Tuesday December 16, 2014 – Weekly Market Update

Since the S & P 500 failed to achieve the objective of
2,093.80 I had previously outlined, the markets have reeled and
sold off over 100 points. And this has only been since
December 5th.

In only eight days, the S & P 500 gave back 103.02,
assuming the low for today of 1,976.45 holds.

Not only that, but oil has continued it’s massive slide
and just today, the Russian government increased
rates 17% in an effort to support their currency.

Wow.

What happened to the Christmas rally?

And what’s with all the chaos around the world?

I like it when you see market action like this.

Extreme moves lead to opportunity. You just need to be
able to pull the trigger.

You also need a framework to help you determine when
pulling the trigger is appropriate.

Let me give you an example.

The price level on Apple I have shared as a support price
should be $106.25.

This morning, Apple hit a low of $106.26 and reversed to
the upside.

As I write this, Apple is trading at $108.64. Or about $2.40
off the previously identified support price.

A move of $2.40 had the affect of moving the $106 weekly
call from a low of $1.91 to a high of $3.20.

That is a 67% return on a $2.40 move.

Not too bad for about an hour.

But, you needed to know the support price … and you needed
to confirm it with just one other technical set up. I will not
share that set up at this time, but it works pretty well!

I know this works because one of my short term trade group
members skyped me and told me he made an 11% return …
in about an 30 minutes.

He saw the set up and pulled out some quick money.

But, as I said before, you need to know what you are looking
for in advance, so that you can be prepared.

I typically do not make predictions, but one of the reasons
I held off from publishing this issue until today is because
I will make one.

My thoughts are that today the market will bottom and
you will see the Christmas rally everyone is talking about.

Here is why and here is the logic behind my prediction.

In a previous article, I mentioned how the S & P 500
had a capitulation day on October 9, 2014 and that
exactly four days later, the market bottomed.

That bottom saw the S & P 500 race up 259 points to a
new high.

On December 10th, the market had another capitulation day.
If the same pattern holds true, then the bottom should hit
today.

Also, the specific price level I was looking for was 1,992.18.

Yesterday, the S & P 500 closed at 1,989.63. So, if the
S & P managed to close today under 1,992.18, I felt it
would continue to drop.

As I write this, the S & P is trading at 2,012.09 or about
20 points above the 1,992.18 price.

If the market can close above 1,9921.18, which at this
point seems likely, look for the Santa Claus rally.

I hope this has been helpful.

Posted in Weekly Market Updates | Leave a comment

Monday December 8, 2014- Weekly Market Update

As you know, I had been calling for the S & P 500 to
hit 2,062.50. Friday it topped out at 2,079.47 and
today it is down over 15 points as I write this.

When a price level is achieved it is not uncommon
to see a pullback in the market. Usually, I expect one.

So, the question now is where should support be and
what is the next objective or the market?

Usually, the level that was just violated should act
as support. That level was 2,062.50.

As I write this, the S & P 500 hit a low today of
2,054.27 and is now trading at 2,061.23. Or about
one point under where support should be.

If this level can hold today, I expect the market to
continue up.

The price objective I am looking at is 2,093.80.

This is going to be a interesting price. And it is
a price area where I would consider putting
some straddles on the SPY.

Perhaps buy some time and see how the market
reacts.

I would not consider a biased directional trade and
here is why.

I consider the 2,094 a key area. What can happen
is that you begin to get a lot of traders shorting.

And if price does break through it can run and run
fast as all the shorts clammer to cover their
short positions. This is why you see some fast
moves at tops.

And if that happens, I could see the S & P 500
run up to 2,125 to 2,140 pretty quickly.

The other scenario is if it does reverse there.

If that happens then I expect a fast move to the
downside.

So, either way you are positioned for can happen.

These are my thoughts on the market and how you
can be set up for when and if the the S & P 500
gets the 2,093 level.

I do want to briefly mention two other markets that
are in dissaray.

The first is oil.

Since peaking at over $112 per barrel, oil now trades for
about $65 per barrel.

It is getting the same love that gold received after it topped
out and began it’s correction. That is to say, it is now
a market that gets no love at all.

These are precisely the type of markets you do want to
watch because the selling has been so extreme.

