Monday March 16, 2015 – Weekly Market Update

Today we are getting a nice rally in the markets
on fears that an interest rate hike may not
happen soon.

Well, the FOMC meets this week and all eyes will
be on the press conference to be held after the
meeting on Wednesday. At 2:00 Eastern, the Fed
will make their statement.

Quite frankly, to me the bigger question this week
is who will beat Kentucky for the NCAA title?

I say that with some sarcasm because I really
do not believe the Fed will raise rates anytime
soon.

In fact, Kentucky winning the NCAA title maybe
more of a sure thing than the Fed raising
interest rates.

Why?

There are a few reasons they most likely
will not raise them in June.

For one, the real estate market continues to limp
along.

If demand has not been created when we have the
lowest long term interest rates in history, what will
happen if the Fed does raise rates?

And now we have the oil market spiralling downhill.

But, to me the biggest factor is that people are
buying treasury bonds at these absurdly low
levels.

Usually you raise rates to spur on demand. But yet,
they don’t need to.

Especially when rates in Europe have gone negative.

Would you put your money in a European bond
with a guaranteed loss when you can buy US Treasury
bonds that pay 2.13% for 10 years?

You can read about the European rates here:
http://www.vox.com/2015/2/5/7981461/negative-interest-rates-

europe

or here:

http://www.businessinsider.com/negative-interest-rates-

threaten-european-bank-profits-2015-3

As I said before, there is no need for the Fed to raise
rates now.

Why do something that could do more harm than good.

But you never know.

Apparently the prospect of the Fed raising rates has
subsided as evidenced by the S & P 500 moving
up almost 28 points today.

And the S & P is almost back to 2,093. The question
now is will it hit the next level, which is 2,125.

My thoughts are it will.

But with this week’s meeting, you never know if something
will be said to derail that prospect.

You can generally expect added volatility after an FOMC
meeting, but the last few ones have been rather tepid.

Maybe this week will be different.

On another note, I want to mention that it was announced
that Apple will be added to the Dow Jones Industrial
Average.

When a company gets added to a major index, it is
generally considered bullish.

This is because funds that mimick the major indexes need
to buy their stock.

You may want to keep an eye on Apple to see if you can
get a decent entry.

I hope this has been helpful.

Posted in Weekly Market Updates | Leave a comment

Monday March 9,2015 – Weekly Market Update

Wow! I did not do a newsletter last week and
Friday we have the biggest one day sell off
in quite some time.

The Friday’s Job Report came in better than expected,
prompting investors to think that the Fed may raise
interest rates sooner than expected.

This caused the dollar to go up and gold to be sold off.

The TLT also dropped on the speculation.

Now today, the market is recovering a bit.

The question is this … was there something that could
have alerted us to a sell off?

The answer is to keep an eye on the VIX.

If you look at a daily chart of the VIX, you will see that
on February 25th, it hit a low of 12.86.

From there is traded sideways for a few days.

The support line on the VIX is 12.50. And if you look at
a daily chart of the VIX, you can see that for the last
two years the VIX had bounced up off that price level.

Yes, it has gotten below it a few times. But everytime it
does, it pops right back up.

And when the VIX moves up, the markets should move
down.

It pays to keep an eye on the VIX and know where
key support and resistance is.

As you know, I track corporate buyback activity.

For the month of February, there was a whopping
$73.7 Billions dollars committed to share buy backs.

That is the highest amount I have seen committed in
quite some time.

The largest was Home Depot. Home Depot annouced
an $18 Billion buy back on February 24th.

After Home Depot, was the $10 Billion buy back
announced by Comcast Corp.

These are incredible amounts and as I have been
saying for sometime now, that this is one of the
reasons that the markets continue higher.

There are no alternative investments available to
companies that make sense, so they continue to buy
back their own shares.

The question is when will this activity begin to taper
off? When the Fed starts to raise rates?

Or will companies continue their massive buy backs
even in a higher interest rate environment?

I don’t know the answer to that question, but I do
know I will continue to track the activity.

I hope this has been helpful.

Until next week, trade safely.

