Second Quarter GDP grew at 1.9% versus the 2.3% growth rate expected. In addition, Weekly Jobless Claims came in at 448k versus the 393k expected. The data put the whammy on the market this morning. The Jobless Claims number flies in the face of the ADP Employment Data from yesterday, and underscores to me that the ADP Report is often not in synch with the government employment data.
Such as it is, traders didn't like the news and sold stocks first thing this morning. The key area now becomes 1,265 on the SPX. If the market doesn't hold that line and rally, the current upswing could be over. Now, more than ever because of the Weekly Jobless Claims number, traders will be straining all eyes and thought like a laser on the big Employment Report tomorrow morning. I don't think the indexes will be able to make a huge move again, like the last two days, until we get past the important data tomorrow morning. The market has a chance to move to the upside a bit if traders take the view that the GDP number is old news (which it is since it represents last quarter). But the Weekly Jobless Claims trends the past several weeks has to make them nervous, and nervous doesn't usually equal big move.....
7:45 am MT: I stopped the SPY calls for a .24 cent loss on a 2/3 - size position. I stopped the DIA calls for a .32 cent loss on a 1/3 - size position. I sold the CSX calls at breakeven. And I'm looking at a graceful exit on the last position, which is CMI. I'm not doing anything drastic there yet because the CMI position is only about a 1/4 - size position, and I may play around with it a little longer.
I've been saying this all year long.....Choppy Market.....You can see exactly why I have been keeping a lot of trades on a short leash and not carrying full positions overnight. Every new day is like a box of chocolates this year.....
We still have a chance to make a little noise in the current upswing, but I think it will be tough for the market to make a third big-move day in a row. Not impossible, but improbable. So I'm going to sit back for quite a bit and see if anything emerges bullish or bearish before I do anything else. I may do something in Energy, and Defense looks interesting, but I want to see this sort itself out a bit before jumping back in.
7:55 am MT: The Naz is making a nice effort right now, and it may still run to its 50dma at 2,369-2,370. That's a good battle going on over there at the very least. We probably won't see a big day out of the markets, but the Naz is at least trying.....
7:56 am MT: I nibbled on some LMT calls. The stock is fighting its way back towards 106, and perhaps it will try to bounce again today.
8:00 am MT: I decided to stop CMI for a 2.73 loss on a 1/4 - size position. It was a small enough position that it didn't do much damage, and CMI looks like a big headfake after earnings. Traders are too volatile on the stock right now.
1:20 pm MT: I sold the LMT calls for a .40 cent profit on one trade and a .10 cent profit on another. All told I made $170.00 on LMT on a small position, which equates to about a 12% gain.
9:00 pm MT: Market Wrap: I had $1,395 in total losses today. It was important for me to preserve as much of the $6,386 I made from last Friday through yesterday. So I’m still up close to $5,000 on the week with one more day to go. I had the kind of day I thought as far as volume of trading. I was pecking pretty lightly and not doing very much. We may have reversed the markets yet again…..up down up down up down….. Tomorrow is all about the Jobs Report and to an extent the ISM. The Dow actually closed below the low of yesterday, so any kind of bearish continuation in the morning means that puts on the DIA are probably in play. The next short term support on the Dow is at 11,125. The SPX held yesterday’s low, but any move below 1,263 opens the way for some possible puts on the SPY. There is support in the 1,245 – 1,250 area with stronger support at 1,235. I thought about putting a bullish/bearish movers list together again today like the past several days but I think that everything could change in the morning depending on how the big economic reports play out. If we get good numbers then the market may shake off today and continue the up down up down up theme. If we get bad numbers we could continue the roll down from today and there could be some good short swing puts on the DIA, SPY, and some stocks. If I do (paper) trade tomorrow I will be doing the usual…..out of most of the position and not holding too much over the weekend, if I hold anything at all.
Thursday, July 31, 2008
Wednesday, July 30, 2008
Market Goes Bang Bang
Stock market futures are quiet on the most recent earnings reports. Traders are awaiting the ADP Employment Data due out in 5 minutes. The report is not as important as the big Employment Report due out Friday, but traders are anxious about job trends in our economic slowing environment. If everything holds together, then the market might make another push sometime today, and perhaps into tomorrow.
Here is the journal recap of my trading day:
Stock Futures got a boost from a surprising ADP Employment Report showing an increase of 9k jobs for July versus an expected decline of 60k jobs. In addition the Fed is extending its Term Securities Lending Facility program. Traders will be watching for the next little catalyst, which will probably be the Oil Inventory Report due out in a little over an hour.
Morgan Stanley downgraded FDX for me, so thanks Morgan, I’m glad they didn’t do it yesterday before I bought calls on the confirmed bounce.....I sure wouldn't have wanted that.....no sir.....oh well, I will look to exit FDX this morning. Nothing quite as exciting as some Financial institution yappity yapping when they have enough of their own problems.....
7:40 am MT: I was busy selling my calls into the nice jumps in the Railroads: NSC and UNP. I also sold the two Steels on the gap up: X and AKS. I sold the FDX calls at breakeven because I had to, not because I wanted to.....thank-you Morgan. That’s how it goes, when risk goes up you have to make a choice, right or wrong. I always err on the safer side of things.
8:00 am MT: Here are the final tallies from yesterday’s calls: FDX was breakeven. AKS was a .73 cent profit or 10% gain. WHR was a 1.07 profit or 22% gain. X was a 2.27 profit or 15% gain. UNP was a .50 cent profit or 10% gain. And NSC was a 1.16 profit or 22% gain.
8:10 am MT: I jumped on LMT on the breakout of the channel on the 60m charts. The stock moved too much too quickly so I sold for a .30 cent profit or 7% gain in about 15 minutes. I think I will be able to buy the calls back in a little while for the same price.
Remember I told you (on yesterday’s post) that yesterday was about staying in the green, turning on a dime with a critical short term change in the market, and positioning for today? I call it "holding the line and turning on a dime." Well, I’ve made $3,021 so far on all the closed trades from this morning because of how I repositioned myself yesterday.....
8:50 am MT: The market is at a critical tipping point intra-day after the Oil Inventory Report. Traders are selling it off a bit. If the selling goes too much further we may get a round trip and then the follow through from yesterday is gone, poof! I’m all out of my calls and watching to see how this goes. I’m also keeping an eye on some oil stocks. We’ll see how this plays out.
11:30 am MT: I nibbled back into WHR calls. I also picked up BNI, CSX, and CMI calls. BNI took off immediately, so I sold the calls for a quick .80 cent profit, or 12% gain, which all the people on VC watched from beginning to end. Because I still want a little BNI, I bought another set of calls slightly OTM on a little pullback. I am looking to run the BNI, CSX, CMI, and WHR calls into the end of the day, and if we get a late-day rally, sell half. If we get a push out of the gate tomorrow morning, I will be aggressively selling the rest of the calls.
12:00 pm MT: The market is at a key point again intra-day. If 11,400 holds on the Dow, and the Bull Flag on the 60m charts holds up and bounces, then we could see an end-of-day push that will make the second wave of calls profitable.
1:20 pm MT: The Bull Flag played out perfectly so I picked up calls on DIA and SPY. I also went back into the Railroads a little more. I ended up selling everything on the late day bump. I then came back in the last 10 minutes on the pullback and bought back into DIA, SPY, and CSX. If we get a push out of the gate tomorrow morning then I will liquidate everything. So I’m holding small call positions on DIA, SPY, CSX, and CMI. I will keep an eye on BNI tomorrow morning as well.
Here is a recap of the last trades: CSX was a .46 cent profit or 8% gain. BNI was a .54 cent profit or 10.5% gain on one trade and a .28 cent profit or 4.5% gain on a second late day trade. I sold WHR at breakeven. DIA was a .29 cent profit or 7.5% gain. And SPY was a .31 cent profit or 7% gain. The final profits on the day for all closed positions was $4,719.
4:00 pm MT: Market Wrap: The market carried through on the bounce from yesterday (I posted yesterday that I was looking for 1-2 more days, and possibly the indexes reaching as far as their 50dma’s). I don’t think traders will push the indexes through their 50dma’s until they see if they like the Employment Report on Friday morning. The ISM will also be a big deal Friday morning. Speaking of employment data, it was the surprisingly strong ADP Private Employment report this morning that sparked the continuation. Positive news from the Fed about extending its liquidity programs also bolstered the market. Now, here is where it gets interesting…..The Oil Inventory Report this morning showed a large drop in gasoline inventories (despite a smaller than expected drop in crude oil stockpiles). So Energy stocks took off today. But the market didn’t sell off too much intra-day, and then pushed to close right at the highs of the day (on the Dow and SPX). We won’t do this forever, if oil prices keep rallying and Energy stocks run up, then the market will cave in eventually under the same weight that pushed the market down most of the summer - high gas prices. I’m playing this swing to run out tomorrow anyway, but the rise in oil prices is something I’m keeping one big eye on.
If the market makes a pretty good push early in the morning tomorrow, I'm all out of everything and probably only doing little nippers here and there into the end of the day - if I do anything at all. If the SPX gets in between 1,290 - 1,300 then I'm done for the early part of the day. The more I look at it the more I think that the market only gets to the 50dma on a good Jobs Report and probably not before. That means I'm not looking for the 50dma until Friday.
Here are some interesting Bullish Movers from today, or stocks that could be going Bullish:
Energy: SUN, HES, NOV, SLB, BHI
Manufacturing/Machinery: CMI, AG, JOYG, BUCY
Steel: CLF, (X, AKS)
Financials: MS, GS
Coals: WLT, ANR, MEE, ACI, PCX
Railroads: UNP, NSC, CSX, BNI
Chemicals: CF, TRA, MON
Also Note: BAX, AMT, ESRX, DD, AET, ACN, BDX, BIIB, MMM, IBM
I am especially interested in BHI and SLB, but the Coal stocks are coming back to life, and it looks like some Steel and Chemical stocks as well. Financials, Tech, and some Cyclicals continue to look pretty good. I still think something will give eventually.....either Energy and Commodity stocks.....or Finacials, Tech, Retail, and Leisure/Consumer Discretionary. I don't think we can have it both ways for very long in our current global environment.....
Here is the journal recap of my trading day:
Stock Futures got a boost from a surprising ADP Employment Report showing an increase of 9k jobs for July versus an expected decline of 60k jobs. In addition the Fed is extending its Term Securities Lending Facility program. Traders will be watching for the next little catalyst, which will probably be the Oil Inventory Report due out in a little over an hour.
Morgan Stanley downgraded FDX for me, so thanks Morgan, I’m glad they didn’t do it yesterday before I bought calls on the confirmed bounce.....I sure wouldn't have wanted that.....no sir.....oh well, I will look to exit FDX this morning. Nothing quite as exciting as some Financial institution yappity yapping when they have enough of their own problems.....
7:40 am MT: I was busy selling my calls into the nice jumps in the Railroads: NSC and UNP. I also sold the two Steels on the gap up: X and AKS. I sold the FDX calls at breakeven because I had to, not because I wanted to.....thank-you Morgan. That’s how it goes, when risk goes up you have to make a choice, right or wrong. I always err on the safer side of things.
8:00 am MT: Here are the final tallies from yesterday’s calls: FDX was breakeven. AKS was a .73 cent profit or 10% gain. WHR was a 1.07 profit or 22% gain. X was a 2.27 profit or 15% gain. UNP was a .50 cent profit or 10% gain. And NSC was a 1.16 profit or 22% gain.
8:10 am MT: I jumped on LMT on the breakout of the channel on the 60m charts. The stock moved too much too quickly so I sold for a .30 cent profit or 7% gain in about 15 minutes. I think I will be able to buy the calls back in a little while for the same price.
Remember I told you (on yesterday’s post) that yesterday was about staying in the green, turning on a dime with a critical short term change in the market, and positioning for today? I call it "holding the line and turning on a dime." Well, I’ve made $3,021 so far on all the closed trades from this morning because of how I repositioned myself yesterday.....
8:50 am MT: The market is at a critical tipping point intra-day after the Oil Inventory Report. Traders are selling it off a bit. If the selling goes too much further we may get a round trip and then the follow through from yesterday is gone, poof! I’m all out of my calls and watching to see how this goes. I’m also keeping an eye on some oil stocks. We’ll see how this plays out.
11:30 am MT: I nibbled back into WHR calls. I also picked up BNI, CSX, and CMI calls. BNI took off immediately, so I sold the calls for a quick .80 cent profit, or 12% gain, which all the people on VC watched from beginning to end. Because I still want a little BNI, I bought another set of calls slightly OTM on a little pullback. I am looking to run the BNI, CSX, CMI, and WHR calls into the end of the day, and if we get a late-day rally, sell half. If we get a push out of the gate tomorrow morning, I will be aggressively selling the rest of the calls.
12:00 pm MT: The market is at a key point again intra-day. If 11,400 holds on the Dow, and the Bull Flag on the 60m charts holds up and bounces, then we could see an end-of-day push that will make the second wave of calls profitable.
1:20 pm MT: The Bull Flag played out perfectly so I picked up calls on DIA and SPY. I also went back into the Railroads a little more. I ended up selling everything on the late day bump. I then came back in the last 10 minutes on the pullback and bought back into DIA, SPY, and CSX. If we get a push out of the gate tomorrow morning then I will liquidate everything. So I’m holding small call positions on DIA, SPY, CSX, and CMI. I will keep an eye on BNI tomorrow morning as well.
Here is a recap of the last trades: CSX was a .46 cent profit or 8% gain. BNI was a .54 cent profit or 10.5% gain on one trade and a .28 cent profit or 4.5% gain on a second late day trade. I sold WHR at breakeven. DIA was a .29 cent profit or 7.5% gain. And SPY was a .31 cent profit or 7% gain. The final profits on the day for all closed positions was $4,719.
4:00 pm MT: Market Wrap: The market carried through on the bounce from yesterday (I posted yesterday that I was looking for 1-2 more days, and possibly the indexes reaching as far as their 50dma’s). I don’t think traders will push the indexes through their 50dma’s until they see if they like the Employment Report on Friday morning. The ISM will also be a big deal Friday morning. Speaking of employment data, it was the surprisingly strong ADP Private Employment report this morning that sparked the continuation. Positive news from the Fed about extending its liquidity programs also bolstered the market. Now, here is where it gets interesting…..The Oil Inventory Report this morning showed a large drop in gasoline inventories (despite a smaller than expected drop in crude oil stockpiles). So Energy stocks took off today. But the market didn’t sell off too much intra-day, and then pushed to close right at the highs of the day (on the Dow and SPX). We won’t do this forever, if oil prices keep rallying and Energy stocks run up, then the market will cave in eventually under the same weight that pushed the market down most of the summer - high gas prices. I’m playing this swing to run out tomorrow anyway, but the rise in oil prices is something I’m keeping one big eye on.
