to know your risks.
7. Never buy or sell with a market order unless it is a butterfly and the bid ask is too much and there is risk of assignment.
8. Reconcile on a weekly basis and analyze your winners and losers. Try to replicate the winners and reduce the losers and try not to repeat the same mistake. Write down why you did a trade, your mental state, your sense of euphoria or panic, etc. Notes are important to analyze why you failed or succeeded.
9. Keep it simple. Do not complicate.
10. Never let a day trade turn into an investment. Hoping and Praying is not part of a trading strategy.
11. It is okay to take profits. I will never catch the absolute high or the low.
12. My portfolio will always be hedged. I like puts or put spreads, Risk Twist trades, Butterflies in the (weakest) indices and like to have GOLD, Silver, Crypto Currencies and TLT in my portfolio.
13. I would rather buy 1 share of AMZN at $2,000 then buy 1000 shares of some junk company at $2.00
June 8, 2020 at 2:37 pm in reply to: Positions Update – Igor – 6/8/2020 #17088

Igor
Keymaster

The market has had a heck of a run and I’m holding a number of positions that are mostly risk-free. I want to continue to take on risk but only when I think the actual volatility will overstate the implied volatility. With SPX erasing 80% of Covid-19 selloff, this is no time to chase. So be careful out there.

NVDA:

FB:

CRWD:

MSFT:

AAPL:

AMGN:

AMD:

BYND:

GD:

TRIP:

FDX:

ADP:

TLRY:

CRM:

ADSK:

NFLX:

FDX:

WYNN:

BA:

JPM:

June 8, 2020 at 6:31 pm in reply to: Monday, June 08, 2020 Closing Thoughts #17097

Anonymous

Monday, June 08, 2020

The stock market rallied into the close Monday, showing it’s not done rising — not even after three straight weeks of sharp gains and a historic rebound from the coronavirus bear market. But a cloud is forming over some leading stocks.

In a milestone, the S&P 500 added 1.2% and is now positive for the year. Still, the index is about 5% from erasing the steep losses from the coronavirus bear market.

The Dow Jones Industrial Average climbed 1.7%. Dow component Boeing (BA) extended a strong rally with a 12% gain Monday, which helped the Dow outperform other major indexes. Aviation stocks are rebounding swiftly as more travelers venture into airplanes. Boeing’s rally helped the Dow Jones transports rise 1.8%.

The Nasdaq composite rose 1.1%, notching a record high. Impressively, the composite is up more than 10% for the year. The market’s rebound is the strongest in history, as one analyst noted.

But the S&P 500 and small caps are catching up to the Nasdaq. The Russell 2000 rose 2% Monday, having conquered its 200-day moving average after dwelling more than three months below it.

Stocks of market leaders such as Facebook (FB), Netflix (NFLX), Apple (AAPL), Microsoft (MSFT), UnitedHealth (UNH), Amazon.com (AMZN) — all of which are trending higher or near highs but their RS lines are falling over the short term, mostly in the past two to three week.
Nvidia’s RS line looks the healthiest.

One word of super caution, the put-call volume ratio Monday fell below 0.5 and is entering a level considered too frothy.

=====================================================================================================

1. Markets rise as investors speculate that demand will return
2. What do Boeing and Exxon Mobil have in common?
3. Car manufacturers rise strongly

Market Moves
For the second trading session in a row the S&P 500 index (SPX) was outdone by the Dow Jones Industrial Average (DJI) and many stocks climbed to new 50-day highs. Signs are abundant that investors are anticipating the release of pent-up consumer demand from now through the end of the year. Consider the following examples.

The chart below compares State Street’s Home builder industry index ETF (XHB) with the 10-year U.S. Treasury note index (TNX). This ETF has strongly rebounded over the last six weeks as interest rates have plummeted. The inverse move makes sense because lower borrowing rates mean more affordable homes, which translate into better potential for the home building industry. What is not intuitively obvious is the fact that last week, as interest rates rebounded strongly, shares of XHB didn’t lose any ground. It is important to understand that in addition to home construction companies, XHB also includes the likes of Home Depot (HD) and Whirlpool (WHR) among its holdings. This continued upward move seems to indicate that investors are acknowledging that these stocks, which will benefit from resurgent consumer demand, remain undervalued from the pandemic’s effects.