I have traded a few gold miners down at the lows as
it continues to consolidate and try and form a base.

The oil vix is up 16% and is trading at 39.68 as I write this.

I am looking for resistance at 40.63 and I do not expect
the oil vix to get through 43.75. If it can get through 43.75
it should head higher, sending oil even lower.

If the oil vix reverses and starts to head down, we should see
oil begin to head up.

Knowing these key levels in advance can help us be positioned
and react to what the market tells us.

I hope this has been helpful.

Posted in Weekly Market Updates | Leave a comment

Monday December 1, 2014 – Weekly Market Update

If you have been reading this newsletter, you no
doubt recognize that the objective of 2,062.50
in the S & P 500 has been achieved.

Two weeks ago, I was calling for the market to hit
that price.

Friday, the S & P 500 hit a high of 2,075.76 and
promtly sold off.

Last week I discussed a trade scenario that would
allow you capture the bulk of the move up to
that level.

The idea is to trade with the trend and take your
profits when the objective is hit.

In fact, had you traded the scenario I discussed
last week, you actually got a bonus of just over
13 points.

That is the amount that the target was exceeded by.

As I write this, the key price you want to monitor
is 2,054.70.

Why?

Because if the S & P 500 has two consecutive daily
closes under 2,054.70, it will want to drop to 2,031.30.

I still feel that 2,094 will be tested. And that is the
price where I feel could be a major problem for
this market.

But today, I want to discuss another market.

That market is oil.

Last week, the OPEC nations decided against cutting
back on the supply of oil.

This send oil prices plunging to under $70 per barrel.
And under what has been perceived as key support
for the commodity.

Let me share where support on the Oil VIX and the
XLE should be.

The Oil VIX works in the same fashion that the VIX
does. That is when the the VIX heads up, the markets
should head down. And vice versa.

The Oil VIX bottomed at 14.25 on June 6, 2014 and
ran all the way up to to a high of 40.63 today.

It made a move of 185% during the year.

Here is where it gets interesting. 40.63 just happens to be
a resistance level for the Oil VIX.

The next level after 40.63 is 43.75. That level is a price
I doubt will be exceeded.

If it does get exceeded, oil prices would continue to drop.

For the XLE, 78.13 is a key support line.

Today, the XLE hit a low of 78.67 and now trades at 80.18.

If 78.13 can hold and the Oil VIX heads down, you may
want to consider picking up some of the oversold oil
companies.

Bargains abound!

I hope this has been helpful.

Posted in Weekly Market Updates | Leave a comment

Weekly Market Update – November 17, 2014

Now that the S & P 500 has hit the objective of
2,031.30 I had been calling for … what next?

Well, I am glad to hear a lot of the old banter about
how overpriced this market is. That tells me that
most likely the next objective will be achieved.

Last week, the S & P 500 had a narrow range doji
bar.

A doji bar can mean indecision. It can also mean
a pause before the move continues.

So, how do you trade this?

On thing you can do is wait for the completion of
this week’s bar before initiating any positions.

Wait until you see how this week’s weekly bar closes.

Or you can get a jump by watching the daily bars.
Last week’s high was 2,046.18 and the low was 2,030.17.

You want to see if a daily bar closes above the high or
below the low of last week.

This way if the market does pull back you are not initiating
positions at the top.

Having said that, the next objective for the S & P is
2,062.50.

At this point, the odds favor a move up to that level.

The question is what is propelling the market to these
levels?

As you are probably aware, the Fed stopped their bond
buying program, so that has not been the impetus for
the continued bull move.

One of the things I track is corporate buyback activity.
It rarely receives any mention from main stream media
and usually when it does, I hear people say how it
does little to help shareholder value.

That maybe true over the long term.

But, you cannot argue with the massive amounts that
companies are infusing into the markets by buying
back their shares.

To me, this is new money flowing into the markets.
Remember, a lot of people were flushed out of the
markets after the 2008 to 2009 crash.

Most of those participants were the retail investors.
That is you and me.

But, I still see significant corporate activity.

For example, in October there was $58 Billion dollars
of buybacks announced. That followed September
in which only $27 billion dollars were announced.