If the market makes a pretty good push early in the morning tomorrow, I'm all out of everything and probably only doing little nippers here and there into the end of the day - if I do anything at all. If the SPX gets in between 1,290 - 1,300 then I'm done for the early part of the day. The more I look at it the more I think that the market only gets to the 50dma on a good Jobs Report and probably not before. That means I'm not looking for the 50dma until Friday.
Here are some interesting Bullish Movers from today, or stocks that could be going Bullish:
Energy: SUN, HES, NOV, SLB, BHI
Manufacturing/Machinery: CMI, AG, JOYG, BUCY
Steel: CLF, (X, AKS)
Financials: MS, GS
Coals: WLT, ANR, MEE, ACI, PCX
Railroads: UNP, NSC, CSX, BNI
Chemicals: CF, TRA, MON
Also Note: BAX, AMT, ESRX, DD, AET, ACN, BDX, BIIB, MMM, IBM
I am especially interested in BHI and SLB, but the Coal stocks are coming back to life, and it looks like some Steel and Chemical stocks as well. Financials, Tech, and some Cyclicals continue to look pretty good. I still think something will give eventually.....either Energy and Commodity stocks.....or Finacials, Tech, Retail, and Leisure/Consumer Discretionary. I don't think we can have it both ways for very long in our current global environment.....
Tuesday, July 29, 2008
Market Bounces Back as Oil Slides
Earnings are continuing to come in left and right. The Chemicals (CF and MOS) are pushing up, with CF leading the way. Steel is getting a big push from the X earnings. CL is in a strong Bullish Kicking Pattern after earnings. Sony gapped down after earnings, and VLO is down after earnings. The two areas I expected the biggest moves were Chemicals and Steel, those will probably stay momentum areas for a day or two.
The Dow has short term resistance between 11,285 - 11,300. The SPX has short term resistance at 1,253 - 1,254. The two indexes appear headed towards those areas. If I see a nice setup intra-day, I will pick up some puts on the DIA and SPY. I'm also watching X and CF for some momentum plays. Today was the reason I got out of my puts yesterday, and I'm glad I did.....You just never know with Earnings Season day to day. Now, if I want, I can get the same puts almost as cheap as yesterday. The good news is we're almost through the most newsy period of earnings, so next week I will be willing to hold more positions overnight.
8:20 am MT: I picked up calls in Papermoney on X and the stock took off, so I sold them for a 7% profit in about 5 minutes. I put the same order right back in to pick it up again if it pops back down. I also picked up calls on AKS. I wanted to pick up CF but the spreads are too wide, and nothing else in Chemicals excites me right now. I'm also keeping an eye on DIA and SPY puts. We shall see what the day brings.....
Here is the journal recap of my trading day:
10:30 am MT: The market is at a critical tipping point intra-day. This is exactly the area I was projecting this morning, and we got here on a nice Bear Flag on the 60m charts. I picked up a little more calls on X and AKS, and I’m contemplating puts on DIA and SPY. If the market doesn’t hold the bullish move today, right here is the place I would expect it to give it up.
11:00 am MT: I sold the AKS calls for a very minimal profit. I also stopped out the LMT calls for a .25 cent loss on a 2/3rd – size position, or a loss of $175. I sold the X calls again for a .60 cent profit or 4% gain. And I sold the WHR calls for a .18 cent profit or 4% gain. I also nibbled on DIA and SPY puts. I want to trade the X and AKS calls again, but I’m going to watch how the market holds up for the next few hours first. I’m watching and positioning in case this rolls over and continues the downswing from here. I also still want the LMT and WHR calls, but I think I can get them a little cheaper.
11:10 am MT: The market pushed up today on a positive Financial sector news bogeys, as opposed to yesterday’s negative Financial sector news bogeys…..So the fun and gun Financial sector is up to its same old tricks for the year. It’s like watching good cop bad cop, it might make you a little crazy, but at least it’s entertaining…..
The other two key drivers today are the relatively decent earnings reports and the drop in oil prices. Oil appears to be dropping today more on the “Strengthening Dollar” than on the “Slowing Global Economy”, so that’s all exciting…..or not…..It does appear that speculators are getting shaken out of oil futures to a certain extent. My guess is that about one third of the speculation has come off the top of oil now.
1:00 pm MT: earlier I nibbled back into the X, AKS, and WHR calls. I’m also probably going to sell the DIA and SPY puts at breakeven before the end of the day. I don’t mind holding the Steel and Cyclicals overnight, but I don’t want to hold the puts overnight.
I mentioned several times going into the week and yesterday about watching out for the Financial and Oil sector news bogeys. Yesterday we got the Financials negative news bogeys and down the market went. Today we got positive Oil and Financials news bogeys and right back up we go. I’m not going to fight the potentially extreme freneticism of traders and force some DIA and SPY puts against their collective emotion over falling oil prices, despite the fact that I just paid $4.13 a gallon this morning to fill up and the main reason (not the only reason, but the main reason) oil is dropping is because of slowing demand, which means slowing global economy, which means…..well, you get the idea.
1:10 pm MT: I sold the DIA and SPY puts for small losses of .05 cents and .10 cents respectively, and both positions were half-sizers so pretty much a scratch trade.
1:20 pm MT: I picked up more X on the little intra-day pullback. I’m watching to pick up some more AKS. I like X on a move back to 170, which is key resistance, but if we punch through that tomorrow then the stock can easily move another 3-5 points or more. It’s an extreme move today, but then again we live in an extreme world…..
I’m also looking to finish out the WHR position just before the close because it’s confirming today.
1:50 pm MT: I picked up the rest of my WHR calls. In addition, I picked up some more AKS. I also picked up some calls on UNP, NSC, and FDX. There are some interesting bullish movers today in Financials, but I just don’t have the stomach for that news-ridden sector right now. We’ve had news bogeys on the Financials every day this week and I don’t know about you, but I’m getting tired of hearing about every tiny thing to do with the sector. I don’t want to know the shade of green of the spinach caught in the teeth of the CFO for JP Morgan after his afternoon gourmet salad…..When we start hearing all the news about the flavor of the slurpee that the mail clerk for Lehman Brothers dropped on the floor of the break room at 3:59 pm Eastern Time while trying to eat a corn dog as he walked to the North East cafeteria table situated 12.7 feet from the Eastern load bearing wall along the windy side of the building…..well….I’ve got to say it’s a little much. I guess since we live in the information age, and news sells…..then obviously you can never quite sell enough of it…..by the shovel full…..
Back to trading and the call positions I took towards the end of the day: you know the routine by now, if we get a substantial gap up in the morning, I will sell all the calls into the gap. If we wiggle out of the gate I might add a little to the positions - if the market holds tough, and then look for another leg up in the swing to sell into.
2:00 pm MT: I finished the day with $390 in profits and $280 in losses for a modes net gain of $110 on all closed positions. Today wasn’t so much about making money as it was staying in the green while I turned on a dime and went bullish from a bearish posture and positioning. When you get a tipping day like this, it’s easy to lose a lot of money if you don’t turn the boat around and head with the tide when it shifts. I picked and pecked and watched and traded until I got in tune with the move. Now, if the market carries through a little Wednesday (and perhaps Thursday), the positions I transitioned into today should make a decent profit tomorrow.
2:30 pm MT: Market Wrap: The major indexes finished with Bullish Engulfing/Breakaway - hybrid types of patterns today. The Dow and SPX look like they want to slide up some more, possibly even swing up towards their 50-day moving averages. The Naz also looks like it could move towards its 50dma. The Naz movement day to day the past six days has gone like this: gap down and then rally back to close up, then an up day, then down hard, then back up strongly, then down hard again, then up sharply today. You don’t get much more split-brained then that. On the other hand, the Dow and SPX and many of their bullish sectors (Financials, Cyclicals, some Commodity-based, Leisure/Casinos, Transports, Railroads, Defense, and a few other areas) look fairly solid for another 1-2 days of upward movement. The 1-2 day move would put us right into Thursday, which times out perfectly for the Employment Report/ISM ultra heavy-hitter economic report day on Friday before the open. So I will probably run the calls from now until Thursday afternoon at the latest (if it goes that long), and then get out and sit on the big news morning Friday morning. Of course, a Financials or Oil news bogey could change all that…..but if we don’t get any goof news, then this move probably times out to Thursday afternoon.
Just as a reminder, I used this same type of strategizing yesterday. I stated for several days to watch out for the earnings on Monday night and Tuesday morning, and to watch out for a Financials or Oil news bogey. Which was exactly why I took my DIA and SPY puts day to day on Friday and again on Monday. That ended up being the perfect call as I made over $2,000 on the DIA and SPY puts total on those two days, and then got out. If I had carried those positions overnight, the profits would have gone right into the toilet today.
Here are some interesting Bullish Movers from today:
Steel: X, AKS
Financials: STI, HIG, PNC, RKH, STT, PRU, ADS, GS
Coals: WLT, ANR, FDG
Railroads: UNP, NSC, CSX, BNI
Transports: FDX
Leisure/Casinos: WYNN, CCL
Chemicals: CF
Defense: GD
Cyclicals: WHR, GR, CAT
Also Note: CL, PCAR, STJ
The Dow has short term resistance between 11,285 - 11,300. The SPX has short term resistance at 1,253 - 1,254. The two indexes appear headed towards those areas. If I see a nice setup intra-day, I will pick up some puts on the DIA and SPY. I'm also watching X and CF for some momentum plays. Today was the reason I got out of my puts yesterday, and I'm glad I did.....You just never know with Earnings Season day to day. Now, if I want, I can get the same puts almost as cheap as yesterday. The good news is we're almost through the most newsy period of earnings, so next week I will be willing to hold more positions overnight.
8:20 am MT: I picked up calls in Papermoney on X and the stock took off, so I sold them for a 7% profit in about 5 minutes. I put the same order right back in to pick it up again if it pops back down. I also picked up calls on AKS. I wanted to pick up CF but the spreads are too wide, and nothing else in Chemicals excites me right now. I'm also keeping an eye on DIA and SPY puts. We shall see what the day brings.....
Here is the journal recap of my trading day:
10:30 am MT: The market is at a critical tipping point intra-day. This is exactly the area I was projecting this morning, and we got here on a nice Bear Flag on the 60m charts. I picked up a little more calls on X and AKS, and I’m contemplating puts on DIA and SPY. If the market doesn’t hold the bullish move today, right here is the place I would expect it to give it up.
11:00 am MT: I sold the AKS calls for a very minimal profit. I also stopped out the LMT calls for a .25 cent loss on a 2/3rd – size position, or a loss of $175. I sold the X calls again for a .60 cent profit or 4% gain. And I sold the WHR calls for a .18 cent profit or 4% gain. I also nibbled on DIA and SPY puts. I want to trade the X and AKS calls again, but I’m going to watch how the market holds up for the next few hours first. I’m watching and positioning in case this rolls over and continues the downswing from here. I also still want the LMT and WHR calls, but I think I can get them a little cheaper.
11:10 am MT: The market pushed up today on a positive Financial sector news bogeys, as opposed to yesterday’s negative Financial sector news bogeys…..So the fun and gun Financial sector is up to its same old tricks for the year. It’s like watching good cop bad cop, it might make you a little crazy, but at least it’s entertaining…..
The other two key drivers today are the relatively decent earnings reports and the drop in oil prices. Oil appears to be dropping today more on the “Strengthening Dollar” than on the “Slowing Global Economy”, so that’s all exciting…..or not…..It does appear that speculators are getting shaken out of oil futures to a certain extent. My guess is that about one third of the speculation has come off the top of oil now.
1:00 pm MT: earlier I nibbled back into the X, AKS, and WHR calls. I’m also probably going to sell the DIA and SPY puts at breakeven before the end of the day. I don’t mind holding the Steel and Cyclicals overnight, but I don’t want to hold the puts overnight.
I mentioned several times going into the week and yesterday about watching out for the Financial and Oil sector news bogeys. Yesterday we got the Financials negative news bogeys and down the market went. Today we got positive Oil and Financials news bogeys and right back up we go. I’m not going to fight the potentially extreme freneticism of traders and force some DIA and SPY puts against their collective emotion over falling oil prices, despite the fact that I just paid $4.13 a gallon this morning to fill up and the main reason (not the only reason, but the main reason) oil is dropping is because of slowing demand, which means slowing global economy, which means…..well, you get the idea.
1:10 pm MT: I sold the DIA and SPY puts for small losses of .05 cents and .10 cents respectively, and both positions were half-sizers so pretty much a scratch trade.
1:20 pm MT: I picked up more X on the little intra-day pullback. I’m watching to pick up some more AKS. I like X on a move back to 170, which is key resistance, but if we punch through that tomorrow then the stock can easily move another 3-5 points or more. It’s an extreme move today, but then again we live in an extreme world…..
I’m also looking to finish out the WHR position just before the close because it’s confirming today.
1:50 pm MT: I picked up the rest of my WHR calls. In addition, I picked up some more AKS. I also picked up some calls on UNP, NSC, and FDX. There are some interesting bullish movers today in Financials, but I just don’t have the stomach for that news-ridden sector right now. We’ve had news bogeys on the Financials every day this week and I don’t know about you, but I’m getting tired of hearing about every tiny thing to do with the sector. I don’t want to know the shade of green of the spinach caught in the teeth of the CFO for JP Morgan after his afternoon gourmet salad…..When we start hearing all the news about the flavor of the slurpee that the mail clerk for Lehman Brothers dropped on the floor of the break room at 3:59 pm Eastern Time while trying to eat a corn dog as he walked to the North East cafeteria table situated 12.7 feet from the Eastern load bearing wall along the windy side of the building…..well….I’ve got to say it’s a little much. I guess since we live in the information age, and news sells…..then obviously you can never quite sell enough of it…..by the shovel full…..
Back to trading and the call positions I took towards the end of the day: you know the routine by now, if we get a substantial gap up in the morning, I will sell all the calls into the gap. If we wiggle out of the gate I might add a little to the positions - if the market holds tough, and then look for another leg up in the swing to sell into.
2:00 pm MT: I finished the day with $390 in profits and $280 in losses for a modes net gain of $110 on all closed positions. Today wasn’t so much about making money as it was staying in the green while I turned on a dime and went bullish from a bearish posture and positioning. When you get a tipping day like this, it’s easy to lose a lot of money if you don’t turn the boat around and head with the tide when it shifts. I picked and pecked and watched and traded until I got in tune with the move. Now, if the market carries through a little Wednesday (and perhaps Thursday), the positions I transitioned into today should make a decent profit tomorrow.