What do Boeing and Exxon Mobil Have in Common?
The second example can be found in the chart below. This chart displays how Boeing (BA) and Exxon Mobil (XOM) are positively correlated. This may not be an obvious correlation without the understanding that investors expect consumers to demand air travel and the fuel behind it all at the same time. Current circumstances being what they are this is a logical line of deduction. What remains interesting is how aggressively investors are buying these stocks in the face of such lingering uncertainty.

Car Manufacturers Rise Strongly
The third example is shown in the chart below. If homebuilding and travel are expected to see a healthy uptick of activity between now and the end of the year, it stands to reason that car-buying shouldn’t be too far behind. Indeed, the price action on car manufacturers’ shares such as Toyota Motor Corp. (TM), General Motors (GM), Ford (F), and Fiat-Chrysler (FCAU) seems to fit along with this theme.

An interesting subscript is how three of these stocks continued up strongly even as interest rates rose significantly last week. Chart watchers can recognize that such a pervasive effect is unlikely to be coincidental. The implication seems clear that the erstwhile big-three manufacturers make more money on financing than Toyota does.

The Bottom Line
Stock continued to rise, with the 30 stocks in the Dow Jones Industrial Average outpacing the other benchmarks. This is likely explained by the idea that investors are anticipating that manufacturing companies are soon likely to benefit from pent-up consumer demand in the months to come. Investors expect this will impact share prices across a wide swath of industry groups including car manufacturers, homebuilders, travel and energy.

June 10, 2020 at 12:33 am in reply to: June 9 Closing Remarks #17102
Anonymous
Tuesday, June 09, 2020
1. Indexes higher but so is the VIX
2. Are jobs coming back?
3. Space tourism no, clean power yes

Market Moves
The Nasdaq 100 (NDX) closed at historic highs, while the S&P 500 index (SPX) and the Dow Jones Industrial Average (DJI) retreated slightly today. However the CBOE Volatility Index (VIX) was higher for the second straight session. This curious indication implies that investors are perhaps secretly more nervous than they want to let on. Both retail and professional fund managers are likely concerned that, going forward, stocks won’t have the rapid gains they have shown of late. The chart below compares several volatility indexes including the Dow Jones Industrial Average Volatility (VXD), the Nasdaq Volatility (VXN), the Russell 2000 Volatility (RVX) and the Volatility on the VIX index itself (VVIX). Each of these indexes is on the rise over the past two days, with RVX making a notable move to the top rank spot on this chart (implying that risky investors feel the most nervous right now). Considering that the S&P 500 index (lower panel) is approaching its starting point for the year, it is not a great surprise. This price level often serves as a resistance zone.

Are Jobs Coming Back?
If stocks are going to rise higher, the economy will have to continue to reopen. More specifically, jobs will have to return–especially jobs that provide 401(k) benefits. Retirement savings represent a steady stream of investment into the market, and indexes won’t rise much higher without that participation.

The chart below displays two equal-weighted portfolios and compares them to prominent index ETFs. The first of these is six companies that help people get into jobs, including Robert Half International (RHI), ManpowerGroup (MAN), 51job (JOBS), Trinet Group (TNET), Korn Ferry (KFY), and Upwork (UPWK). The second is a two-company portfolio that provides services for people already in jobs. It is made up of Automated Data Processing (ADP) and Paychex (PAYX). The ETFs include State Street’s Mid Cap index ETF (MDY), the S&P 500 index (SPY) and iShares Russell 2000 index ETF (IWM).

What the chart shows is that since the days the markets rebounded, the first portfolio is actually outperforming the market, demonstrating that these companies are finding success in placing people into jobs. Since such jobs are usually the first to be filled, it is a good confirmation that the economic recovery is underway. For this move to continue on, the payroll portfolio will have to catch up. A quick look at the chart indicates that it may be in the process of doing so.

Space Tourism No, Clean Power Yes

Now you guys and gals know why I am not a fan of SPCE? Garbage in garbage out.
June 10, 2020 at 8:22 pm in reply to: Wednesday, June 10, 2020 #17103

Anonymous

Dow Jones futures turned lower late Wednesday, along with S&P 500 futures and Nasdaq futures, amid some growing concerns of a new wave of coronavirus cases. The coronavirus stock market rally had mixed session, as the Federal Reserve signaled no interest rate hikes until 2023.
AMD, NVDA, NOW and BABA cleared buy points, while TSLA soared above another milestone and Brazilian IPO XP (XP) continued to race toward record highs.

Growth stocks have reasserted leadership in the coronavirus market rally, but in greater numbers.