So far in November, there has already been just
over $11 Billion in buybacks announced. And
that was only through the 11th.

So, in the last 2 1/2 months, it totals almost $100 Billion.

These are massive amounts of money chasing stocks.

It is my opinion that this is one of the main reasons
for the continuation of the bull market. But why
would companies commit so much to buybacks?

With 30 year interest rates hovering just over 3%,
I suspect one of the reasons is that alternative
investment options are so low.

I have even heard how foolish it is for companies
to borrow money to buyback shares.

But it is really?

If they can earn 10% per year and borrow long term
at well under rate, wouldn’t it make sense?

Think about it.

If you have a home mortgage where you are paying
a rate greater then today’s rate, wouldn’t it make
sense to refinance and lower your monthly payment?

It seems everyone is looking for rates to go up, but
that has not happened.

Late last year when all the talk was that rates were going
higher in 2014, I told people the opposite.

The 30 year rate peaked at 3.96% last December.

Today, they are at 3.04%. So, they dropped 92 basis
points or 23% since then.

I was telling my members to buy high yielding stocks at
that time.

Stocks like Hatteras Financial Corp (HTS), which hit a
low last December of $14.55.

Today, it trades for $19.17. 31% higher since then.

And on top of that appreciation, you would have received
$2 per share in dividends. That works out to another
13%.

By tracking the TLT and the interest rates you can
time your entries in high yielding stocks. The TLT is
currently around $119.

A move back up the highs, which was $127 would not
be out of the question.

I hope this has been helpful.

Posted in Weekly Market Updates | 2 Comments

Monday November 10, 2014 – Weekly Market Update

After bottoming on October 15, 2014 at 1,820.66, the
S & P 500 continues to move up and hit our objective
of 2,031.30 last Friday.

It’s funny how you don’t hear mention that this bull
market is over. Wasn’t that the chatter last month
as the market was selling off?

Last week I mentioned how you cannot predict the
speed or the depth of the move.

As I have previously mentioned, you can use a few
tools readily available to help determine when a
downmove will end.

I like to use the down to up volume on the New York
Stock Exchange.

When you see day when the down volume is nine times
greater than the up volume, I consider that a selling climax.

During the downmove into the October bottom, there
were two days when this occurred.

The first day was on September 25 and the second day
was on October 9th.

Turning points came 4 days after the selling climaxes,
with the major bottom forming exactly four days after
the second selling climax.

So, if one selling climax has the power to turn the markets,
then two is even better.

Do you think that downmove fooled a lot of market
followers?

I read from multiple sources that this was the end of the
bull market.

Then the market bottoms and proceeds to move up
and makes a new all time high!

Wonder what those people are saying now?

I don’t try and predict the markets, I know that may seem
contrary to what you may think.

I try to read the markets and react to them.

To do this you start by indentifying the trends on multiple
timeframes.

Start with the monthly chart and work your way down.

Both the monthly & weekly charts are in uptrends for
the S & P 500.

Then scaling down to the daily chart, we see that it is also
in an uptrend. Yes, even with the sell off in September
and October, the daily still remained in an uptrend.

Knowing the trend formations tell us that we are still
better off buying after the market bottoms.

One characteristic of a bull market is that they will not
usually end without a rally attempt.

It may rally to the prior high and make a lower top or
make a slightly higher high before rolling over.

So, by putting all these facts together, we can make a
logical determination as to how we should trade,

As I have said on more than one occasion, the thing
we cannot predict is the speed and size of the move.

We can determine approzimately where a move should
terminate, but what we cannot predict is how far and
how fast the next move should be.

If I could predict that I would be on a beach sipping
drinks with little umbrellas in them.

This last upmove has gone 214.34 points in the S & P 500.

If you knew it would have moved that distance, you would
have had multiple contracts on the S & P 500 futures, cashing
them in along the way.

The next level for the S & P 500 is 2,062.50. If this gets
taken out, look for a move up to 2,125.

Before I end for the week, I want to mention the GDX.

As you know, gold has been selling off since it topped out
at 1,923 per once back in 2011.

I know what you are thinking, yes this is the same market
where the experts where predicting it would go to $5,000
per ounce or more.