2:30 pm MT: Market Wrap: The major indexes finished with Bullish Engulfing/Breakaway - hybrid types of patterns today. The Dow and SPX look like they want to slide up some more, possibly even swing up towards their 50-day moving averages. The Naz also looks like it could move towards its 50dma. The Naz movement day to day the past six days has gone like this: gap down and then rally back to close up, then an up day, then down hard, then back up strongly, then down hard again, then up sharply today. You don’t get much more split-brained then that. On the other hand, the Dow and SPX and many of their bullish sectors (Financials, Cyclicals, some Commodity-based, Leisure/Casinos, Transports, Railroads, Defense, and a few other areas) look fairly solid for another 1-2 days of upward movement. The 1-2 day move would put us right into Thursday, which times out perfectly for the Employment Report/ISM ultra heavy-hitter economic report day on Friday before the open. So I will probably run the calls from now until Thursday afternoon at the latest (if it goes that long), and then get out and sit on the big news morning Friday morning. Of course, a Financials or Oil news bogey could change all that…..but if we don’t get any goof news, then this move probably times out to Thursday afternoon.
Just as a reminder, I used this same type of strategizing yesterday. I stated for several days to watch out for the earnings on Monday night and Tuesday morning, and to watch out for a Financials or Oil news bogey. Which was exactly why I took my DIA and SPY puts day to day on Friday and again on Monday. That ended up being the perfect call as I made over $2,000 on the DIA and SPY puts total on those two days, and then got out. If I had carried those positions overnight, the profits would have gone right into the toilet today.
Here are some interesting Bullish Movers from today:
Steel: X, AKS
Financials: STI, HIG, PNC, RKH, STT, PRU, ADS, GS
Coals: WLT, ANR, FDG
Railroads: UNP, NSC, CSX, BNI
Transports: FDX
Leisure/Casinos: WYNN, CCL
Chemicals: CF
Defense: GD
Cyclicals: WHR, GR, CAT
Also Note: CL, PCAR, STJ
Monday, July 28, 2008
Market Takes Another Leg Down
Stock market futures are down pre-market as traders focus on the empty half of the glass. It appears that investors are having a melancholy moment as they contemplate the 470b in writedowns and credit losses worldwide amongst Financial institutions stemming from the subprime mortgage market. Bill Gross has predicted that the number may reach $1 trillion.....
As it is, the market is set for a soft open. I will probably be looking to play some puts for a little while intra-day, but I'm not looking for a strong momentum day to the downside. It may happen, so I will be ready if it does, but I'm looking for more of a softer, mushier day of trading ahead of the earnings reports due out tonight and tomorrow morning.
Here is the journal recap of my trading day:
7:45 am MT: The Market came out of the gate with a squish. I’m looking around, but I don’t see a lot. PRU looks interesting, and DHR may be trying to move. I decided to do a tiny nibble on PRU calls. Financials are making a little wiggle.
8:00 am MT: I also picked up a tiny nibble on LMT calls. The market this morning is doing what I thought it would so far, mush and squish. However, the longer it holds up, the better chance the PRU and LMT calls (or other areas) run up a little. So I’m tiptoeing around and doing a little here and there. Like I said, pretty much how I thought today would go. If the market breaks down through the three-day support I will probably do a quick put play on SPY and DIA. Until then.....I am sitting and watching. Also, PRU legged up a little more, so I nibbled on calls a little more.
8:10 am MT: I nibbled on some WHR calls. Traders may be turning it off the gap. I also picked up a little more of the LMT calls on the intra-day Hammer.
8:45 am MT: I sold most of the LMT calls into the extreme intra-day move for a .33 cent profit or 9% gain in less than an hour. I figure that I can get the calls cheaper in a few minutes.
9:10 am MT: I picked up the LMT calls again at a cheaper price. I also nibbled a little on some SPY and DIA puts. I am close to stopping out of the PRU calls, but it’s holding support for now.
9:15 am MT: I stopped the PRU calls for an .82 cent loss or 14% on a half-sized position.
9:50 am MT: I started scaling out of a little of the DIA and SPY puts. I locked about 4% - 5% profits so far on the puts. I took full sized positions, and I may add more back in on any pullbacks.
10:30 am MT: I added back into the DIA and SPY puts on the intra-day consolidation.
10:45 am MT: I scaled out of a little more of the DIA and SPY puts on the breakdown of the consolidation. I have some of the puts that I am just riding throughout the day for a normal short swing and I have some of the puts I’m getting in and out of a little faster to reduce my risk. I’m targeting 11,175 on the Dow and 1,240 – 1,242 on the SPX to exit most of the puts.
11:00 am MT: I have been busy scaling out of the DIA and SPY puts.
11:35 am MT: I finished selling all the DIA and SPY puts. Here are the tallies for the quick hits: DIA was a .27 cent profit or 7% gain on a full-sized position. SPY was a .30 cent profit or 7% gain on a full-sized position. Here are the tallies for the short swings: DIA was a .45 cent profit or 12% gain on a full-sized position. SPY was a .54 cent profit or 12% gain on a full-sized position. Here are my total profits on the day in dollars for closed positions: I made $1,557 on the DIA and SPY puts, I made $130 on the LMT calls, and I lost $410 on the PRU calls. The net profit is $1,277.00. I put the time stamps in as accurately as possible, but anyone who wants to check the trade entries and exits more closely in my Papermoney can ask me to show the trades and analysis in my Wednesday VC.
3:00 pm MT: Market Wrap: The SPX went through short term support at 1,250 and made it all the way down to the top end of my next support zone at 1,235. The Dow and the Naz had similar types of drops, with the Naz flopping down through the low end of its short term consolidation channel. It was a nice day for puts on the DIA and SPY. In fact, it’s been a nice two days of puts on the index ETF’s. Many of the sectors that saw the most short-covering last week were the sectors that sold off the hardest today: Banks, Brokers, Airlines, and Housing. The Financials were in the center of the storm after the FDIC shut down two more Regional Banks (the sixth and seventh failures this year). In addition, the IMF (International Monetary Fund) stated that it was their belief that the mortgage mess in Financials was going to reach $1 trillion in losses (hey, Bill Gross said the same thing.....). So Financials gave us a nice little news bogey to help the puts along today. I thought it was going to be a quiet-ish day unless we got a Financials or Oil news bogey. Well, we got the Financials news bogey.....If Earnings take us down another leg tomorrow, then I’ll do puts all over again.
The next support level on the SPX is 1,225, and then 1,215. After that it could be a round trip back to 1,200, we shall see.....The Dow has a support zone between 10,920 and 11,000. I would guess that a move down to 10,920 on the Dow would coincide with a move down on the SPX down to 1,215. The Naz has support at 2,250, and then minor support in the 2,225 – 2,230 area, with a more key support level at 2,192 – 2,197.
We have a lot of earnings to digest tonight and tomorrow. I wouldn’t mind a little wiggle out of the gate tomorrow to load up on SPY and DIA puts again. But watch the stocks with earnings that I mentioned from Saturday’s post as well, we could see some strong sector and stock movement in a few areas tomorrow, even if the overall market doesn’t move quite like it did today.
As it is, the market is set for a soft open. I will probably be looking to play some puts for a little while intra-day, but I'm not looking for a strong momentum day to the downside. It may happen, so I will be ready if it does, but I'm looking for more of a softer, mushier day of trading ahead of the earnings reports due out tonight and tomorrow morning.
Here is the journal recap of my trading day:
7:45 am MT: The Market came out of the gate with a squish. I’m looking around, but I don’t see a lot. PRU looks interesting, and DHR may be trying to move. I decided to do a tiny nibble on PRU calls. Financials are making a little wiggle.
8:00 am MT: I also picked up a tiny nibble on LMT calls. The market this morning is doing what I thought it would so far, mush and squish. However, the longer it holds up, the better chance the PRU and LMT calls (or other areas) run up a little. So I’m tiptoeing around and doing a little here and there. Like I said, pretty much how I thought today would go. If the market breaks down through the three-day support I will probably do a quick put play on SPY and DIA. Until then.....I am sitting and watching. Also, PRU legged up a little more, so I nibbled on calls a little more.
8:10 am MT: I nibbled on some WHR calls. Traders may be turning it off the gap. I also picked up a little more of the LMT calls on the intra-day Hammer.
8:45 am MT: I sold most of the LMT calls into the extreme intra-day move for a .33 cent profit or 9% gain in less than an hour. I figure that I can get the calls cheaper in a few minutes.
9:10 am MT: I picked up the LMT calls again at a cheaper price. I also nibbled a little on some SPY and DIA puts. I am close to stopping out of the PRU calls, but it’s holding support for now.
9:15 am MT: I stopped the PRU calls for an .82 cent loss or 14% on a half-sized position.
9:50 am MT: I started scaling out of a little of the DIA and SPY puts. I locked about 4% - 5% profits so far on the puts. I took full sized positions, and I may add more back in on any pullbacks.
10:30 am MT: I added back into the DIA and SPY puts on the intra-day consolidation.
10:45 am MT: I scaled out of a little more of the DIA and SPY puts on the breakdown of the consolidation. I have some of the puts that I am just riding throughout the day for a normal short swing and I have some of the puts I’m getting in and out of a little faster to reduce my risk. I’m targeting 11,175 on the Dow and 1,240 – 1,242 on the SPX to exit most of the puts.
11:00 am MT: I have been busy scaling out of the DIA and SPY puts.
11:35 am MT: I finished selling all the DIA and SPY puts. Here are the tallies for the quick hits: DIA was a .27 cent profit or 7% gain on a full-sized position. SPY was a .30 cent profit or 7% gain on a full-sized position. Here are the tallies for the short swings: DIA was a .45 cent profit or 12% gain on a full-sized position. SPY was a .54 cent profit or 12% gain on a full-sized position. Here are my total profits on the day in dollars for closed positions: I made $1,557 on the DIA and SPY puts, I made $130 on the LMT calls, and I lost $410 on the PRU calls. The net profit is $1,277.00. I put the time stamps in as accurately as possible, but anyone who wants to check the trade entries and exits more closely in my Papermoney can ask me to show the trades and analysis in my Wednesday VC.
3:00 pm MT: Market Wrap: The SPX went through short term support at 1,250 and made it all the way down to the top end of my next support zone at 1,235. The Dow and the Naz had similar types of drops, with the Naz flopping down through the low end of its short term consolidation channel. It was a nice day for puts on the DIA and SPY. In fact, it’s been a nice two days of puts on the index ETF’s. Many of the sectors that saw the most short-covering last week were the sectors that sold off the hardest today: Banks, Brokers, Airlines, and Housing. The Financials were in the center of the storm after the FDIC shut down two more Regional Banks (the sixth and seventh failures this year). In addition, the IMF (International Monetary Fund) stated that it was their belief that the mortgage mess in Financials was going to reach $1 trillion in losses (hey, Bill Gross said the same thing.....). So Financials gave us a nice little news bogey to help the puts along today. I thought it was going to be a quiet-ish day unless we got a Financials or Oil news bogey. Well, we got the Financials news bogey.....If Earnings take us down another leg tomorrow, then I’ll do puts all over again.
The next support level on the SPX is 1,225, and then 1,215. After that it could be a round trip back to 1,200, we shall see.....The Dow has a support zone between 10,920 and 11,000. I would guess that a move down to 10,920 on the Dow would coincide with a move down on the SPX down to 1,215. The Naz has support at 2,250, and then minor support in the 2,225 – 2,230 area, with a more key support level at 2,192 – 2,197.
We have a lot of earnings to digest tonight and tomorrow. I wouldn’t mind a little wiggle out of the gate tomorrow to load up on SPY and DIA puts again. But watch the stocks with earnings that I mentioned from Saturday’s post as well, we could see some strong sector and stock movement in a few areas tomorrow, even if the overall market doesn’t move quite like it did today.
Saturday, July 26, 2008
Watchlist Saturday
Market Posture:
Dow: IT (intermediate term) Bearish and ST (short term) Bearish. The Dow rolled over with an Evening Star Reversal on Thursday and is now hovering in no-mans land between ST support and resistance and floating in the LT channel. There are no key economic reports until Thursday (GDP and ECI) and the most important aren't until Friday (Employment Report and ISM). Normally the two biggest economic reports of the month don't fall on the same day, but when the first day of a month is a Friday.....well then they do. There are some big name companies reporting earnings early in the week: Monday before the open - VZ, Monday after the close - AMGN, CF, MOS, Tuesday before the open - COH, CL, GM, NOV, NOC, SNE, X, VLO. Expect Chemicals, Steel, and Cyclicals to be movers on Tuesday. So the theme emerging for the week (especially if we don't get any news bogeys in Oil and Financials), is going to be earnings driving the early week and economic reports driving the end of the week. I will play the Dow and SPX for a potential drop on Monday, but then I'm standing back and watching how earnings drive the market on Tuesday. I usually put some supports and resistances on the Dow and the SPX, but I'm not going to focus too much on that until Tuesday day. I will play an intra-day put (if it shows itself) on the DIA and SPY on Monday and then stand back and re-assess when all the news hits the market Tuesday.
Here is the short term chart of the Dow:
(click on image to enlarge)
Here is the long term chart of the Dow:
(click on image to enlarge)
SPX: IT Bearish and ST Bearish. Not much to say about the SPX that's different from the Dow. I drew several short term supports and resistances so I can play the SPY tomorrow like I did on Friday. Same story as the Dow, we probably won't see a bigger move until Tuesday.(click on image to enlarge)
Here is the long term chart of the Dow:
(click on image to enlarge)
Here is the short term chart of the SPX:
(click on image to enlarge)
Here is the long term chart of the SPX. I'm not super excited about the Hammer followed by the Shooting Star, that's a little too volatile.....we'll see if it settles down:
(click on image to enlarge)
Naz: IT Bearish and ST Chop and Slop (you like that designation?...... ). The Naz is all over the place. I'm steering clear of the Q's for awhile.(click on image to enlarge)
Here is the long term chart of the SPX. I'm not super excited about the Hammer followed by the Shooting Star, that's a little too volatile.....we'll see if it settles down:
(click on image to enlarge)
Here is the short term chart of the Naz (ughh.....pew!):
(click on image to enlarge)
Here is the long term chart of the Naz (that's better, smooth out that chop and slop and now we can see an interesting potential Double-Bottom):
(click on image to enlarge)
(click on image to enlarge)
Here is the long term chart of the Naz (that's better, smooth out that chop and slop and now we can see an interesting potential Double-Bottom):
(click on image to enlarge)
Here are some interesting Bullish Movers or possible setups from Friday:
Manufacturing/Machinery: BUCY (note JOYG may change trend).
Coal: (still in downtrends with a few sideways trends like ANR and FDG, but the Coals are bouncing a little): MEE, PCX, ACI, BTU, ANR, FDG. I'm not playing them yet, but they are moving a bit.