For much of the coronavirus stock market rally, the big winners were Covid-19 plays such as Zoom Video Communications (ZM), Chegg (CHGG) and Teladoc Health (TDOC), or companies that could at least fare well during the crisis, such as Microsoft (MSFT), ServiceNow stock or Nvidia stock.

But now growth stocks hard-hit in the market crash are rebounding on recovery hopes, including Tesla stock, XP stock and RH (RH).

Tesla stock skyrocketed above 1,000 on a variety of headlines, while upstart rival Nikola (NKLA) sold off. XP stock kept running toward its all-time high.

ServiceNow stock moved above a short consolidation, offering a new entry. AMD stock cleared two buy points intraday, closing above one. But it’s lagged rivals, including Nvidia stock, which offered a new add-on buy area. Alibaba stock also broke out, but has lagged many peers as well.

==========================================================================================================================================

1. Fed meeting leaves indexes mixed
2. Can you beat the indexes?
3. Apple charts new course

Market Moves
Even though markets held a tight range for much of the day in anticipation of the Federal Reserve’s Open Market Committee (FOMC) meeting, the Nasdaq 100 (NDX) managed to close at new highs, while the S&P 500 index (SPX) and the Dow Jones Industrial Average (DJI) retreated again today. The Fed announced they intend to keep interest rates low into 2022, giving encouragement to growth-stock investors, but pause to investors of blue-chip companies.

However the CBOE Volatility Index (VIX) did not close higher than yesterday, which is an indication that those investors feeling nervous about the meeting didn’t find their fears realized by today’s FOMC announcement. This is yet another indication that the healthy, post-pandemic rebound may have more room to climb. The chart below compares three ETFs with Invesco’s Nasdaq 100 index ETF (QQQ) over the past two months. This over-the-top performance suggests that better performance can be gained by focusing on sectors in favor with investors right now. State Street’s Internet index ETF (XWEB), O’Shares Global Internet Giants ETF (OGIG), and iShares Genomics Immunology and Healthcare ETF (IDNA) all have outpaced the growth-and-tech-heavy QQQ. Such a chart provides evidence to curious investors about what might be possible in the weeks and months ahead.

Can You Beat the Indexes?
Investors who use a self-directed account and wonder where to allocate their money likely consider whether beating the indexes is possible or even a reasonable goal. Those convinced that it is not only reasonable and possible, but also desirable, may want to review the chart below. Actively managed ETFs are investment funds that literally try to do this work for you, constantly shifting resources to the best opportunities. Sometimes this works, but not always. In the chart below are a few examples of those that have worked recently.

The chart below displays two time frames. The left panel is a year-to-date view of State Street’s S&P 500 index ETF (SPY), iShares 20+ Year Treasury Bond ETF (TLT) and three actively managed ETFs including State Street’s DoubleLine Total Return Bond-index Tactical ETF (TOTL), SPDR DoubleLine Short Duration Total Return Bond-index Tactical ETF (STOT), and SPDR MFS Systematic Growth Equity ETF (SYG). These actively managed funds try to time the allocation of investor money into various funds with reasonable success, including less drawdown and better gains than the S&P 500. The left half of the chart looks at a time frame of the last two months and breaks out these ETFs into stock-oriented investments (top panel) and bond-oriented investments (bottom panel). This chart is worth zooming into so that you can see how these ETFs have compared against their benchmarks.

Apple Charts New Course

Analysts at Deutsche Bank upgraded their target price on Apple (AAPL) from $325 to $350. That was all the excuse investors needed. Interestingly enough, the stock closed over two dollars above that number. Apparently investors know something that the bank analysts do not.

This begs the question of just how high the stock could go. Fundamental research is often ill-equipped to identify such a target, while technical analysis offers only chart-based guesswork. That being said, the Fibonacci extension study makes an interesting tool for establishing a guess when a rational one is not so easily found. The chart below shows a 1.61 multiple of the rebound amount and adds it to the price above the old high. This creates a price target near $400 per share. Could Apple get that high? While nothing is impossible, chart watchers will want to keep an eye on the benchmark indexes. Apple is not likely to make new highs without the S&P also doing the same.