Now that it has been selling off, I am getting excited.

Excited because I believe it is getting to the level where
a long term bottom is setting up.

I will use the GDX as the proxy for gold. You want to
watch the 17.19 price level on the GDX. If the GDX
closes for two straight days under 17.19, then it should
continue to drop.

If that happens, I would expect it to continue down to
the $12 to $14 area. At that point, I would get excited
and look to get into some miners.

If it cannot get through 17.19, look for it head up.

As I write this, it is trading at 17.46, just 27 cents above
the price I feel is very sigificant.

I know I said before that I do not make predictions and
I don’t. I just read the logic of the markets.

I hope this has been helpful.

Posted in Weekly Market Updates | 1 Comment

Monday November 3, 2014 – Weekly Market Update

This has probably been one of the most volatile
markets I have ever seen.

And that includes the flash crash back in 2010.

I say this because after topping at 2,019.26
on September 19th, the S & P 500 dropped to
a low of 1,820.66 on October 15th.

So in a span of one month, the market dropped
198.60 points. On a percentage basis, that was
a drop of 9.8%. Just below the official 10%
correction level.

Then after bottoming at 1,820.66, the market
proceeded to reverse and hit a high today of
2,024.46.

In five weeks the S & P 500 lost 198.60 points
and in four weeks it gained back 203.80 points.

If you look at these moves on a percentage
basis, that means the S & P 500 had a move
of almost 20% of the total index. That is when
you use the 2,019.26.

Pretty volatile I would say.

The question is can you predict moves of this
extent?

Certainly if you could, you would have substantially
padded your account in the course of two months.

The answer for me is no, you can’t.

I believe what we can predict are the reversals.

What we cannot predict is the extent of the ensuing
move or the velocity of the move, if you will.

But, usually fast moves lead to fast reactions.

And that has certainly been the case.

So, then how would you profit off this recent
market action and what do you look for?

First off, I always start with trend identification.
And if you look at the longer term trends on the
monthly and weekly charts, they are both bullish.

Also, the daily chart was in an uptrend when the
sell off occurred … and still is in an uptrend.

So, had you shorted or bought puts back in September
when the market proceeded to sell off, congratulations
if you made money. But, it was still a countertrend
trade.

To me, you are better off stepping aside and look
for signs of a bottom when the longer term charts
are in an uptrend.

Don’t add long positions as the market sells off.

And don’t believe the hype that the bull market
was ending, as a lot of pundits had mentioned.

In fact, I read from quite a few publishers that
this was the end of the bull market.

There is no doubt that this bull market is over extended.
Overextended both in price and time.

But that does not mean the bull rally will end.

It only alerts you to the fact that you need to be careful.

Then last week, the Fed announced the end of their
quantitative easing. And the markets just shrugged it
off and continued higher.

So, back to the question of how do you indentify
a reversal from down to up?

One of the things I look for and have written about in the past
are selling climaxes.

A selling climax is a capitulation day. This is when all
the sellers throw in the towel and sell out. Most likely
people are selling out at a loss or to protect a profit.

They are actually pretty easy to indentify. You look for days
when the down to up volume exceeds 10 to 1.

During the last downmove, the first selling climax occurred
on September 25th. On that day, the down to up volume
was 10.51 to 1.

That day was followed by 4 bearish closes and a rally for
2 days.

The next selling climax occurred on October 9th when the
down to up volume was 12.04 to one.

That day was followed by 4 bear closes and bottomed on
the 4th day at 1,820.66.

On that day, the rally began.

If one selling climax has the power to turn the market, two
are even better.

So, just by knowing this information, you can be in a position
to determine when the market should turn.

I hope this has been helpful.

Posted in Weekly Market Updates | 1 Comment

Monday October 13, 2014 – Weekly Market Update

Happy Columbus Day to everyone in the United States.

The markets remained open today, but the bond market
is closed.

My family just got back from visiting our son who is
in his second year of college.

Back in time to see this sell off continue. As I write this,
the S & P 500 is down almost 30 points.

This is of course on top of the 61 point drop from last week.

So, is this the end of the bull market that began in
March of 2009?

That is the main question we need to address.