Cyclicals: DHR, WHR
Retail: AMZN is pulling back a little
Drug Stores: MHS
Defense is interesting: GR, GD, LMT (remember that NOC has earnings on Tuesday)
Tech Services: ESRX (earnings coming up this week), IBM is pulling back a little
Biotechs: CELG and ILMN are still on the move
Healthcare: STJ and BDX look interesting
Note: NIHD is very strong, GILD may not be a put opportunity anymore - it's getting too strong, APOL is continuing to chug its way up, and JEC and BHI are worth watching.
Here are some Bearish Movers or possible setups from Friday:
Transports: CHRW (soon, maybe at 51), UPS, FDX
Cyclicals: TXT
Retail: RTH
Note: ZMH and GENZ (bearish gap).
I'll probably have a better idea on the direction of sectors and stocks on Tuesday through Thursday by Tuesday mid-morning. But then next Friday could change all that.....In the meanwhile I will probably play some little puts on DIA and SPY tomorrow (if it shows itself) just like last Friday. If the indexes turn and burn with a mid-week rally off of earnings then I may add an SPY and DIA Iron Condor to my existing Iron Condors.
Manufacturing/Machinery: BUCY (note JOYG may change trend).
Coal: (still in downtrends with a few sideways trends like ANR and FDG, but the Coals are bouncing a little): MEE, PCX, ACI, BTU, ANR, FDG. I'm not playing them yet, but they are moving a bit.
Cyclicals: DHR, WHR
Retail: AMZN is pulling back a little
Drug Stores: MHS
Defense is interesting: GR, GD, LMT (remember that NOC has earnings on Tuesday)
Tech Services: ESRX (earnings coming up this week), IBM is pulling back a little
Biotechs: CELG and ILMN are still on the move
Healthcare: STJ and BDX look interesting
Note: NIHD is very strong, GILD may not be a put opportunity anymore - it's getting too strong, APOL is continuing to chug its way up, and JEC and BHI are worth watching.
Here are some Bearish Movers or possible setups from Friday:
Transports: CHRW (soon, maybe at 51), UPS, FDX
Cyclicals: TXT
Retail: RTH
Note: ZMH and GENZ (bearish gap).
I'll probably have a better idea on the direction of sectors and stocks on Tuesday through Thursday by Tuesday mid-morning. But then next Friday could change all that.....In the meanwhile I will probably play some little puts on DIA and SPY tomorrow (if it shows itself) just like last Friday. If the indexes turn and burn with a mid-week rally off of earnings then I may add an SPY and DIA Iron Condor to my existing Iron Condors.
Friday, July 25, 2008
Durable Orders Wiggles the Market
Durable Orders came in better than expected, which is giving the market a little wiggle into the green out of the gate. The SPX has a chance to test the 1,262 - 1,265 area. I will be watching for puts on SPY and DIA if the market rolls over again after testing those areas based on the Evening Star Reversals we got yesterday.
It looks like Energy and Liesure/Discretionary Spending (Retail, Airlines etc.) will battle it out today. It will be interesting to see who wins that battle. I am going to nibble on SPY and DIA puts this morning if the indexes roll over intra-day, and I will take some of the profits early, if the market does fade below yesterday's lows. I will decide towards the end of the day if I keep any of the puts through the weekend.
8:00 am MT: the market rallied a little, and the SPX made it right into the zone that I was watching for. The morning high was 1,263 and the SPX is still fighting. We may see 1,266 in a few minutes. I'm also looking for 11,480 - 11,500 on the Dow. Whatever plays out, I'm watching for that intra-day reversal. We'll see if we get it.....
Market Wrap: The major indexes finished up on the day, but down for the week. Durable Orders gave the market a little wiggle, which was enough to play some intra-day puts. But overall the action was pretty quiet. Earnings Season is still tossing the market around, and that theme will continue with plenty more companies reporting next week. After that, things quiet down a bit on the earnings front. The Dow and the SPX still look like they are susceptible to rolling down a bit further off the Evening Star Reversal from Thursday. The Naz is very choppy, trading up one day and down the next in a tight consolidation channel. I will look for a potential put play on DIA or SPY again on Monday, but I don't want to hold overnight because there are so many companies reporting earnings on Monday night and Tuesday morning.
I picked up some DIA puts when the index was around 114.30 early in the day. I also picked up some SPY puts at the same time, when SPY was around 126.25. I sold both positions about 20 minutes or so before the close, just before the Hot Potato bounce I warned was going to come at the end of the day (I wrote about on yesterday's post). Here are the final tallies: SPY was a .28 cent profit or 6% gain intra-day, and DIA was a .50 cent profit or 11% gain intra-day. I would have liked more, obviously, but some days you just take your $500 bucks and walk.
Some of you played the CYMI puts and CELG calls that I mentioned. Those, along with several other stocks from the watchlist ended up being very nice plays. On Saturday's Watchlist I will set up some stocks to watch for Monday, and some earnings stocks to watch for Tuesday.
It looks like Energy and Liesure/Discretionary Spending (Retail, Airlines etc.) will battle it out today. It will be interesting to see who wins that battle. I am going to nibble on SPY and DIA puts this morning if the indexes roll over intra-day, and I will take some of the profits early, if the market does fade below yesterday's lows. I will decide towards the end of the day if I keep any of the puts through the weekend.
8:00 am MT: the market rallied a little, and the SPX made it right into the zone that I was watching for. The morning high was 1,263 and the SPX is still fighting. We may see 1,266 in a few minutes. I'm also looking for 11,480 - 11,500 on the Dow. Whatever plays out, I'm watching for that intra-day reversal. We'll see if we get it.....
Market Wrap: The major indexes finished up on the day, but down for the week. Durable Orders gave the market a little wiggle, which was enough to play some intra-day puts. But overall the action was pretty quiet. Earnings Season is still tossing the market around, and that theme will continue with plenty more companies reporting next week. After that, things quiet down a bit on the earnings front. The Dow and the SPX still look like they are susceptible to rolling down a bit further off the Evening Star Reversal from Thursday. The Naz is very choppy, trading up one day and down the next in a tight consolidation channel. I will look for a potential put play on DIA or SPY again on Monday, but I don't want to hold overnight because there are so many companies reporting earnings on Monday night and Tuesday morning.
I picked up some DIA puts when the index was around 114.30 early in the day. I also picked up some SPY puts at the same time, when SPY was around 126.25. I sold both positions about 20 minutes or so before the close, just before the Hot Potato bounce I warned was going to come at the end of the day (I wrote about on yesterday's post). Here are the final tallies: SPY was a .28 cent profit or 6% gain intra-day, and DIA was a .50 cent profit or 11% gain intra-day. I would have liked more, obviously, but some days you just take your $500 bucks and walk.
Some of you played the CYMI puts and CELG calls that I mentioned. Those, along with several other stocks from the watchlist ended up being very nice plays. On Saturday's Watchlist I will set up some stocks to watch for Monday, and some earnings stocks to watch for Tuesday.
Thursday, July 24, 2008
Market Rolls Over
The market wiggled a little out of the gate and then rolled down early in the day. There is no specific catalyst, although the jump in Weekly Jobless Claims to 406k would be the most significant new bit of news. Earnings continue to come pouring in at a rapid pace. The market action is basically playing out as anticipated. The indexes were over extended short term, especially after the Rising Three Methods variant, and we got the 1-2 day additional move that I speculated. Now it appears as though traders are taking some profits. It may be that the shorts have finished covering for now as well. We shall see.....
Watch for diagonal support on the SPX on the short term uptrend channel around 1,262. If the index gets through that area then it could drop to 1,250 pretty quickly.
9:00 pm MT: Market Wrap: The Dow and SPX rolled over in Evening Star Reversals, and the Naz had a Bearish Engulfing. The SPX ran to 1,262 as I warned earlier, and the when it broke down through that area it dropped quickly to 1,251 (I had the target at 1,250). So things played out basically as I warned they might earlier today. There was no real news catalyst, so this is profit taking and the end of the short covering (at least for now). Once the Shorts stopped covering in Financials, and all the bullish bargain hunting ran out of energy, the market rolled over pretty sharply. Some Financials rolled down, but the strongest selling was in Leisure, Gold, Chemicals, and Steel.
Here are some interesting Bullish stocks: AMZN, CELG, and to an extent QCOM. I like how IBM and BAX are holding tough. Also: DHR, LMT, GD, and WHR are in nice little pullbacks.
Here are some interesting Bearish stocks: GILD and TXT may roll over. ERTS, PH, ESV, and MTB all rolled down. SPY and DIA look like they could be good put opportunities for at least part of the day tomorrow, and perhaps for several more days.
It is interesting that a number of Coal and Energy stocks closed well off their lows today:
Energy: BHI, SLB, CHK, UPL, RRC, WFT, XTO, OXY, HES
Coal: WLT, ACI, ANR, CNX
Tomorrow watch for a Hot Potato day. The perfect scenario is a little wiggle up out of the gate to buy puts on SPY, DIA, and several stocks (but not Energy, I don’t want puts there for now). Then if the market sells off through the mid-day, I would look for the Hot Potato as Shorts cover dips and Bulls sell rallies in the last 90 minutes or so. The indexes look like they could be headed for a higher low, but may dip down deeper towards a potential Double Bottom (a test of the recent lows). I speculate the drop down to the recent lows scenario would only be if we get a big bounce in oil prices, or more data that indicates that the unemployment rate is going up.
Watch for diagonal support on the SPX on the short term uptrend channel around 1,262. If the index gets through that area then it could drop to 1,250 pretty quickly.
9:00 pm MT: Market Wrap: The Dow and SPX rolled over in Evening Star Reversals, and the Naz had a Bearish Engulfing. The SPX ran to 1,262 as I warned earlier, and the when it broke down through that area it dropped quickly to 1,251 (I had the target at 1,250). So things played out basically as I warned they might earlier today. There was no real news catalyst, so this is profit taking and the end of the short covering (at least for now). Once the Shorts stopped covering in Financials, and all the bullish bargain hunting ran out of energy, the market rolled over pretty sharply. Some Financials rolled down, but the strongest selling was in Leisure, Gold, Chemicals, and Steel.
Here are some interesting Bullish stocks: AMZN, CELG, and to an extent QCOM. I like how IBM and BAX are holding tough. Also: DHR, LMT, GD, and WHR are in nice little pullbacks.
Here are some interesting Bearish stocks: GILD and TXT may roll over. ERTS, PH, ESV, and MTB all rolled down. SPY and DIA look like they could be good put opportunities for at least part of the day tomorrow, and perhaps for several more days.
It is interesting that a number of Coal and Energy stocks closed well off their lows today:
Energy: BHI, SLB, CHK, UPL, RRC, WFT, XTO, OXY, HES
Coal: WLT, ACI, ANR, CNX
Tomorrow watch for a Hot Potato day. The perfect scenario is a little wiggle up out of the gate to buy puts on SPY, DIA, and several stocks (but not Energy, I don’t want puts there for now). Then if the market sells off through the mid-day, I would look for the Hot Potato as Shorts cover dips and Bulls sell rallies in the last 90 minutes or so. The indexes look like they could be headed for a higher low, but may dip down deeper towards a potential Double Bottom (a test of the recent lows). I speculate the drop down to the recent lows scenario would only be if we get a big bounce in oil prices, or more data that indicates that the unemployment rate is going up.
Wednesday, July 23, 2008
Papermoney Trade
PAPERMONEY SOLD -1 NSC 100 SEP 08 70 CALL @3.80, NSC MARK 69.98, ACCOUNT D-******47
More of the Same Market Action Today
The market opened up a little in the green on more positive earnings and another drop in oil prices. Traders are still holding the momentum from yesterday, although there is a pause coming out of the gate this morning. Gold continues to sell off as traders leave the “flight to safety” and continue to nibble and bite on stocks. Eventually the Financials will see some consolidation off the extremely sharp short-term bullish move that came from short covering and bargain buying. Earnings Season continues to put volatility in the market as traders push and shove and jostle around. The initial consensus from Earnings Season appears to be more bullishness than bearishness.
7:00 pm MT: Market Wrap: There wasn't a whole lot that the market did today that it didn't do yesterday, and pretty much for the same reasons. Energy and Commodities down and Financials, Healthcare/Biotechs, Railroads, Retail, and Cyclicals up. Most of my bullish watchlist from yesterday carried through a little bit today (or for some stocks - a lot), and most of my bearish watchlist from yesterday dropped a little or a lot today. The one notable exception was CAT, which rolled over today. Yesterday I posted that I thought the short term upswing could go another 1-2 days (especially because I was seeing a lot of Rising Three Methods). We had one of those days today, we may see a little more wiggle up tomorrow. And as always: earnings, earnings, earnings.....
Here is a summary of my (paper) trades on the day: I sold the BNI calls for a 1.10 profit, or 16% gain from yesterday. I also continued playing Railroads with some NSC calls today that I bought and sold for a .46 cent profit, or 14% gain intra-day. I closed all the Railroad plays because BNI and UNP both announce earnings before the open tomorrow. I also nibbled in a 1/5th size call position on SLB that I'm holding for a day or two. The last thing I did was add an IWM Iron Condor to my existing IC on IWM. I liked the add-on because the IWM has moved so much the past week. So I picked up a 77/78 65/66 for a net credit of .15 cents. There were more trades today than there was time or money if you were playing short swings, especially on stocks from the watchlist I gave you yesterday.
Here is a list of interesting Bullish Bounces or Breakouts today (in addition to yesterday's Bullish Watchlist, which had many movers today):
Biotechs: ILMN
Tech: ADBE
Railroads: NSC, BNI, UNP
Retail: SHLD, ANF (the move in ANF is almost done)
Defense: GD, LMT
Chemicals: PX
Financials: JPM
Note: DHR is pulling back nicely, AMZN is headed for a breakout of a Double-Bottom after a better than expected earnings report a few hours ago, and CELG may be interesting to watch after earnings tomorrow morning.
Here is a list of Bearish movers today: (besides Energy, Utility and Commodity stocks from yesterday's watchlist)
CHRW, COST, BJ, and CAT
7:00 pm MT: Market Wrap: There wasn't a whole lot that the market did today that it didn't do yesterday, and pretty much for the same reasons. Energy and Commodities down and Financials, Healthcare/Biotechs, Railroads, Retail, and Cyclicals up. Most of my bullish watchlist from yesterday carried through a little bit today (or for some stocks - a lot), and most of my bearish watchlist from yesterday dropped a little or a lot today. The one notable exception was CAT, which rolled over today. Yesterday I posted that I thought the short term upswing could go another 1-2 days (especially because I was seeing a lot of Rising Three Methods). We had one of those days today, we may see a little more wiggle up tomorrow. And as always: earnings, earnings, earnings.....