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Monday February 23, 2015 – Weekly Market Update

I mentioned last week that the objective in the
S & P 500 of 2,093.80 was achieved … and
exceeded.

The question now is where should the market go?

Before I answer that, let me just say that this is
precisely the time to stay with the trend, until
that trend gets broken.

I am seeing more and more so called guru’s saying
that the market is ready for a drop.

That maybe true. But you need to stay with the
trend until the trend is proven to be over.

Just because it is so high does not mean that it
will reverse.

In fact, markets are designed to fool people.

Take Apple for example.

Apple has been incredibly strong. In fact, as I write
this it is up $2.84 today.

I got an email from a friend of mine and he said he
bought some puts on Apple last Friday.

He said he did not risk a lot on the trade and if it
did not work out, he would not lose a lot.

At least he did not load the boat thinking that just
because the stock is overbought it is due to drop.

He bought puts because he felt it was high.

Now, it may just do that.

But, I told him he is far better off waiting for it to
reverse before trying to trade the short side.

You see, Apple continues to make new highs.
So, there is no overhead resistance.

The reason you start to see quick moves at highs
is because the traders who shorted the stock need
to cover very quickly. And that helps to fuel the
move even higher.

I read there where a lot of traders who were shorting
NASD stocks back before the top in 2000.

They were shorting the tech stocks that had no
earnings or prospects for the future.

As it turns out, they were right in their thinking that a lot
of these overvalued stocks would come back to
reality. But, they were wrong in their timing
and lost a lot of money as a lot of these stocks
continued to make crazy moves.

Back to the markets.

The next objective for the S & P 500 is 2,125.

If the S & P can close today above 2,101.62, I expect
2,125 to get hit.

As I write this, it is trading at 2,103.38.

There is less than an hour to go in the trading day.

If it cannot close above that level, then the market could
drop to the 2,086 area.

Keep an eye on it and let’s see if I am right.

I hope this has been helpful.

Posted in Weekly Market Updates | Leave a comment

Monday February 9, 2015 – Weekly Market Update

 

Are you getting the impression that this market
is schizophrenic?

Two weeks ago, the S & P 500 was down 56.83 points.
Then last week, it reversed and was up 60.48!

And it seems like this has happened all year.

As of today, the S & P 500 has an average range of
26.44 points per day. On a weekly basis, it is almost
51 points.

When you consider that back in December, the
S & P 500 had an average daily range of $14,
today’s movements are massive compared to that.

Last September, the range was only about $12.

If you compare those two figures, you realize that
we are double the daily range from six months
ago.

So, what does this volatility tell us?

Well for one, it tells you that you need to be careful.
Better to err on the side of caution.

Don’t fall victim to the talking heads on TV who
constantly scream buy, buy, buy.

Pick your spots to buy.

Last week I was mentioning to take a look at out
of favor sectors.

Steel was one of the sectors to take a look at.

The other one is oil. The spot price for oil lost
over 50% of it’s value since last summer.

Along with that drop, the stocks of oil companies
dropped like a rocket.

I was looking at a few Candian oil sand stocks.

One of them was Penn West Energy Ltd., symbol PWE.
PWE was trading for over $9 per share last summer.

It recently dropped to a low of $1.37. Essentially, it
lost almost 85% of it’s value.

There was an entry on January 30th when it closed at
$1.49 per share.

Today it is trading for $2.64. So, in just over one week,
it is up almost 80%.

This is why it pays to keep an eye on oversold sectors.

Will it head higher? I don’t know, but at this point you
can trail a stop under the daily low and keep moving it
up if it does head higher.

This is why it pays to look at beaten down sectors.

I hope this has been helpful.

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Monday February 2, 2015 – Weekly Market Update

So, the Super Bowl ends with a highly controversial
play call by the Seahawks and the Patriots hang on
to win!

I am certain that Coach Carroll will be questioned
until the next Super Bowl, if not longer.

But, when you have a running back like the “Beast”,
it really surprised me that they did not hand off to
him every play.

If you want to compare this to the markets, you
can see the similarities.