The Bottom Line
Stocks had mixed performance again today on the heels of the FOMC meeting announcements. Low interest rates may help growth stocks continue to grow, while investors remain more uncertain about value stocks or income investments. Apple shares continue higher and may hit $400 per share by the end of the year.
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June 10, 2020 at 10:05 pm in reply to: My Trading Plan – Anya Sheth #17107

Anonymous

Thank you for the post Anya. Very useful and helpful . 🙂

June 10, 2020 at 11:31 pm in reply to: Are Retail Investors Driving Price Action? #17108

Anonymous

Are Retail Investors Driving Price Action?

We’ve seen a lot of media coverage focused on the idea that small investors are piling into the market and driving lots of the aggressive price action in recent months. This phenomenon was around before the March plunge in the market, but with bankrupt rental car companies (HTZ), flailing airlines (AAL), and Chapter 11 energy names (CHK) showing up in lists of stocks most widely-held by retail investors along with hyper-speculative plays on hot new products like electric truck manufacturer NKLA, it’s easy to see why people might get the idea that small retail investors flush with commission-free trading confidence might be having an outsized impact.

To test this theory, we started with the theory that relatively small traders are more likely to buy lower dollar price stocks. It’s easier to dip your toe into a $1 stock than a $150 stock, even if the division of the company’s value is arbitrary. For small-dollar accounts, that truism is the most important. Starting on October 7th of last year, Charles Schwab (SCHW) started offering commission-free trading to brokerage clients, competing with popular zero-commission product Robinhood. Fidelity and other brokers followed shortly after. In the year before October 7th, stocks with low dollar prices were notable underperformers relative to the rest of the market. The chart below uses the Russell 3000 as its sample and breaks the index into deciles (10 groups of 300 stocks each) based on share price. Since Schwab went to $0 commissions, the lowest priced stocks have been huge outperformers, and in fact the decile of stocks with the lowest per share prices are up 15%, substantially more than the rest of the market. To us, this looks like plausible evidence that smaller traders are playing at least some role in the performance of the market.

We’d note that the decile of the highest priced stocks has also outperformed over the same time period. Since $0 commissions began, we’ve also seen the introduction of fractional share trading on many online brokerage platforms, which allows investors to buy stocks by dollar amount instead of share amount. This now lets a small-dollar investor easily invest in high-priced stocks above $1,000/share like AMZN and GOOGL. Instead of having to buy a share of AMZN at $1,400, an investor can now simply buy $100 worth of AMZN and own a fraction of a share.

June 10, 2020 at 11:36 pm in reply to: Tech Stocks June 10, 2020 #17110

Anonymous

Within the Tech sector, there are several stocks that have begun to break out as well. As shown in the charts below from our Chart Scanner, there are some like Apple (AAPL), Adobe (ADBE), Microsoft (MSFT), OneSpan (OSPN), and Texas Instruments (TXN) that have broken out to or are very close to new 52-week highs after taking out their highs from earlier this year within the past several days. Though they are not at 52-week highs, there are others like Advanced Micro Devices (AMD) and Hewlett Packard (HPE) which are experiencing other types of breakouts. For AMD, the stock was quick to recover most of its 2/19 to 3/23 losses retesting those prior highs as early as mid-April, though, it had done so unsuccessfully. Ever since AMD has been in a short term downtrend as Tech shifted from a market leader to somewhat of a laggard in the past month. But surging 6.5% yesterday and another 2.87% today, the stock has broken that downtrend. HPE on the other hand had peaked last fall with losses accelerating during the bear market. Since March, the stock has not shared the massive recovery of other stocks as it has consolidated between roughly $9 and $10.5. In just the past week, though, HPE has managed to break out above this range.

As previously mentioned, AAPL has experienced a significant breakout in the past week and the same can be said for other mega-cap stocks as well. Of the FAANG stocks, Amazon (AMZN) also broke out (again) yesterday to its own 52-week high. Facebook (FB) has nearly done the same after successfully retesting former resistance around $223 in the past couple of weeks. At the same time, Netflix (NFLX) has held up at its 50-DMA while Alphabet (GOOGL) has moved back into its range from earlier this year leading up to its 2/19 high.

June 11, 2020 at 9:05 pm in reply to: Thursday, June 11, 2020 Closing Thoughts #17112
Anonymous
Market Moves

I am still Cautiously Bullish with a chance of Disaster

The outlook from the Federal Open Market Committee (FOMC) meeting yesterday wasn’t interpreted as bearish at the outset. However, as news of rising COVID-19 counts seemed to confirm the committee’s narrative of a slow recovery, investors hit the sell button after hours. The interesting point of this dynamic is that buyers, unlike what they have done several times in the past week, did not step in to shop for bargains. The exhaustion buyers displayed allowed the indexes to close sharply lower. The Nasdaq 100 (NDX) shed a full five percent, the S&P 500 index (SPX) fell almost six percent and the Dow Jones Industrial Average (DJI) declined nearly seven percent for the session.