Here is a summary of my (paper) trades on the day: I sold the BNI calls for a 1.10 profit, or 16% gain from yesterday. I also continued playing Railroads with some NSC calls today that I bought and sold for a .46 cent profit, or 14% gain intra-day. I closed all the Railroad plays because BNI and UNP both announce earnings before the open tomorrow. I also nibbled in a 1/5th size call position on SLB that I'm holding for a day or two. The last thing I did was add an IWM Iron Condor to my existing IC on IWM. I liked the add-on because the IWM has moved so much the past week. So I picked up a 77/78 65/66 for a net credit of .15 cents. There were more trades today than there was time or money if you were playing short swings, especially on stocks from the watchlist I gave you yesterday.
Here is a list of interesting Bullish Bounces or Breakouts today (in addition to yesterday's Bullish Watchlist, which had many movers today):
Biotechs: ILMN
Tech: ADBE
Railroads: NSC, BNI, UNP
Retail: SHLD, ANF (the move in ANF is almost done)
Defense: GD, LMT
Chemicals: PX
Financials: JPM
Note: DHR is pulling back nicely, AMZN is headed for a breakout of a Double-Bottom after a better than expected earnings report a few hours ago, and CELG may be interesting to watch after earnings tomorrow morning.
Here is a list of Bearish movers today: (besides Energy, Utility and Commodity stocks from yesterday's watchlist)
CHRW, COST, BJ, and CAT
Tuesday, July 22, 2008
Bulls Climb a Wall of Worry
Earnings continue to come in worse than expected this morning after the negative earnings from last night. AAPL, TXN, and SNDK have pushed the Naz futures way down pre-market, which means the Naz will likely gap down hard at the open. The SPX and Dow are also looking to have negative opens on the AXP, WB, DD and other earnings. CAT looks like it may be up slightly after earnings. BHI in Energy looks like it will be up sharply after earnings. The market is probably going to roll over short term and things may play out today as I posted last night. We shall see.....
5:00 pm MT: The stock market is following the old adage that "Bull Markets Climb a Wall of Worry." The saying is applicable to situations where much of the news appears to be bad, and yet the market goes up. Today, the market was set to tumble over on a slew of bad earnings reports and ongoing macro-economic issues. However, a drop in oil prices put a strong bid under the market and sent it chugging up the charts. If you reason the oil prices you can see that a drop into the mid 120's is not that big a deal, especially given that the recent slide from the 148 area to the 128 area hasn't even put a dent in $4.00 a gallon gasoline. Nor has the drop changed the supply and demand equation globally. Nevertheless, the bulls are pushing forward. The climb may be more of a short term to intermediate term effect, but the market seems to be determined to move up in spite of bad news. Right now, the Hammers on the Weekly Charts on the major indexes (that I charted for you on the Saturday post) are playing out. The chart signals on the major indexes are pointing towards another 1-2 days of upside in the current short term upswing, and possibly a change in the intermediate term downtrend. The Dow has climbed right into the middle of a short term resistance zone, but could still run for a day or two, especially given that it could eventually trend towards the top end of the long term channel.
The Naz and the SPX are also bouncing in a similar manner on their respective charts. It adds up to a probable 1-2 days more of upside, and perhaps a little longer. Shorts don't want to be short right now, and dips are getting covered in a blink in almost every area outside of Energy and Commodity stocks. The sector rotation seems to want to continue a little longer and there aren't any key signs of reversing yet.
There were a lot of Rising Three Methods continuation patterns today, I will show some charts in various sectors to demonstrate the pattern:
Here is a Watchlist for stocks that are either Bullish or starting to go Bullish:
Financials: Brokers: MS, GS Insurance: PRU (Reverse H&S), LNC, MET Banks: JPM Regional Banks: STI, PNC, RKH, STT, NTRS Other: TROW, COF, ADS
Leisure: CCL, WYN
Biotechs/Healthcare: BIIB, COV, STJ, AMGN, MDT, BDX, BAX, CELG
Transports: JBHT, UPS, PCAR, FDX
Railroads: NSC, BNI
Materials/Manufacturing: CAT, CMI, VMC
Retail: WMT, RTH, ANF
Cyclicals: DD, UTX, ITW, DHR
Note: GIS, SOHU, IBM, JEC, APH
Also note: Energy is Bearish but Oil Services is hanging in there pretty good: BHI, SLB, SII. Coal is Bearish but FDG is hanging in there pretty good, and Chemicals are Bearish but TRA is hanging in there pretty good.
Here is a Bearish Watchlist:
Utilities: FE, ETR, EXC
Energy: APA, COP, NE, EOG, APC, MUR, NBL, OXY, ECA, NBR, DVN, HES, UPL, XTO, CHK
Steel: NUE, X
Gold: AEM, GG (both formed H&S Tops today)
Coal: BTU, ACI, CNX, MEE
The selling in Energy and Commodities looks like it may continue a little longer, which may keep the short term bounce on all the bullish areas above alive for another 1-2 days or longer. But remember, we still have tons and tons of earnings reports due out the next several days which can change the tone of the market.
It looks like the combination of oil prices going down, an oversold market last week, and a number of earnings reports coming in less than catastrophic are acting as the catalysts to bounce the market now.
I am working on a way to record my (paper) trading and market analysis in real-time, and then post the whole day to you in the evenings so you can review what I have done for the day.
Here is a very brief synopsis of today: I sold the RDC calls for a 1.25 profit or 29% gain. I stopped the ABX calls for a .30 cent loss and the GG calls for a 1.20 loss. I sold the TRA calls for a final profit of .34 cents, and I stopped the CAM calls for a loss of .20 cents. I also nibbled on calls for BNI and MDT. I am still playing the AAPL strangle, but the stock went too far today for my taste. I may not give it a whole lot more room, we'll see if it rolls over here in the next couple of days.
5:00 pm MT: The stock market is following the old adage that "Bull Markets Climb a Wall of Worry." The saying is applicable to situations where much of the news appears to be bad, and yet the market goes up. Today, the market was set to tumble over on a slew of bad earnings reports and ongoing macro-economic issues. However, a drop in oil prices put a strong bid under the market and sent it chugging up the charts. If you reason the oil prices you can see that a drop into the mid 120's is not that big a deal, especially given that the recent slide from the 148 area to the 128 area hasn't even put a dent in $4.00 a gallon gasoline. Nor has the drop changed the supply and demand equation globally. Nevertheless, the bulls are pushing forward. The climb may be more of a short term to intermediate term effect, but the market seems to be determined to move up in spite of bad news. Right now, the Hammers on the Weekly Charts on the major indexes (that I charted for you on the Saturday post) are playing out. The chart signals on the major indexes are pointing towards another 1-2 days of upside in the current short term upswing, and possibly a change in the intermediate term downtrend. The Dow has climbed right into the middle of a short term resistance zone, but could still run for a day or two, especially given that it could eventually trend towards the top end of the long term channel.
Here is the near term chart of the Dow showing the short term resistance areas:
(click on image to enlarge)
Here is a long term chart of the Dow showing the Hammer on the Weekly charts starting to play out:
(click on image to enlarge)
(click on image to enlarge)
The Naz and the SPX are also bouncing in a similar manner on their respective charts. It adds up to a probable 1-2 days more of upside, and perhaps a little longer. Shorts don't want to be short right now, and dips are getting covered in a blink in almost every area outside of Energy and Commodity stocks. The sector rotation seems to want to continue a little longer and there aren't any key signs of reversing yet.
There were a lot of Rising Three Methods continuation patterns today, I will show some charts in various sectors to demonstrate the pattern:
Here is GIS in Food & Beverage:
(click on image to enlarge)
(click on image to enlarge)
Here is MDT in Healthcare:
(click on image to enlarge)
(click on image to enlarge)
Here is RTH in Retail (which is also forming a potential Reverse H&S):
(click on image to enlarge)
(click on image to enlarge)
Here is GS in Brokers:
(click on image to enlarge)
(click on image to enlarge)
Here is a Watchlist for stocks that are either Bullish or starting to go Bullish:
Financials: Brokers: MS, GS Insurance: PRU (Reverse H&S), LNC, MET Banks: JPM Regional Banks: STI, PNC, RKH, STT, NTRS Other: TROW, COF, ADS
Leisure: CCL, WYN
Biotechs/Healthcare: BIIB, COV, STJ, AMGN, MDT, BDX, BAX, CELG
Transports: JBHT, UPS, PCAR, FDX
Railroads: NSC, BNI
Materials/Manufacturing: CAT, CMI, VMC
Retail: WMT, RTH, ANF
Cyclicals: DD, UTX, ITW, DHR
Note: GIS, SOHU, IBM, JEC, APH
Also note: Energy is Bearish but Oil Services is hanging in there pretty good: BHI, SLB, SII. Coal is Bearish but FDG is hanging in there pretty good, and Chemicals are Bearish but TRA is hanging in there pretty good.
Here is a Bearish Watchlist:
Utilities: FE, ETR, EXC
Energy: APA, COP, NE, EOG, APC, MUR, NBL, OXY, ECA, NBR, DVN, HES, UPL, XTO, CHK
Steel: NUE, X
Gold: AEM, GG (both formed H&S Tops today)
Coal: BTU, ACI, CNX, MEE
The selling in Energy and Commodities looks like it may continue a little longer, which may keep the short term bounce on all the bullish areas above alive for another 1-2 days or longer. But remember, we still have tons and tons of earnings reports due out the next several days which can change the tone of the market.
It looks like the combination of oil prices going down, an oversold market last week, and a number of earnings reports coming in less than catastrophic are acting as the catalysts to bounce the market now.
I am working on a way to record my (paper) trading and market analysis in real-time, and then post the whole day to you in the evenings so you can review what I have done for the day.
Here is a very brief synopsis of today: I sold the RDC calls for a 1.25 profit or 29% gain. I stopped the ABX calls for a .30 cent loss and the GG calls for a 1.20 loss. I sold the TRA calls for a final profit of .34 cents, and I stopped the CAM calls for a loss of .20 cents. I also nibbled on calls for BNI and MDT. I am still playing the AAPL strangle, but the stock went too far today for my taste. I may not give it a whole lot more room, we'll see if it rolls over here in the next couple of days.
Monday, July 21, 2008
Market Spins Around Ahead of Apple
The market is set to open slightly bullish after BAC reported earnings that were better than expected. There is no indication yet that the SPX and the Dow are ready to roll over. If the indexes hold up through most of the day, then expect traders to look towards AAPL's earnings after the close to act as the catalyst for whether or not the short term bounce continues for another day or two.
6:00 pm MT: Market Wrap: The stock market spun around in circles as traders held on to some of the recent movers like Banks and Cyclicals, while piling into Energy and Commodity based stocks on a relief bounce. Brokers, Retail, Airlines, Drugs, and Chips all rolled over a little bit. The Dow and SPX both had Spinning Top - like candlesticks, and the Naz kind of just hung around. Oil futures went up a little and Steel had a strong day. In addition, traders started nibbling back into Gold stocks, perhaps as a hedge against a short term rollover in the market.
The net result was a bounce in Energy and Commodity stocks like Chemicals, Steel, and Coal, and some short term nibbling in Gold stocks.
Here is a summary of what I (paper) traded today:
ENERGY: Early in the day I picked up calls on RDC, and sold half the position by the close for a .55 cent profit, or 13% gain intra-day. I like the bounce on RDC, CAM, SLB, ESV, and SII. I picked up some CAM calls to go with my RDC calls just before the close. I will look at SLB for calls tomorrow morning.
GOLD: I picked up calls on GG early in the day as it was forming a small hammer. I will look at calls on ABX tomorrow morning.
CHEMICALS: I picked up calls on MOS and TRA in the mid-morning. I sold the MOS calls for an .80 cent profit, or 5% gain about half an hour before the close. I sold part of the TRA calls for a .43 cent profit, or 9% gain so far. I like the look of the bounces on TRA and MOS, but I will wait for a pullback on the 60m charts before re-entering MOS.
TECH: I bought the AAPL August Earnings Strangle for a Short Swing just like I said I would. In addition, I bought a September Earnings Strangle to demonstrate how to handle a Normal Swing on a Strangle.
Here's where the AAPL Strangle gets really fun (and I hope some of you paper traded this). I picked up the August 170/160 Strangle for a net debit of $13.90. I picked up the September 170/160 Strangle for a net debit of 19.50. AAPL lowered their forward guidance on the company earnings report after the close. And as you should know by now, lowering guidance on a Cult Stock to the Kool-Aid Crowd is somewhere between a hot fireplace poker in the eye and duck taping your knees to your chest and getting dragged through a sea of glass-shards by a Hummer.....It's not a pretty sight. AAPL is down over $16.00, or almost 10% in after-hours trading. So here is how I'm going to play this. If AAPL gaps down into the 148-149 area it may take a quick drop to the next support at 145. And if the August Strangle is going for around $16.00 - $17.00 or more I will unwind the whole thing and walk away with $2.00 - $3.00 of profit for a very quick trade. The September Strangle will be a little different. At the open I will immediately sell the 170 call and then let the 160 put ride for a swing down, which could go several more days and possibly drop as far as the 130 - 140 area.
So there is how to handle a short month Earnings Strangle and a medium month Earnings Strangle. It should be a fun ride in the morning.
6:00 pm MT: Market Wrap: The stock market spun around in circles as traders held on to some of the recent movers like Banks and Cyclicals, while piling into Energy and Commodity based stocks on a relief bounce. Brokers, Retail, Airlines, Drugs, and Chips all rolled over a little bit. The Dow and SPX both had Spinning Top - like candlesticks, and the Naz kind of just hung around. Oil futures went up a little and Steel had a strong day. In addition, traders started nibbling back into Gold stocks, perhaps as a hedge against a short term rollover in the market.
The net result was a bounce in Energy and Commodity stocks like Chemicals, Steel, and Coal, and some short term nibbling in Gold stocks.
Here is a summary of what I (paper) traded today:
ENERGY: Early in the day I picked up calls on RDC, and sold half the position by the close for a .55 cent profit, or 13% gain intra-day. I like the bounce on RDC, CAM, SLB, ESV, and SII. I picked up some CAM calls to go with my RDC calls just before the close. I will look at SLB for calls tomorrow morning.
GOLD: I picked up calls on GG early in the day as it was forming a small hammer. I will look at calls on ABX tomorrow morning.
CHEMICALS: I picked up calls on MOS and TRA in the mid-morning. I sold the MOS calls for an .80 cent profit, or 5% gain about half an hour before the close. I sold part of the TRA calls for a .43 cent profit, or 9% gain so far. I like the look of the bounces on TRA and MOS, but I will wait for a pullback on the 60m charts before re-entering MOS.
TECH: I bought the AAPL August Earnings Strangle for a Short Swing just like I said I would. In addition, I bought a September Earnings Strangle to demonstrate how to handle a Normal Swing on a Strangle.