You think you have everything lined up and you
place your trade.

Then the price promptly moves against you.

Has this ever happened to you?

If you answered no, I would suggest that you are
not being honest with yourself.

This happens to everyone.

The question is can you be discplined enough to know
that you are wrong and immediately cut your losses.

For example, last week I mentioned how you may want
to look at sectors that have been oversold.

And I mentioned a low priced steel stock, AKS.

At that time, AKS was trading for $4.33 and I mentioned
that you could buy the stock with a stop just under $3.83.

And if your entry was right, a move up to $6.20 would
not be out of the question.

Well AKS did in fact drop. It dropped to a low of $3.62.

So, if you had your stop under $3.83, you would have lost
about $.55 per share.

This is where the disclipline comes in. Take the loss and
reavulate the situation.

You can always get back in.

Another position I mentioned last week was NUGT.

I mentioned how I bought NUGT and sold rounds
of weekly calls against the stock. I collected a total
of $1.28 per share.

Friday, it did settle above $18, which was the strike
I sold, therefore I was obligated to sell my shares at $18.

I owned the shares for seven days. The return for
those seven days ended up being 7.5%.

Not too bad for one week. If you annualize that, the
return would be almost 400%.

I will take that everyday of the week.

As for the markets, the volatility continues.

As of today, the average true range for the S & P 500
is 28.57.

A week ago, it was around 26.

So, the volatility is actually increasing.

In these types of markets you have to be careful.

I hope this has been helpful.

Until next week, trade safely.

Posted in Weekly Market Updates | Leave a comment

Tuesday January 27, 2015 – Weekly Market Update

I am a day late on publishing this due to the major
blizzard that was supposed to hit our area.

We are certainly quite fortunate in that it looks like
we only got about 4 inches of snow when the
experts were calling for over two feet.

To say we dodged a bullet is an understatement
when you see parts of Long Island buried in that
type of snow.

If you were in the path, I hope you faired well.

Back to the markets.

One of the themes I keep mentioning is that I expect
tremendous volatility this year.

And it certainly has worked out that way.

Out of the four trading days last week, three of them
had daily ranges of around 25 points. And Thursday’s
range was almost 40 points.

The S & P 500 now has an average daily range of
26.87 points.

So you can be sure that moves like this will be fairly
common.

The question is what do you do to make money in
an environment like this?

You put on a trade and promtly watch the DOW
sink over 200 points.

It is not a great feeling.

There are a couple of things you can do. One is to
look for markets that appear to be oversold and
forming a bottom.

One market like this is gold and the GDX, which
is the gold miners index.

Let me share a trade I did last Friday on NUGT.

NUGT is an etf that mimicks the GDX, which the
exception that it is leveraged three times the GDX.

In other words, if the GDX moves up 50 cents, in
theory, NUGT should move up $1.50.

Last Friday, I bought NUGT at $17.93. I then sold the
$18 call that expired that day and collected 16 cents
per share.

NUGT was trading just under $18 when I did this.

I then watched how NUGT traded into the close.

It ended up dropping a bit and was around $17.70.

So, just before the close I sold the $18 call that
expires this Friday and collected another $1.12 per share.

I was naked on the second set of calls, but because
I have the margin to do this, it was no problem.

And my risk was that NUGT would have to run up
about 30 cents in a few minutes.

So, in the span of a few hours, I collected $1.28 per
share.

As I write this, NUGT is trading for $19.84 or $1.84
above the strike price.

If NUGT settles above $18 this Friday, the calls will
be assigned.

The return for holding the stock will be 7.5%. When
you consider the holding period is only 6 days, that
is not too bad.

Of course the week is not over and it could drop.

But, if it does, I will sell another round of calls.

But the point is that you need to be looking for
situations where there is a buying opportunity.

A lot of stocks are priced too high. And if you get
caught chasing them, you can lose substantial
money.

Why not look at sectors that have been beaten
down?

For example the steel sector. The steel sector is
down over 12% for the month.

A few of the companies in the sector are reporting
this week. Take AKS for example.

They reported profit of 14 cents per share versus
a consensus of 8 cents.