Before I address that question, I want to point out
a few things.

Based on the high market valuations and how I look
for deals to trade, I have found recently that there are
very few opportunities to go long anyway.

The price scans I look for every day and every week
have not produced a lot of trade opportunities.

This tends to keep me from putting on positions
as the market reaches oversold levels.

I did suggest a VXX put position which we closed
out the following day for a 32% gain.

However, I mentioned this trade a week ago and how
it was based on timing the first selling climax in this
downleg.

The market has had another selling climax and that
was on October 9th.

Usually when this happens, the market is due for
a reversal.

There are a couple of factors in place now that seem
to support the bear market position.

The first and I believe the most important of the factors
is that this bull market is overextended.

The bull market started on March 9, 2009 and usually
bull markets last for five years.

So, if we assume the top made on September 19, 2014
at 2,019.26 is the end of this bull market, then the
bull market has lasted for five and one half years.

Slightly longer than an average bull market.

So, in terms on time, we have actually exceeded the
average time of bull markets.

The other consideration is price.

The 2009 bottom was at 666.79. The top made
last month was 2,019.26.

The move measured 1,352.47 points.

On a percentage basis this works out to just over
a 200% move.

The prior bull market that ended in 2007, moved up
just over 100%.

The tech bubble that burst in 2,000 resulted in a
247% gain.

So, you can see how in terms of price, we are around
the level where a bull market can end.

This does not mean the market will continued to drop
straight down. In fact, I fully expect bounces.

In fact, the S & P 500 is right around a level where
I would expect a bounce to occur … and that is the
1,875 level.

If it takes out 1,875, I would expect a drop to
the 1,840 level.

The moving averages are still in an uptrend
formation. I would expect the 50 ema to cross
under the 200 ema on the daily chart and this
has not happened yet.

But, what is concerning is the fact that today closed
under the 50 ema on the weekly chart. That price
is 1,878.19 and today closed at 1,874.74.

I bring this up because the 200 ema on the weekly
chart is sitting just under 1,600. And that is a
level that usually acts as support. But, understand
it is about 300 points away.

So what do you do as the market sells off?

My suggestion is always the same. Do not try
and force positions. If you want to take a shot
at an oversold stock, buy less than you normally
would. And take profits quickly.

Another way to do this is to use a married position.
This is when you buy a stock and a put at the
same time.

The put protects any downside move.

Just my thoughts for today.

Posted in Weekly Market Updates | Leave a comment

Monday October 6, 2014 – Weekly Market Update

Were you looking for a reversal last Thursday?

What was the clue that price would rally last week?

Before I get into that, let me say this. The word on
the street is that the market is way overvalued and
in my opinion, that is true.

But, for the market to roll over into a bear market,
I believe we need a little more price confirmation
before we can officially declare the bull dead.

Now having said, on my weekly webinar last
Wednesday, I stated that I expected the market
to reverse the next day.

The primary reason being that the market had already
had a capitulation day. A capitulation day is a selling
climax.

And I define it as a day when the down to up volume
exceeds 9 to 1.

Now here is where it gets interesting.

The most recent capitulation day before the one on
September 25th, occurred on July 31st.

It took five days after July 31st for the market to
bottom.

Exactly five days later on August 7th, the market
bottomed at 1,904.78. In four weeks, the market
rallied 106 points to a high of 2,011.17 on
September 4th.

Here is where is gets interesting.

The next capitulation day happened on September 25th.

Five days after that day, puts the bottom on
October 2nd … and that is what happened.

The S & P hit a low of 1,926.03 last Thursday
and promptly rallied 51 points in three days.

Knowing this in advance had you looking for
a reversal and being in a position to profit
from this move.

So, how could you have traded this?

A simple way to trade it is buy calls on the SPY
or the DIA.

The SPY bottomed last week at 192.35 and
rallied to a high of 196.88 the next day.

This was a nice 4.53 point move. And if you
used weekly options that expired the next day,
you did not pay a lot for time value.

Another way to trade this is to buy puts on the
VXX. This is what I recommended to my
members.

There is overhead resistance, so this week
could be choppy. But, remember, the markets
can remain overbought a lot longer than you
think they can.