Today’s selling marked the biggest drop in stocks since a two-month rally began on March 24th and raised fresh questions for professionals about how they should position themselves going forward. Chart watchers have lots to digest as well beginning with the price pattern shown below. It is a classic example of an exhaustion gap. While it does not guarantee more selling will come, investors should check their positions carefully to be sure they have an exit strategy in place

When to Consider Buying the Dip

Investors who aren’t scared away by the sharp drop in prices today may be asking themselves whether this represents an opportunity to buy right now. The big debate is whether to buy now or wait for signs of exhausted selling. One individual who specialized in finding ways to indicate the presence of exhaustion among buyers or sellers, is a gentleman by the name of Thomas DeMark. His background in technical analysis is notable because long ago he was given a blank check by his employers to find evidence of any advantage that could be found in price patterns. By his own estimates that globe-spanning effort racked up a $15 million tab.

So what came from all that spending and the accompanying study he did? Several unique indicators, the best known of which is called the TD Sequential indicator. It is featured below in the chart of State Street’s SPDR Dow Jones Industrial Average ETF (DIA). Mr. DeMark is fond of explaining that sellers don’t surge so much as buyers merely stop buying at the top of markets, and the reverse is true at the bottom of markets. He found that after nine, or thirteen, consecutive closes higher (with some special qualifications), market participants were often mentally primed for a reversal in their current activity.

The chart’s 9-day marker signaled a warning last week, but on this chart it shows that a 13-day marker may be tripped for going the other way. It is a bold indication with little other confirmation. Chart watchers may want to cautiously wait for signs of support to appear before jumping in.

What Option Sellers Think is Happening
One important indicator that should suggest caution for entering the markets, at least right now, can be found in the price action on the CBOE Volatility Index (VIX). The chart below shows that not only the VIX, but two similar ETNs gave an indication that option sellers are much more nervous than usual. Both of Barclay’s VIX-tracking ETNs, the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) which tracks the VIX futures 30 days forward, and the iPath Series B S&P 500® VIX Mid-Term Futures ETN (VXZ) which tracks VIX futures 90-days forward, closed significantly higher than several of the recent highs. When this happens it means that option sellers are pricing in more risk of selling options across not only the next week but the next one to three months. That means they are concerned about what earnings season will bring. It is a troubling sign for bullish investors.

The Bottom Line
Stocks sold off harshly today. Indications show that there may be some short term buying by adventurous investors and traders, but there is plenty to suggest that it could be short-lived. In particular the VIX and VIX futures appear to show options sellers pricing in a lot more risk.

Equity markets have been rolling over the past two weeks after melting up in May in one of the greatest recoveries in history. There was a growing drumbeat that the market had come too far, too fast, given the economic realities facing the U.S. and every other economy on the planet. Last Friday’s May jobs report may have lulled investors into a false sense of security as markets plowed higher.

That all seemed to fade yesterday as Fed Chair Jay Powell vocalized the Fed’s fears about the uncertainty of the recovery and the troubling unemployment rate. Add to that a resurgence in COVID-19 cases in states like Arizona and Texas that seemed to have the virus under control, and sentiment has clearly melted.

Today’s sell-off was reminiscent of those in March. Given the spike in volatility, this tantrum is not even close to being complete.
June 12, 2020 at 10:01 pm in reply to: Friday, June 12, 2020 #17113

Anonymous

The stock market ended an erratic session with moderate gains Friday. The major stock indexes briefly turned negative in mid afternoon trade after the Centers for Disease Control said lock downs may be again necessary if coronavirus cases make a comeback.

The Nasdaq composite rallied as much as 2.9% before closing with a 1% gain. The S&P 500 climbed 1.3%, while the Dow Jones Industrial Average advanced 1.9% — boosted by an 11.5% surge in shares of Boeing (BA). On Thursday, the Dow Jones industrial’s had the worst day since March 16.

Meanwhile, the small-cap Russell 2000 advanced 2.3%. Volume was substantially lower on the Nasdaq and NYSE vs. Thursday’s session, removing some of the strength from today’s rebound.