Another company that reported today is Nucor (NUE).

NUE reported 68 cents per share of profits versus a
consensus of 56 cents.

Both stocks are up today on the news.

Lets look at how these companies have traded.

AKS hit a high of $11.37 back in August of last year.
Since then it dropped to a low of $3.83 this month.

It lost 66% of it’s value since last summer.

Now it reported decent earnings and is moving up.

And NUE hit a high of almost $60 last September
and dropped to a low of $45.13 this month.

It lost 25% as it pulled back. And now it is starting to
reverse after their earnings announcement.

I could go through the same analysis on two other
companies reporting this week, STLD & X.

But I will spare you that analysis.

But, based on what AKS and NUE reported, I would
generally expect more of the same for STLD and X.

I often hear the mantra that you should not try and catch
a falling knife.

But, if you think about it, aren’t maximum profits made
after a stock pulls back?

Let’s look again at AKS. Right now it is trading at $4.33
per share. The pivot low is $3.83.

Say you bought the stock right now and used that low
as your stop loss price.

You could enter the deal with about a 13% risk.

And if this low turns out to be a major bottom, I would
expect the first rally to take out $6.25.

That is the next prior high. So, if it complied you would
be sitting with returns of about 44%. With a risk of 13%.

And if it ran to the prior high at $11.37, your return
could be as much as 162%.

I hope this has been helpful.

Until next week, trade safely.

Posted in Weekly Market Updates | 1 Comment

Monday January 19, 2015 – Weekly Market Update

I mentioned last week that I fully expect that we
will see tremendous volatility this year.

The very next day, the S & P 500 had a daily range
of almost 50 points. That was followed by three
straight days where the range was around 30 points.

When you consider that just two weeks earlier, the
S & P 500 was averaging a daily range of around
8 to 9 points, the recent moves are quite massive.

This type of volatility has the potential to make
you money, but it also has the potential to
take your money and create a lot of frustration.

This is because if you are wrong on an entry
the move against you can be quite massive.

And it can happen fast.

I fully expect this will be more of the norm this
year.

Time to move onto another topic. Today, I want
to discuss earnings season.

Last Monday began the new earnings season with
Alcoa reporting after hours.

There are a lot of people who trade earnings.
And there are a lot of methodologies that people
employ to trade earnings.

Some people buy straddles BEFORE the earnings
announcement.

Some people will sell out of the money credit spreads.

Let me what what I like to do, especially if the company
reports on Thursday afternoon or Friday mornings …
and they have weekly options.

If a company reports at that time and has a price move
that crosses a few strike prices, I tend to take notice.

Let’s take a look at a company that reported last week,
Goldman Sachs (GS).

GS opened down at $176.73 and dropped to a low of
$174.06. After firming up, it ran up to a high of $178
on the day.

So, about a $4 move off the low. And that $4 move
crossed the $175 strike.

So, you could have bought an out of the money call
that moved in the money.

These are the most profitable option trades you will
find … especially if it occurs on a Friday when the
time premium is the lowest.

I hope this gives you some ides for this earnings season.

I will share some earnings trades in future editions.

Until next week, trade safely.

Posted in Weekly Market Updates | Leave a comment

Monday January 12, 2015 – Weekly Market Update

The DOW is down over 100 points today as I
write this. It seems that since the year started,
every day has seen moves over 100 points.

Actually that is not true because on January 2nd,
the DOW only had a 20 point range.

However, every day after that saw swings of at
least 100 points.

Personally, I think this is going to be quite common
this year. Volatility should be high this year.

So, how can you make money in this type of
environment?

I already mentioned last week, that the markets are
overdue for a serious correction. Personally, I
don’t believe these are the times to pile into
the markets.

Think back to 2007 and far the market fell after
topping out.

Could the same thing happen this year?

Sure. Why not? That is what markets do and
how they move.

They go from oversold to overbought. And
vice versa.

So, what can you do to make money?

This year I am trading more volatility. Basically, that
means I am using staddles and strangles more
frequently to try and capture some of these big
swings.