Here's where the AAPL Strangle gets really fun (and I hope some of you paper traded this). I picked up the August 170/160 Strangle for a net debit of $13.90. I picked up the September 170/160 Strangle for a net debit of 19.50. AAPL lowered their forward guidance on the company earnings report after the close. And as you should know by now, lowering guidance on a Cult Stock to the Kool-Aid Crowd is somewhere between a hot fireplace poker in the eye and duck taping your knees to your chest and getting dragged through a sea of glass-shards by a Hummer.....It's not a pretty sight. AAPL is down over $16.00, or almost 10% in after-hours trading. So here is how I'm going to play this. If AAPL gaps down into the 148-149 area it may take a quick drop to the next support at 145. And if the August Strangle is going for around $16.00 - $17.00 or more I will unwind the whole thing and walk away with $2.00 - $3.00 of profit for a very quick trade. The September Strangle will be a little different. At the open I will immediately sell the 170 call and then let the 160 put ride for a swing down, which could go several more days and possibly drop as far as the 130 - 140 area.
So there is how to handle a short month Earnings Strangle and a medium month Earnings Strangle. It should be a fun ride in the morning.
Here is a chart of AAPL showing where it is set to open tomorrow morning (red circle), and also the next potential support areas, which the stock could hit even by tomorrow.
(click on image to enlarge)
(click on image to enlarge)
Here is another important thing about your (paper) trading tomorrow: In addition to AAPL, AXP blew earnings and is set to take Financials down a little. Here are more earnings tidbits: MRK and SGP look like they are going to take down Drugs. And TXN and SNDK look like they are going to take down Chips. Tomorrow before the open: BHI, HAL, and XTO will affect Energy a little. CAT and DD will affect Cyclicals. UNH will affect HMO's. UPS will affect Transportation Services. And AKS will affect Steel. And that's not all the earnings to report, we really get hit hard with the reports this week.
As it is, unless we get some very good reports in the morning, the market is set to roll over on AAPL and AXP. That means Gold may be up and Tech may be down. Financials may see some pullback finally, and Energy and Commodities may actually continue to bounce a little, especially if oil prices hold up and the earnings come in better than expected.
I will look for calls on ABX (I already have GG) in Gold. I will look for calls in SLB (and perhaps one of the earnings Energy stocks), and I'm sitting on RDC and CAM. I may look for calls on MOS, and I'm sitting on TRA (in Chemicals). And you know what I'm doing with the AAPL Strangle. In addition, I may pick up puts on DIA (we'll see how CAT and DD do), and SPY. But I want to see them start to roll over first, and I'm not planning on being in the puts very long. I will also look at QQQQ puts and perhaps another Tech stock like RIMM.
We'll see how this all plays out.....
As it is, unless we get some very good reports in the morning, the market is set to roll over on AAPL and AXP. That means Gold may be up and Tech may be down. Financials may see some pullback finally, and Energy and Commodities may actually continue to bounce a little, especially if oil prices hold up and the earnings come in better than expected.
I will look for calls on ABX (I already have GG) in Gold. I will look for calls in SLB (and perhaps one of the earnings Energy stocks), and I'm sitting on RDC and CAM. I may look for calls on MOS, and I'm sitting on TRA (in Chemicals). And you know what I'm doing with the AAPL Strangle. In addition, I may pick up puts on DIA (we'll see how CAT and DD do), and SPY. But I want to see them start to roll over first, and I'm not planning on being in the puts very long. I will also look at QQQQ puts and perhaps another Tech stock like RIMM.
We'll see how this all plays out.....
Saturday, July 19, 2008
Watchlist Saturday
Dow: IT (intermediate term) Bearish and ST (short term) Bullish to Neutral. The Dow went right into the key support zone between 10,700 - 11,000 (green circle on the chart). The index threw a Hammer/Engulfing hybrid candlestick and looks like it could continue to move up for several more weeks. However, the Dow may run into short term resistance in the 11,500 - 11,750 zone (pink circle on the chart), to we may see some wiggling around next week, perhaps a short-term pullback as traders test whether or not the Dow has set an intermediate term bottom. I am very intrigued by the Hammer on the Weekly chart, though, and I am starting to speculate the index could bounce some more, or even trend towards the top end of the channel.
SPX: IT Bearish and ST Bullish to Neutral. The SPX bounced nicely right off of 1,200. The index also threw a Hammer on the Weekly charts. The short term move may be exhausting itself, but will probably be extremely dependent on how the earnings reports come in for BAC before the open on Monday and AAPL after the close on Monday. The early part of the week is light on economic reports and pretty benign overall. The majority of the focus will probably be on earnings and oil prices. Resistance is right in the 1,260 - 1,275 area and support is 1,200 - 1,210. The Hammer on the Weekly charts is portending a possible move up for another week. The Hammer along with a huge amount of earnings reports is why I will be cautious and nimble on any put plays on the SPY this week. If I play puts, I will likely keep it intra-day.
Naz: IT Bearish and ST Neutral to Bullish. The Naz tested a key support zone between 2,150 - 2,200. The index bounced quickly right into a short term resistance zone of 2,280 - 2,320. If the Naz bounces up again from here, it will likely be because of the Tech earnings reports this week come in better than expected. Like the Dow and the SPX, the Naz looks intriguing on the Weekly charts because of its Hammer-like candlestick. If the Naz can close above 2,325 then it could make a run towards 2,400. Also like the Dow and the SPX, it is starting to look like the Naz is trying to hammer out an intermediate term bottom.
Here is the long term chart of the Dow: (click on image to enlarge)
SPX: IT Bearish and ST Bullish to Neutral. The SPX bounced nicely right off of 1,200. The index also threw a Hammer on the Weekly charts. The short term move may be exhausting itself, but will probably be extremely dependent on how the earnings reports come in for BAC before the open on Monday and AAPL after the close on Monday. The early part of the week is light on economic reports and pretty benign overall. The majority of the focus will probably be on earnings and oil prices. Resistance is right in the 1,260 - 1,275 area and support is 1,200 - 1,210. The Hammer on the Weekly charts is portending a possible move up for another week. The Hammer along with a huge amount of earnings reports is why I will be cautious and nimble on any put plays on the SPY this week. If I play puts, I will likely keep it intra-day.
Here is the shorter term chart of the SPX:
(click on image to enlarge)
Here is the longer term chart of the SPX showing the Hammer and the possibility of an intermediate term trend towards the top end of the long-term channel:
(click on image to enlarge)
Naz: IT Bearish and ST Neutral to Bullish. The Naz tested a key support zone between 2,150 - 2,200. The index bounced quickly right into a short term resistance zone of 2,280 - 2,320. If the Naz bounces up again from here, it will likely be because of the Tech earnings reports this week come in better than expected. Like the Dow and the SPX, the Naz looks intriguing on the Weekly charts because of its Hammer-like candlestick. If the Naz can close above 2,325 then it could make a run towards 2,400. Also like the Dow and the SPX, it is starting to look like the Naz is trying to hammer out an intermediate term bottom.
Here is the shorter term chart of the Naz:
(click on image to enlarge)
Here is the close up of the Weekly chart of the Naz showing the Hammer-like candlestick:
(click on image to enlarge)
(click on image to enlarge)
Here is the close up of the Weekly chart of the Naz showing the Hammer-like candlestick:
(click on image to enlarge)
Like last week, I am reluctant to lock in on a Watchlist with so many companies due to report earnings, but I am playing momentum day to day. Right now, Financials, Discretionary Spending, Cyclicals, and some Retail are strong. Tech is a little squishy still, and Energy and Commodity based stocks are weak. Watch Energy because those stocks may be ready to bounce a little, even though they are in intermediate term consolidation mode.
Tomorrow I will demonstrate with a paper trade an Earnings Strangle on AAPL. I will buy an August put one strike out of the money and an August call one strike out of the money just before the close.
One final note: My employer is disallowing any personal blogging during work hours. This means that for the near future I will be doing recaps of market action and trades that I entered or exited outside of my work schedule. I will do my best to set up potential (paper) trades ahead of time for now. I am requesting that no-one email my employer for now on this particular subject (although I do appreciate what you have done for me in the past) while I set the table for a different way of doing things. I will still get the postings open every day so you can comment to one another, and I will answer questions and post content and charts as always. I know that this will be a disappointment to many of you, but hang in there, things have a way of working out in the end.
Tomorrow I will demonstrate with a paper trade an Earnings Strangle on AAPL. I will buy an August put one strike out of the money and an August call one strike out of the money just before the close.
One final note: My employer is disallowing any personal blogging during work hours. This means that for the near future I will be doing recaps of market action and trades that I entered or exited outside of my work schedule. I will do my best to set up potential (paper) trades ahead of time for now. I am requesting that no-one email my employer for now on this particular subject (although I do appreciate what you have done for me in the past) while I set the table for a different way of doing things. I will still get the postings open every day so you can comment to one another, and I will answer questions and post content and charts as always. I know that this will be a disappointment to many of you, but hang in there, things have a way of working out in the end.
Friday, July 18, 2008
Naz Has No Jazz but the Market Hangs Tough
Earnings this morning have attenuated the negative sentiment from last night considerably (see yesterday's late postings), especially in Financials, Cyclicals, and Energy. Just as I warned of yesterday, C has changed the picture in Financials considerably this morning by reporting less than catastrophic numbers. Most Financial companies were down after hours on the MER, COF, and ZION's earnings misses yesterday. Now the Banks have come way back and look to at least hold the two day bounce and not turn the day into a bloodbath. Brokers and Credit Services may not do quite as well, but the Bears in Financials will be more scared this morning, by quite a ways, than they were last night.
In addition, HON beat expectations and should give Cyclicals a boost. Also, SLB beat expectations and that along with Oil being up slightly will probably give Energy a boost out of the gate. The reports in the Oil Patch will probably slow or even stop the current ST downswing. The slight move up in Oil prices shouldn't be a huge bearish drag on the market early in the day, but if Oil prices keep spiking throughout the day then the market could sell off.
As it is, the Naz is the only index of the three majors to maintain more of a bearish-looking open. The Futures have come way back, though, from last night and earlier this morning. The SPX Futures were down 14.7, and now they have come all the way back to breakeven. This means that Financials (and Cyclicals) are still catching some wind beneath their wings. Perhaps the Dow and the SPX will even wiggle up a little on more fear out of the Shorts. I'm expecting a real back and forth day today with the negative/positive earnings creating a good cop/bad cop environment. In addition, it's options expiration and a Friday.
Only the Naz is set to gap down now, and the Futures have backed way off there as well. The Naz futures were down 36.3, and now they have come all the way back to down only 12.5 with 30 minutes to go until the open. I'm still looking for selling in Tech because of MSFT and GOOG, but this morning's outlook is much better than it was last night.
I was going into the day watching for Tech puts on the Q's, RIMM, and maybe a few other stocks. I also was interested in Steel puts on SCHN, NUE, and AKS, and Chemical puts on MOS, CF, or AGU. I was also interested in SPY puts, and perhaps puts on Brokers LEH, MER, or LM. Now I would be a little more cautious, but Steel, Tech, and Brokers might still be in play.
I was going into the day watching for Bank calls on JPM and PNC. I was also watching the Cyclicals with DHR and UTX. Other stocks that I liked for calls today were ERTS and FLIR.
At this point I see some very mixed signals out there in market land. I am expecting some pretty wild price action banging around today, so be patient as you watch for an opportunity to appear. Take slightly smaller positions and mostly play the intra-day swing on the 30m - 60m charts while keeping an eye on the lower time frames. You probably want to take partial profits on directional trades fairly quickly intra-day, and then just ride with part of the position. I'm going to take care of some personal things for the next few hours because I have the night shift today. But I will be back to put on those Iron Condors for August several hours before the close, especially if the market is holding up. I have set the table for you today, so you should have an idea what to expect and how to handle it. I'll be back in a few hours.
8:00 am MT: The market wiggled and faded out of the gate, but only the Naz is seeing heavy selling. Financials are selling a bit, but not as bad as they could have based on last night's futures. Airlines are down a bit as oil is up a bit, but the jump in oil prices is relatively contained at $130.00 so far. Any spike on oil above $133 - $134 and the overall market is probably going to sell.
I am floating the following Iron Condors for August:
DIA 106/107 Bull Put spread and 122/123 Bear Call spread for .23 cents (I got filled). This is a potential 30% return on risk for 28 days (25 days after the weekend).
SPY 116/117 Bull Put spread and 133/134 Bear Call spread for .30 cents (I got filled). This is a potential 43% return on risk for 28 days (25 days after the weekend).
IWM 63/64 Bull Put spread and 75/76 Bear Call spread for .26 cents (I'm waiting to see if I get filled). This is a potential 35% return on risk for 28 days (25 days after the weekend).
Also, I nibbled on puts for SCHN and NUE. If either stock drops $2 - $3 then I will sell the puts.
I will be away for the next several hours.
1:00 pm MT: I decided to take .26 cents on the IWM IC. I floated .27 for most of the day and couldn't get it. I was filled at .26, so that is a 35% return. I adjusted it on the entry above.
I also sold half my SCHN puts for a .40 cent profit, or 6% gain so far. In addition I sold part of the NUE puts for a .40 cent profit, or 9% gain so far.
1:10 pm MT: I'm not super inspired by the price action today, but I will go hunting anyway. I'm comfortable with the Iron Condors I did, and I also like the Steel puts so far. The market has had a relatively quiet day, especially in light of the horrendous earnings from last night. But yesterday morning's earnings, and this morning's earnings, along with the recent drop in oil prices is keeping a little air under the markets wings.
In addition, HON beat expectations and should give Cyclicals a boost. Also, SLB beat expectations and that along with Oil being up slightly will probably give Energy a boost out of the gate. The reports in the Oil Patch will probably slow or even stop the current ST downswing. The slight move up in Oil prices shouldn't be a huge bearish drag on the market early in the day, but if Oil prices keep spiking throughout the day then the market could sell off.
As it is, the Naz is the only index of the three majors to maintain more of a bearish-looking open. The Futures have come way back, though, from last night and earlier this morning. The SPX Futures were down 14.7, and now they have come all the way back to breakeven. This means that Financials (and Cyclicals) are still catching some wind beneath their wings. Perhaps the Dow and the SPX will even wiggle up a little on more fear out of the Shorts. I'm expecting a real back and forth day today with the negative/positive earnings creating a good cop/bad cop environment. In addition, it's options expiration and a Friday.
Only the Naz is set to gap down now, and the Futures have backed way off there as well. The Naz futures were down 36.3, and now they have come all the way back to down only 12.5 with 30 minutes to go until the open. I'm still looking for selling in Tech because of MSFT and GOOG, but this morning's outlook is much better than it was last night.