Stock Market Rally Fades
Friday’s volatile but positive action left the Nasdaq’s distribution-day count at two, while the S&P 500 has three distribution days. Despite Thursday’s sell-off, the stock market remains in a confirmed uptrend. It’s normal for stocks to take a break and consolidate, potentially offering new entries at support levels or new bases.

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1. Stand off between buyers and sellers adds to volatility
2. The industry to watch
3. Measuring correlated market action

Market Moves
The net change from yesterday to the close today was far less impressive than the range and volatility might have suggested. Though stocks closed higher than yesterday, they closed lower than they opened. The pitched battle between buyers and sellers left a significant trading range for the day, implying that sellers may have the upper hand for a few days next week.

However, as the chart below suggests, there may come a time when conditions are right for opportunistic buyers to step in. This chart compares four indexes that track the number of stocks in the 30-component Dow Jones Industrial Average (DJI) that are trading above their 20-day (DITW), 50-day (DIFI), 100-day (DIOH), and 200-day (DITH) moving averages. Historically any time two or more of these lines cross below the 20 level, it can often lead to well-timed buying opportunities. If markets sell off again next week, some of these indexes could drop into a favorable position on this chart (such as the previous ones indicated by red circles).

The Industry to Watch
Investors hoping that the recent stock market rally will continue may be interested to watch one particular industry group that can provide a strong indication of economic recovery: the homebuilders. Next week one prominent company in this group, Lennar (LEN), will deliver its earnings report. If the news from this announcement is good, then analysts and professional investors may regain confidence in buying up shares for 2020.

The chart below compares LEN with State Street’s Homebuilder ETF (XHB) and Home Depot (HD). Both of these stocks, like the benchmark, are currently falling back a bit, but may rebound over the course of the week if investors catch a whiff of opportunity.

Measuring Correlated Market Action
Over the past three months, an interesting phenomenon has emerged regarding the price action of Bitcoin (BTCUSD) and its correlation to the S&P 500 index (SPX). By extension, this also means that Bitcoin had become inversely correlated with the CBOE Volatility Index (VIX). The charts below make comparisons to demonstrate how this correlation has appeared.

Both of these charts show that there was no serious amount of correlation during 2019. However, beginning in 2020 the correlation between stocks and bitcoin aligned positively and remained so as a result of the COVID-19 pandemic. The importance of this is to note when such a correlation goes away. If these asset classes remain correlated, it is likely an indication that investors still fear the economic effects of the pandemic. Once that correlation begins to break, it becomes an indication that investor fear has waned and that price action for both assets may return to something more normal.

The Bottom Line
Stocks fluctuated strongly today but closed higher than the day before, leaving chart watchers wondering if a buy-the-dip opportunity might be in store soon. Both the home building industry group and a break of the correlation of bitcoin to the benchmark indexes may provide insight next week

June 14, 2020 at 12:44 pm in reply to: Anya Sheth Watch List for June 14, 2020 #17142

Anonymous

1) ZS –> 102.47

2) TER –> 71.75

3) SHOP –> 742.58

4) AMZN –> 2545.02

AMZN can be bought for a target of $2650.08-$2681.86 against a stop below $2503.73. Longer term chart shows a price target of 2781.92

5) NOW –> 385.13

6) KLAC –> 184.69

7) GOOGL –> 1412.92

Have a near term target of $1472.53-$1487.83 (prior gap level) against a stop below 1387.85

8) AAPL –> 338.90

AAPL can be bought for a target of $359.2-$360.20 against a stop below $333.93

For swing trading, AAPL can be bought right now with a stop under its 10 EMA which happens to be 333.77

9) BABA –> 217.64

BABA can be bought for a target of $229.38.2-$236.24 against a stop below $212.70

10) MU –> 48.69

MU can be bought for a target of $56.85-$59.43 against a stop below $47.63

11) FB –> 228.58

FB can be bought for a target of $246.28-$247.89 against a stop below $223.53. Longer term target of 261.34

12) MSFT –> 187.74

MSFT can be bought for a target of $202.15 against a stop below $184.97

13) NVDA –> 357.30

NVDA can be bought for a target of $380.16 against a stop below $348.20

14) KLAC –> 184.69

15) CHGG –> 56.90

16) CPB –> 47.07

This is a good stock to buy puts on as it is facing big resistance at its 50 SMA and now the 10 and 21 EMA are sloping downwards. Can buy puts or put spreads with a clear defined stop over $50
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