The good part about this strategy is that you do
not need to pick a direction. You only need to
see a decent move. Which as of late, we have
seen quite a few.

One stock I like for this strategy is BIDU. In fact,
last Tuesday you could have bought the $220
straddle for $3. That means you would have long
both the $220 call and $220 put that expired
the end of the week.

Two days later, BIDU ran up to a high of $232.99.
The calls were worth $12 at the peak.

Say you did not sell them at the top, but you sold
them for $10. That means the position netted
$7 per position or $700 for a one lot.

Not bad for two days … and you did not have to
pick a direction.

The other strategy I continue to employ is shorter
term trading. Especially on Friday’s.

I have mentioned before how I have a smaller group
of members who I have dubbed the “Friday Trade
Group.”

The focus of this group is to trade weekly options
on Fridays that expire that very same day.

Yes, there is risk involved, but I know of no other
way to reap signficant returns in such a short period
of time.

This is because time value is the lowest on the Friday
of expiration.

So, it is very possible to pay almost nothing for
an option and see it climb to $3, $4 or even $6.

Can you make money with strategy?

Well, I received an email from one member of the group
who reported that he had his first $1,000 day trading
last Friday.

And here is the thing. He did only 3 trades. One trade
cost him $240 to put on. And on the second trade he had
$245 of risk on it.

On the first trade, he bought a 10 lot of the $102.50
calls on the QQQ and paid 24 cents each for them
or a total of $240.

He sold them about 45 minutes later for $.50 each, netted
him $260 in the process.

This is what I mean about inexpensive options. For
only $24 you control $10,250 worth of QQQ stock.

By my calculation, that is leverage of 427 to one.

The second trade he did was using a strategy I shared
with him.

He bought a 5 lot of the TLT $129.50 calls and paid
$25 each for them.

Around the same time, he also bought a 10 lot of the
$130 calls for only $.12 a piece.

So in total these 15 contracts cost him $245.

The idea is to sell the at the money calls when they hit
the strike price of the out of the money calls, which he did.

He sold the $129.50 calls for $.65 each, netting a profit
of $200.

So, at this point, he has already booked a profit for the
day of $460 and he has risk on the table of only $120.

The worst that can happen at this point, is he walks
away with a profit on the day of $340.

A short time after 1:00 EST, he sold the TLT $130 calls
for $.75. So, he collected another $750.

When you add it all up, he made $1,090 and was done
for the day around 1:00.

Not a bad day’s pay for making a few trades.

Now you can see why I love the leverage options give you
on a Friday.

And if you think investing $485 is too rich for you, then scale
it back.

I have no doubt that this gentlemen will have many more
days where his profit exceeds $1,000. And I thank him
for letting me share his results.

If this type of trading appeals to you, I encourage you to
join the Fusion Trading System. You get access to the
Friday Trade Group as part of your membership.

Go to www.FusionTradingSystem.com

Until next week, trade safely.

Posted in Weekly Market Updates | 2 Comments

Monday January 5, 2015 – Weekly Market Update

Well, New Years has come and gone and the market
sells off in a big way.

The DOW is down just over 300 points as I write this
and the S & P is off almost 36 points.

Not the way you want to see the new year start.

But, if you think back to last year, that is exactly
how 2014 began.

The market actually topped out on January 15th last
year at 1,850.84. From that top, it dropped over 100
points to a low of 1,737.92 on February 5th.

So, in about three weeks, the market lost over 6%.

The question you have to ask yourself is this … will
this year be any different?

Because after that bottom, the market went on to make
new highs and have another positive year.

Will this year be any different?

I think these types of moves will be normal this
year. In other words, I am expecting a lot of
volatility.

One of the reasons is that the market is overdue for
a bear market.

On average, bull markets last for five years. This
bull market, which began on March 9, 2009 is now
in it’s six year. So, from a time perspective it is
overdue for a major pullback.

What will be impetus for the next bear market?

Perhaps the free fall in oil? Could it be that the Fed
starts to raise interest rates in 2015?

With the deflation across the board in commodity
prices, it seems that inflation is not an issue.