I was going into the day watching for Tech puts on the Q's, RIMM, and maybe a few other stocks. I also was interested in Steel puts on SCHN, NUE, and AKS, and Chemical puts on MOS, CF, or AGU. I was also interested in SPY puts, and perhaps puts on Brokers LEH, MER, or LM. Now I would be a little more cautious, but Steel, Tech, and Brokers might still be in play.
I was going into the day watching for Bank calls on JPM and PNC. I was also watching the Cyclicals with DHR and UTX. Other stocks that I liked for calls today were ERTS and FLIR.
At this point I see some very mixed signals out there in market land. I am expecting some pretty wild price action banging around today, so be patient as you watch for an opportunity to appear. Take slightly smaller positions and mostly play the intra-day swing on the 30m - 60m charts while keeping an eye on the lower time frames. You probably want to take partial profits on directional trades fairly quickly intra-day, and then just ride with part of the position. I'm going to take care of some personal things for the next few hours because I have the night shift today. But I will be back to put on those Iron Condors for August several hours before the close, especially if the market is holding up. I have set the table for you today, so you should have an idea what to expect and how to handle it. I'll be back in a few hours.
8:00 am MT: The market wiggled and faded out of the gate, but only the Naz is seeing heavy selling. Financials are selling a bit, but not as bad as they could have based on last night's futures. Airlines are down a bit as oil is up a bit, but the jump in oil prices is relatively contained at $130.00 so far. Any spike on oil above $133 - $134 and the overall market is probably going to sell.
I am floating the following Iron Condors for August:
DIA 106/107 Bull Put spread and 122/123 Bear Call spread for .23 cents (I got filled). This is a potential 30% return on risk for 28 days (25 days after the weekend).
SPY 116/117 Bull Put spread and 133/134 Bear Call spread for .30 cents (I got filled). This is a potential 43% return on risk for 28 days (25 days after the weekend).
IWM 63/64 Bull Put spread and 75/76 Bear Call spread for .26 cents (I'm waiting to see if I get filled). This is a potential 35% return on risk for 28 days (25 days after the weekend).
Also, I nibbled on puts for SCHN and NUE. If either stock drops $2 - $3 then I will sell the puts.
I will be away for the next several hours.
1:00 pm MT: I decided to take .26 cents on the IWM IC. I floated .27 for most of the day and couldn't get it. I was filled at .26, so that is a 35% return. I adjusted it on the entry above.
I also sold half my SCHN puts for a .40 cent profit, or 6% gain so far. In addition I sold part of the NUE puts for a .40 cent profit, or 9% gain so far.
1:10 pm MT: I'm not super inspired by the price action today, but I will go hunting anyway. I'm comfortable with the Iron Condors I did, and I also like the Steel puts so far. The market has had a relatively quiet day, especially in light of the horrendous earnings from last night. But yesterday morning's earnings, and this morning's earnings, along with the recent drop in oil prices is keeping a little air under the markets wings.
Thursday, July 17, 2008
Market Continues the Bounce
JPM beat earnings expectations and is giving Financials a boost as Shorts continue to run screaming into the ocean. The economic reports this morning were actually pretty good as well. Housing Starts beat expectations, and Weekly Jobless Claims were lower than expected. The market gapped up out of the gate before the "still nervous" Bulls jumped screaming into the ocean. This is starting to get purely hilarious to watch. I told you we were in a Hot Potato market, and it continues to play out. I can see all the Bears and Bull churning around in the ocean, treading water, bobbing around offshore and looking around with startled looks at each other. "You're in here, but I just jumped in?" "What are you doing out here, I thought I was the one that had problems?" "Well, I'm supposed to be out here, it's the end of the world, don't you know it?" "No, no, I'm the one that belongs out here, we're all going to die when the fiery comet hits the earth!"
So the gyrations continue.....and so do the intra-day swings for directional players.
8:20 am MT: Here is a brief recap of the earnings reports and sector effects so far: JPM is up sharply and giving Banks and Brokers a boost. NUE and RS are down a bit and causing Steel to gyrate to the downside a bit. NOK is up sharply and giving Wireless a little boost. EBAY is down sharply and causing Retail to be soft this morning (although Retail is still more concerned about the future price of oil). UTX and ITW are up strongly and giving Cyclicals a boost. And XLNX doesn't appear to be hurting Chips with their earnings miss since INTC and ALTR had strong reports that boosted Chips yesterday. So the market will gyrate and spit and hiss and everything else it does while traders work their way through all the earnings, and all the earnings to come.
8:30 am MT: Here is a recap of my flurry of trading activity from this morning: I stopped the HAL puts for a 1.07 loss. I stopped the NE puts for a 1.00 loss. I sold the APA puts at breakeven. I stopped the MDT calls for a .55 cent loss. I sold the ADBE calls for a .15 cent gain. I'm still holding a very small call position on COST, which is my only directional trade right now. The market may take another leg up later in the day, but I'm not planning on doing anything for several hours because it looks like it could be 2-3 hours before the market mounts an attempt to bounce some more.
Use the 60m charts on the SPX, Dow, and Naz for now to guide you through the next possible bounce intra-day. It will probably be several hours before a bounce, and then we'll see if the day finishes in the green.
9:00 am MT: Here is a recap of my Iron Condor trade management - I unwound (closed) the Bull Put Spreads on all three Iron Condors this morning:
The IWM Bull Put was a net debit of .20 cents. The original Iron Condor net credit was .32 cents plus the Bear Call Spread Hedge of .12 cents. So the total trade is still a .12 cent credit and the possibility of getting assigned on the riskier Bull Put side is gone. I took a potential loss and turned it into a probable gain, which preserves the profits on all the other Iron Condors I have done this year.
The SPY Bull Put was a net debit of .42 cents. The original Iron Condor net credit was .35 cents plus the Bear Call Spread Hedge of .08 cents. So the total trade is still a .01 cent credit and the possibility of getting assigned on the riskier Bull Put side is gone. Once again, I took a potential loss and turned it into a probable gain, which again preserves the profits on all the other Iron Condors I have done this year.
The DIA Bull Put was a net debit of .30 cents. The original Iron Condor net credit was .27 cents plus the Bear Call Spread Hedge of .11 cents. So the total trade is still a .08 cent credit and the possibility of getting assigned on the riskier Bull Put side is gone. So, like the other two, I took a potential loss and turned it into a probable gain.
Those of you who have been following along with me on the Iron Condors should be able to see the concepts starting to come together. The idea is to win on at least 3 out of every 4 months. And in the system I can take a max loss on the loser month and still be very nicely profitable overall. When I can take defensive measures to maneuver a loser month into a slightly profitable month it just adds more gravy on top. And of course, the one-point spread ETF Iron Condors with good money management allow me the comfort of running as far as I need to in order to give myself the maximum flexibility for maneuvering. In this case I took it right to the day before expiration. The losers don't always work out, but when you can maneuver out of them it just piles on more profits for the year-end tally.
11:30 am MT: The market is continuing the bounce that started yesterday. The Naz and the Dow both reached their 20dma's. The Naz has even exceeded the 20dma a little. Shorts continue to cover, and perhaps there is even a little bargain buying going on.
11:40 am MT: I took advantage of the current leg up on COST to lock down my profits on the trade. The stock may run another .50 - .75 cents, but I can't watch it for a bit, so I closed it out. The trade was a .84 cent profit, or 21% gain.
One other side note: I have talked at length about the difference between Day Trading and Swing Trading, including Intra-day Swing Trading. It's been years since I Day Traded options, so I went ahead this morning and experimented with Day Trading options on several higher priced stocks on the 5m charts (which is about as far down the time frames that I can stomach). I came to the same conclusion that I have always had about Day Trading options, which is that options are a fairly unfriendly vehicle for trying to catch quick moves and breakouts on the 1m or 5m charts. Every time a stock went through a key price point and gave a signal the market makers jacked the premiums or widened the spreads. Even when I caught the move right I would still be breakeven or lose money because of the spreads. If I had traded the stock outright, I would have made a profit because there was no artificial inflation at the buy signals. But because I was trading options I actually lost money. I've said all along that I don't Day Trade options, and the lowest swings that I like to look at are the 30m or 60m time frames. I might look at the lower time frames to guide me, but I don't take them as the base buy signal. When an Options Swing Trader drops down to the 15m time frame or below, they run into serious slippage risk (inflated premiums, higher commissions, and the wider spread between the bid and ask than on the stock itself, or a futures contract). I've preached that concept for a long time now, and the new "penny" spreads have not changed my mind. Just because something can trade in a penny spread doesn't mean that market makers will tighten the spreads to a penny. Market makers have too much leeway to play with premiums and spreads to make Options Day Trading consistently profitable for my style of trading. However, I haven't made it my life's work to develop a day trading system for options, so that doesn't mean someone else can't create a system. And I have developed some systems around the 15m charts that will work on higher priced stocks with narrower spreads.
3:30 pm MT: GOOG reported earnings, and whatever the numbers are the initial reaction isn't making traders very happy. The stock is down 8%, or over $40.00 in after-hours trading. We'll see where this goes, but it could be that the Naz is headed for a bit of a gap down tomorrow morning.
8:00 pm MT: Market Wrap: Here's the quick version: Financials continued to bounce on the positive JPM earnings. Steel rolled over on the NUE earnings. Tech, Retail, Cyclicals, and Leisure/Discretionary Spending all bounced. The Dow and Naz made it through their 20dma's, the SPX is lagging because Energy and Commodity stocks continue to drop.
After-Hours Earnings: Here are some approximate numbers: GOOG is down 8%, MSFT is down 6%, MER is down 6%, COF is down 5%, ZION is down 5%, GILD is down 3%, and IBM is flat. Essentially the market is probably going to gap down sharply out of the gate tomorrow morning. The Q's are down quite a bit in after-hours trading. Things could change a little bit tomorrow morning. Here are some possible scenarios for the morning earnings reports. If C blows their earnings tomorrow morning, then Financials will probably sell quite a bit, but if C has decent earnings then it may mitigate the selling that is going to come from MER and COF. Also, SLB's earnings in the morning will affect Energy, and HON's earnings will affect Cyclicals.
As it stands, we are probably looking at early selling, possibly sharp selling. Tomorrow is also options expiration and Friday. So expect plenty of volatility.
So the gyrations continue.....and so do the intra-day swings for directional players.
8:20 am MT: Here is a brief recap of the earnings reports and sector effects so far: JPM is up sharply and giving Banks and Brokers a boost. NUE and RS are down a bit and causing Steel to gyrate to the downside a bit. NOK is up sharply and giving Wireless a little boost. EBAY is down sharply and causing Retail to be soft this morning (although Retail is still more concerned about the future price of oil). UTX and ITW are up strongly and giving Cyclicals a boost. And XLNX doesn't appear to be hurting Chips with their earnings miss since INTC and ALTR had strong reports that boosted Chips yesterday. So the market will gyrate and spit and hiss and everything else it does while traders work their way through all the earnings, and all the earnings to come.
8:30 am MT: Here is a recap of my flurry of trading activity from this morning: I stopped the HAL puts for a 1.07 loss. I stopped the NE puts for a 1.00 loss. I sold the APA puts at breakeven. I stopped the MDT calls for a .55 cent loss. I sold the ADBE calls for a .15 cent gain. I'm still holding a very small call position on COST, which is my only directional trade right now. The market may take another leg up later in the day, but I'm not planning on doing anything for several hours because it looks like it could be 2-3 hours before the market mounts an attempt to bounce some more.
Use the 60m charts on the SPX, Dow, and Naz for now to guide you through the next possible bounce intra-day. It will probably be several hours before a bounce, and then we'll see if the day finishes in the green.
9:00 am MT: Here is a recap of my Iron Condor trade management - I unwound (closed) the Bull Put Spreads on all three Iron Condors this morning:
The IWM Bull Put was a net debit of .20 cents. The original Iron Condor net credit was .32 cents plus the Bear Call Spread Hedge of .12 cents. So the total trade is still a .12 cent credit and the possibility of getting assigned on the riskier Bull Put side is gone. I took a potential loss and turned it into a probable gain, which preserves the profits on all the other Iron Condors I have done this year.
The SPY Bull Put was a net debit of .42 cents. The original Iron Condor net credit was .35 cents plus the Bear Call Spread Hedge of .08 cents. So the total trade is still a .01 cent credit and the possibility of getting assigned on the riskier Bull Put side is gone. Once again, I took a potential loss and turned it into a probable gain, which again preserves the profits on all the other Iron Condors I have done this year.
The DIA Bull Put was a net debit of .30 cents. The original Iron Condor net credit was .27 cents plus the Bear Call Spread Hedge of .11 cents. So the total trade is still a .08 cent credit and the possibility of getting assigned on the riskier Bull Put side is gone. So, like the other two, I took a potential loss and turned it into a probable gain.
Those of you who have been following along with me on the Iron Condors should be able to see the concepts starting to come together. The idea is to win on at least 3 out of every 4 months. And in the system I can take a max loss on the loser month and still be very nicely profitable overall. When I can take defensive measures to maneuver a loser month into a slightly profitable month it just adds more gravy on top. And of course, the one-point spread ETF Iron Condors with good money management allow me the comfort of running as far as I need to in order to give myself the maximum flexibility for maneuvering. In this case I took it right to the day before expiration. The losers don't always work out, but when you can maneuver out of them it just piles on more profits for the year-end tally.
11:30 am MT: The market is continuing the bounce that started yesterday. The Naz and the Dow both reached their 20dma's. The Naz has even exceeded the 20dma a little. Shorts continue to cover, and perhaps there is even a little bargain buying going on.
11:40 am MT: I took advantage of the current leg up on COST to lock down my profits on the trade. The stock may run another .50 - .75 cents, but I can't watch it for a bit, so I closed it out. The trade was a .84 cent profit, or 21% gain.
One other side note: I have talked at length about the difference between Day Trading and Swing Trading, including Intra-day Swing Trading. It's been years since I Day Traded options, so I went ahead this morning and experimented with Day Trading options on several higher priced stocks on the 5m charts (which is about as far down the time frames that I can stomach). I came to the same conclusion that I have always had about Day Trading options, which is that options are a fairly unfriendly vehicle for trying to catch quick moves and breakouts on the 1m or 5m charts. Every time a stock went through a key price point and gave a signal the market makers jacked the premiums or widened the spreads. Even when I caught the move right I would still be breakeven or lose money because of the spreads. If I had traded the stock outright, I would have made a profit because there was no artificial inflation at the buy signals. But because I was trading options I actually lost money. I've said all along that I don't Day Trade options, and the lowest swings that I like to look at are the 30m or 60m time frames. I might look at the lower time frames to guide me, but I don't take them as the base buy signal. When an Options Swing Trader drops down to the 15m time frame or below, they run into serious slippage risk (inflated premiums, higher commissions, and the wider spread between the bid and ask than on the stock itself, or a futures contract). I've preached that concept for a long time now, and the new "penny" spreads have not changed my mind. Just because something can trade in a penny spread doesn't mean that market makers will tighten the spreads to a penny. Market makers have too much leeway to play with premiums and spreads to make Options Day Trading consistently profitable for my style of trading. However, I haven't made it my life's work to develop a day trading system for options, so that doesn't mean someone else can't create a system. And I have developed some systems around the 15m charts that will work on higher priced stocks with narrower spreads.