Posted in Weekly Market Updates | Leave a comment

Monday September 29, 2014 – Weekly Market Update

Last week I mentioned how I did not feel this was the
end of the bull market.

One of the reasons for this is because I felt it was
quite significant that the S & P 500 managed to
take out the 2,000 price level.

The S & P hit a high of 2,019.26 on September 19th
and that was the top preceding this pullback.

I felt the 2,000 level to be fairly significant.

Significant enough that I don’t see a major correction
coming until at least we see a retest of the high.

The interesting thing is that after two days of sell off
last week, the S & P 500 rallied on the 24th to a high
of 1,999.79 … just 21 cents under the 2,000 level.

Then the next day, the market sold off in a big way.

Big in that the daily range was 31.33 points last
Thursday.

But someting interesting happened that day.

The amount of down to up volume on the New York
Stock Exchange was just under 11 to 1.

So, there were a lot of sellers out in the market that day.

Wonder who was doing the buying?

Perhaps the smart money?

Let’s face it. If some one is selling, then someone is
buying.

Reminds me of old Mr. Potter in “Its A Wonderful Life”.
You remember the scene where young George Bailey
tells his depositors that Mr. Potter is buying and not
selling?

I bring this up because the last time the markets had a
day when the down to up volume was this high was
back on July 31st. That day the S & P hit a low
of 1,930.67.

Exactly five days later on August 7th, the S & P 500
hit a low of 1,904.78.

In less than a month, the S & P rallied up to a high of
2,011.17.

Will the market do the same this time?

If history is any indication, I believe it will.

At this point, the key support line for the S & P 500
is 1,968.80. Today, the market is trading just above it.
The next support line under that price is 1,960.90.
It is possible the market could test it.

I mentioned last week that I am not a big fan of
using weekly options to place credit spreads.

I would prefer to buy them.

I started testing a strategy to use weekly options
to trade straddles.

Granted, at this point, I only have one week’s
worth of data, but the results seem quite enouraging.

Encouraging enough to continue to test it out.

Last week, I tracked five stocks with this particular
set up.

The maximum returns for each deal were 65%, -26%,
150%, 175% and 65%.

The maximum returns assume you exit your options
as peak value, which is never going to happen.

However, here is where it gets interesting.

If I add one more filter to the test, it would have eliminated
one of the deals that earned 65% and the loss of -26% .

You would have been left with 3 trades that earned a
maximum of 150%, 175% and 65%.

So, if you placed only $1,000 in each trade, your cash return
was $3,900.

And I remind you this was for a week. Actually, one of the
three deals resulted in a 150% profit in one day!

In that trade, the stock dropped $6.50 the day after you placed
the trade, thereby giving you the maximum profit in only one day!

I will keep you posted as to how it works out.

Posted in Weekly Market Updates | Leave a comment

Wednesday September 24, 2014 – Daily Market Update

In yesterday’s daily update, I mentioned that support
in the S & P 500 should be at 1,984.40.

Today, the market came down to 1,978.63 and promptly
reversed.

So, it stopped 5.77 underneath the support line I
called for.

Since stopping at 1,978.63, it has run up to hit 2,000
again.

It is right back to the key level of 2,000!

That is an intra day swing of over 20 points.

I mentioned yesterday there is a key indicator that can
help time these turns. I could explain it, however, it
will not help you because it is dynamic. Dynamic in
that the price where I expect it to pivot or reverse will
change over time depending upon the price it trades
at it.

So, it will not do you any good, unless you know
where it is trading and where it has been trading.

My members have access to that information and pay
for it, so it is not fair to share it here for free.

So, the question is how can you take advantage of
this information?

Well, a simple way to use it is to buy calls on the SPY.

Let’s see how that could have worked out.

This morning, the SPY bottomed at 197.52.

The $197.50 call was around $1 this morning. After
the rally, they are trading for $2.27. Not a bad
return for one day.

Say you went 50 cents out of the money and bought
the $198 call. They would have set you back around
65 cents.

After the rally, they are trading for $1.83.

Even better, almost a three to one return.

That is just one way to take advantage of the turning
point.

But, you have to know what you are looking for.

Posted in Daily Commentary | Leave a comment