These are the questions you need to ask yourself.

Don’t be fooled by mainstream pundits who
constantly tought the virtues of staying fully
invested in the markets.

The issue is how do you make money in a volatile
market?

Do you pull out altogether?

That depends upon your risk tolerance and how much
you are willing to accept. But, imagine that you sold out
of the market in 2007 and waited for the bottom
in 2009. Bargains could have been had at that point.

Before I would suggest that, I believe the market needs
more price confirmation before we can say it has
shifted to a bear market.

So, how do you make money in markets like this?

One thing you can do is trade off of shorter timeframes.

I do this using 60 minute charts and combine them
with 10 minute or even 5 minute charts.

I especially like this on Friday using weekly options that
expire that day. This way, you pay very little for
time premium and your loss is capped at the premium
you pay.

Let me give you a quick example from last Friday.

We were looking at BIDU.

BIDU gapped up and opened Friday at $229.46. It moved
up to a high of $230.45. At that point, the $230 put that
expired that day would have cost you about $1 or $100
for one contract.

BIDU dropped to a low of $221.48. At that point, the
$230 put would have been worth around $8.50.

So, a $100 investment would have grown to $850 in a day.
Actually, it made that move by 11:00 EST, so you
would have been in the trade for about an hour and half.

And that was not even the best trade in BIDU last Friday.

At the time that it spiked up just over $230, the $225 put
could have been bought for 10 cents. If went to a high
of $3.30 the same day.

These examples are why I love the leverage of weekly
options on a Friday.

The other strategy I am doing more of are non directional
straddles and strangles.

With this strategy, you do not need to pick a direction. You
anticipate an expansion of volatility.

I have indentified certains sets ups where this trade makes
sense.

It is not without risk. Your risk is if the stock fails to move
more that the cost of your straddle or strangle.

I know it seems odd to bring up issues like thinking about
a shift in market momentum. But, this is precisely the
time to start.

Until next week, trade safely.

Posted in Weekly Market Updates | 2 Comments

Monday December 22, 2014 – Weekly Market Update

Last week I postponed publishing the weekly update
until Tuesday.

Thats because I felt the bottom for the market
would be that exact day. And I wanted you to
read my call the exact day of the low.

How did it turn out?

Well it just so happened that the bottom hit at 1,972.56
last Tuesday.

Since then, the S & P 500 has rallied up to a high on
Friday of 2,077.85.

That was a move of 105.29 points.

Not too bad. In only 3 days, the market moved up 5.3%.

The question is would this type of information benefit you?

If you go back and read last week’s update, you will learn
the reasons why I felt the market would bottom last week.

You can find it posted here …
http://fusiontraderblog.com/?p=192

When you have a sold framework to analyze the markets,
you can become a much better trader.

Speaking of trading, I am doing more volatility trades.

And why not? With the moves the market is seeing, trading
non directionally can be quite profitable.

Let me give you an example. About two weeks ago I felt
that BIDU would make a decent move.

So, here is what I did. I bought both the weekly $225 put
and call that expired in two days from the day I bought
them.

I paid a total of $4.85 for both of them.

The next day, I was able to sell the calls for $8.00. And I
closed out the putside for 18 cents.

So, I collected a total of $8.18.

Considering I paid $4.85 the day before, the profit was $3.33.

That works out to a return of 68.6% for one day.

Not too bad.

And it did not require me to pick a direction, just anticipate
a normal trading day.

There was a specific reason why I chose to do this on
BIDU. That is what I teach inside my service.

For a limited time, we are running a special where you can
gain access for 50% off the normal monthly rate.

Instead of the regular $97 per month, for a short time you
can get access at only $49. That works out to $1.63 per day.

So, for less than the cost of your daily cup of coffee you
can become a full member.

And you are protected with a No Questions asked 60 day
money back guarantee. If for any reason you do not
like my style or what I can offer you, you can get a refund.

Sign up today at …

http://fusiontradingsystem.com/49special/

And Merry Christmas to you and your family!

I hope this has been helpful.

Posted in Weekly Market Updates | 1 Comment