3:30 pm MT: GOOG reported earnings, and whatever the numbers are the initial reaction isn't making traders very happy. The stock is down 8%, or over $40.00 in after-hours trading. We'll see where this goes, but it could be that the Naz is headed for a bit of a gap down tomorrow morning.
8:00 pm MT: Market Wrap: Here's the quick version: Financials continued to bounce on the positive JPM earnings. Steel rolled over on the NUE earnings. Tech, Retail, Cyclicals, and Leisure/Discretionary Spending all bounced. The Dow and Naz made it through their 20dma's, the SPX is lagging because Energy and Commodity stocks continue to drop.
After-Hours Earnings: Here are some approximate numbers: GOOG is down 8%, MSFT is down 6%, MER is down 6%, COF is down 5%, ZION is down 5%, GILD is down 3%, and IBM is flat. Essentially the market is probably going to gap down sharply out of the gate tomorrow morning. The Q's are down quite a bit in after-hours trading. Things could change a little bit tomorrow morning. Here are some possible scenarios for the morning earnings reports. If C blows their earnings tomorrow morning, then Financials will probably sell quite a bit, but if C has decent earnings then it may mitigate the selling that is going to come from MER and COF. Also, SLB's earnings in the morning will affect Energy, and HON's earnings will affect Cyclicals.
As it stands, we are probably looking at early selling, possibly sharp selling. Tomorrow is also options expiration and Friday. So expect plenty of volatility.
Wednesday, July 16, 2008
Market Bounces on Oil Inventory Report and Financials Earnings
Traders are getting good news from early Earnings Season reports. If I throw out the Regional Banks then several other sectors and groups are giving the market decent reports. INTC and ALTR in chips, ABT in Healthcare/Biotechs, WFC in Banks, and even CSX in Railroads are all set to open higher today off their earnings reports. So far, we are seeing less than catastrophic earnings.
In addition, both Industrial Production and Capacity Utilization came in better than expected. The only report that really stunk for traders was the CPI report on inflation, which came in higher (or worse) than expected. The CPI report dropped pre-market futures, which were bullish before the open. Now the market is set to open down. I will use that as an opportunity to sell the DIA, SPY, and IWM puts, and probably some of the Energy puts.
7:35 am MT: I sold the four Energy puts into the initial gap down this morning. I want to be out ahead of the Oil Inventory report due out in an hour. Here are the totals: RDC was a .15 cent profit, or 5% gain, APA was an .80 cent profit, or 10% gain, ECA was a .50 cent profit, or 9% gain, and DVN was a 1.30 profit, or 16% gain.
7:50 am MT: I picked up some smaller call positions on MDT and WYE. I want some exposure to the Biotech/Healthcare sector again, but not too much. I also got rid of the mechanical error AAPL calls. I got tired of doing a lot of work to build many good trades in the past week and watch the software error trade keep blowing them up. I may do a little trick here later in the day with AAPL, but I'll write about that later.
7:55 am MT: since I don't need them anymore, I sold the put hedges on the DIA, SPY, and IWM. I lost .55 cents on the DIA, I lost .75 cents on the SPY, and I lost .57 cents on the IWM.
8:35 am MT: Banks and Brokers are up sharply this morning as the less than catastrophic earnings reports from Financials continue to roll in. WFC, SCHW, NTRS, and MI all beat expectations. At the very least, the shorts are probably covering (buying) some of their positions in the Financial sector.
8:40 am MT: I just bought a bunch of puts on Energy. I picked up APA, HAL, ECA, DVN, NE, and XTO. I sold the ECA already for a quick .30 cent profit, or 7% gain in a few minutes. I will sell a couple more and then keep the rest. I also culled out WYE for a .20 cent loss, and I may lock some profits on MDT soon.
I'm inserting this comment in here because I realized that I hadn't written about this: The drop in Energy stocks coincided with the Oil Inventory report showing a larger than expected build. That dropped the price of Oil to the low 130's and gave the market a boost intra-day. So the short covering in Financials broadened out to Retail and the Discretionary Spending sectors and bumped the market up pretty good intra-day.
11:15 am MT: Here is a recap of the past several hours. I sold the MDT calls for a .55 cent profit, or 24% gain intra-day. An hour or so later I bought them back cheaper. I also sold the APA puts for a (total trade) of .90 cents, or 12% gain. I sold the DVN puts for a (total trade) of .45 cents, or 6% gain. I sold the XTO puts for a .30 cent profit or 5% gain. I bought back the APA puts and a little bit of the DVN puts, and I'm still holding the HAL and NE puts. I also nibbled on some COST calls.
I'm targeting 55.00 to sell the MDT calls, but only if it gives it to me today. If I hold it overnight then I'll look for 55.50 - 56.00 tomorrow. I'm playing the Energy puts for another 1-2 day drop, but if we make strong new lows later today I will sell most of the positions just so I don't have to hold them overnight. For COST I was targeting 72.00 for today, and I was going to get out and play it again tomorrow if it moves across 72.50 (for a run to 74.50). COST is turning at 71.95, which means every other trader was targeting 72.00 as well. So I have a sell order in place for if the stock comes back into the 72.90 area.
11:45 am MT: I sold the COST calls when the stock was around 71.80 or so. I made .40 cents, or a 12.5% gain intra-day. I might re-visit the calls tomorrow. If COST pulls back .40 - .50 cents in the next hour, I will nibble a call position before the close.
1:10 pm MT: I nibbled back a call position on COST. I also sold the DVN puts for an .18 cent profit just to cull back on the Energy puts to four positions. More than anything I just don't want too much exposure in any one area. I also nibbled some ADBE calls to get a little more exposure to Tech. Also interesting in Tech: QQQQ (but it's countertrend), IBM, SOHU, and NIHD. I want IBM, but it has earnings tomorrow, so it's not worth the risk.
4:00 pm MT: Market Wrap: Ok.....here's the quick, easy to read version of what happened today. Remember that I warned yesterday that INTC and ALTR would drive Chips and Tech? And I warned over the weekend that if the Financials started reporting less than catastrophic earnings that the Shorts would light themselves on fire and run screaming into the ocean? And I warned yesterday of the Energy stocks rolling over as I was playing puts on them? Well.....we got the bounce in Tech from INTC, ALTR, and the Chips. We got the less than catastrophic earnings in Financials which set off huge short covering. We got the build in Weekly Oil Inventories which dropped Oil and Energy stocks and gave the market another big boost - through short covering and bargain buying in Retail, Consumer Discretionary/Leisure, Transportation, and other "high oil price" sensitive areas. And the Dow finally closed (slightly) above its 10dma (which the SPX still hasn't been able to do). The Naz had the biggest move, and all three major indexes confirmed a bounce. The Naz is headed towards 2,300, with a shot at the 2,320 area.
After the close: EBAY looks like it missed its earnings as the company is down about 7% in after hours trading. XLNX also looks like it missed expectations slightly (as opposed to ALTR) and is down around 2% after hours. Neither report will be as significant as the slew of Financial companies set to report earnings tomorrow morning, including JPM. Many other sectors will be impacted tomorrow morning as well, with NUE (and RS) probably driving Steel, UTX (and ITW) driving Cyclicals, NOK driving Wireless, F and HOG driving some Transportation/Leisure, KO driving Food & Beverage, and CAL driving Airlines. I said to expect peak volatility in the markets this week on Tuesday - Thursday, and that's exactly how it's playing out so far. If the earnings come in less than catastrophic, for the most part, then expect the market to continue the bounce. I will look for any kind of early gap down or drop (in the Energy sector not the market) to sell the Energy puts, just like this morning. And I will continue to work the calls I have, and maybe add some more tomorrow for a possible 1-2 days more in the bounce. I'm still not a super fan of holding things overnight this week unless I see really clear signals. So far so good, but I've got a quick trigger finger on all the directional plays.
The Iron Condors will benefit greatly from a continuation of the bounce tomorrow. It's very possible that I will be unwinding all the Bull Puts on the IWM, DIA, and SPY Iron Condors tomorrow, especially on another nice move up. I will probably use any continuation of this bounce tomorrow or Friday to load up my Iron Condors on the same three ETF's for August.
In addition, both Industrial Production and Capacity Utilization came in better than expected. The only report that really stunk for traders was the CPI report on inflation, which came in higher (or worse) than expected. The CPI report dropped pre-market futures, which were bullish before the open. Now the market is set to open down. I will use that as an opportunity to sell the DIA, SPY, and IWM puts, and probably some of the Energy puts.
7:35 am MT: I sold the four Energy puts into the initial gap down this morning. I want to be out ahead of the Oil Inventory report due out in an hour. Here are the totals: RDC was a .15 cent profit, or 5% gain, APA was an .80 cent profit, or 10% gain, ECA was a .50 cent profit, or 9% gain, and DVN was a 1.30 profit, or 16% gain.
7:50 am MT: I picked up some smaller call positions on MDT and WYE. I want some exposure to the Biotech/Healthcare sector again, but not too much. I also got rid of the mechanical error AAPL calls. I got tired of doing a lot of work to build many good trades in the past week and watch the software error trade keep blowing them up. I may do a little trick here later in the day with AAPL, but I'll write about that later.
7:55 am MT: since I don't need them anymore, I sold the put hedges on the DIA, SPY, and IWM. I lost .55 cents on the DIA, I lost .75 cents on the SPY, and I lost .57 cents on the IWM.
8:35 am MT: Banks and Brokers are up sharply this morning as the less than catastrophic earnings reports from Financials continue to roll in. WFC, SCHW, NTRS, and MI all beat expectations. At the very least, the shorts are probably covering (buying) some of their positions in the Financial sector.
8:40 am MT: I just bought a bunch of puts on Energy. I picked up APA, HAL, ECA, DVN, NE, and XTO. I sold the ECA already for a quick .30 cent profit, or 7% gain in a few minutes. I will sell a couple more and then keep the rest. I also culled out WYE for a .20 cent loss, and I may lock some profits on MDT soon.
I'm inserting this comment in here because I realized that I hadn't written about this: The drop in Energy stocks coincided with the Oil Inventory report showing a larger than expected build. That dropped the price of Oil to the low 130's and gave the market a boost intra-day. So the short covering in Financials broadened out to Retail and the Discretionary Spending sectors and bumped the market up pretty good intra-day.
11:15 am MT: Here is a recap of the past several hours. I sold the MDT calls for a .55 cent profit, or 24% gain intra-day. An hour or so later I bought them back cheaper. I also sold the APA puts for a (total trade) of .90 cents, or 12% gain. I sold the DVN puts for a (total trade) of .45 cents, or 6% gain. I sold the XTO puts for a .30 cent profit or 5% gain. I bought back the APA puts and a little bit of the DVN puts, and I'm still holding the HAL and NE puts. I also nibbled on some COST calls.
I'm targeting 55.00 to sell the MDT calls, but only if it gives it to me today. If I hold it overnight then I'll look for 55.50 - 56.00 tomorrow. I'm playing the Energy puts for another 1-2 day drop, but if we make strong new lows later today I will sell most of the positions just so I don't have to hold them overnight. For COST I was targeting 72.00 for today, and I was going to get out and play it again tomorrow if it moves across 72.50 (for a run to 74.50). COST is turning at 71.95, which means every other trader was targeting 72.00 as well. So I have a sell order in place for if the stock comes back into the 72.90 area.
11:45 am MT: I sold the COST calls when the stock was around 71.80 or so. I made .40 cents, or a 12.5% gain intra-day. I might re-visit the calls tomorrow. If COST pulls back .40 - .50 cents in the next hour, I will nibble a call position before the close.
1:10 pm MT: I nibbled back a call position on COST. I also sold the DVN puts for an .18 cent profit just to cull back on the Energy puts to four positions. More than anything I just don't want too much exposure in any one area. I also nibbled some ADBE calls to get a little more exposure to Tech. Also interesting in Tech: QQQQ (but it's countertrend), IBM, SOHU, and NIHD. I want IBM, but it has earnings tomorrow, so it's not worth the risk.
4:00 pm MT: Market Wrap: Ok.....here's the quick, easy to read version of what happened today. Remember that I warned yesterday that INTC and ALTR would drive Chips and Tech? And I warned over the weekend that if the Financials started reporting less than catastrophic earnings that the Shorts would light themselves on fire and run screaming into the ocean? And I warned yesterday of the Energy stocks rolling over as I was playing puts on them? Well.....we got the bounce in Tech from INTC, ALTR, and the Chips. We got the less than catastrophic earnings in Financials which set off huge short covering. We got the build in Weekly Oil Inventories which dropped Oil and Energy stocks and gave the market another big boost - through short covering and bargain buying in Retail, Consumer Discretionary/Leisure, Transportation, and other "high oil price" sensitive areas. And the Dow finally closed (slightly) above its 10dma (which the SPX still hasn't been able to do). The Naz had the biggest move, and all three major indexes confirmed a bounce. The Naz is headed towards 2,300, with a shot at the 2,320 area.
After the close: EBAY looks like it missed its earnings as the company is down about 7% in after hours trading. XLNX also looks like it missed expectations slightly (as opposed to ALTR) and is down around 2% after hours. Neither report will be as significant as the slew of Financial companies set to report earnings tomorrow morning, including JPM. Many other sectors will be impacted tomorrow morning as well, with NUE (and RS) probably driving Steel, UTX (and ITW) driving Cyclicals, NOK driving Wireless, F and HOG driving some Transportation/Leisure, KO driving Food & Beverage, and CAL driving Airlines. I said to expect peak volatility in the markets this week on Tuesday - Thursday, and that's exactly how it's playing out so far. If the earnings come in less than catastrophic, for the most part, then expect the market to continue the bounce. I will look for any kind of early gap down or drop (in the Energy sector not the market) to sell the Energy puts, just like this morning. And I will continue to work the calls I have, and maybe add some more tomorrow for a possible 1-2 days more in the bounce. I'm still not a super fan of holding things overnight this week unless I see really clear signals. So far so good, but I've got a quick trigger finger on all the directional plays.
The Iron Condors will benefit greatly from a continuation of the bounce tomorrow. It's very possible that I will be unwinding all the Bull Puts on the IWM, DIA, and SPY Iron Condors tomorrow, especially on another nice move up. I will probably use any continuation of this bounce tomorrow or Friday to load up my Iron Condors on the same three ETF's for August.
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