Options Trading Newsletter: October 22, 2014

Wednesday

October 22, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

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Great Morning !

Closing Prices From Yesterdaypot1

Earnings Today

Below is a list of some of the bigger earnings announcements today

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Don’t Worry – The Bull is Most Likely Just Taking a Nap.

Weeding out people before huge profits are made is what the market does best.

Today’s Number(s)pot3

Yesterday and TodayScreen Shot 2014-08-21 at 7.37.24 AM

Yesterday

The SPX was up 37 points and it felt like a dead and boring day. Had there been a negative sign in front of that number every analyst on television would have been saying that the sky is falling. As I stated all the way down to SPX 1820, this is NOT the end. The end goes faster and out of nowhere. It is not because of Ebola, ISIS or oil prices. I must admit that the end is taking a lot longer to get here than I though. But it is coming.

TODAY

Be careful around 10:30am when the crude inventories come out. For some unexplained reason crude falling was a big consideration when the markets fell two weeks ago. Since 1904 was not even played with (other than closing right on the number for one day) it appears that the bull is back with greater force than previously. Can you believe we are just 400 points away from Dow 17,000? And had IBM not weighed on the markets it would only be 250 points away.Screen Shot 2014-08-21 at 7.37.32 AM

Contract the office at 1- 855 – RWT – 0008 for more details.

Check Email For POT update.Screen Shot 2014-08-21 at 7.37.44 AM

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Option Trading Newsletter: October 21, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

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Earnings Today

Below is a list of some of the bigger earnings announcements today

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Don’t Worry – The Bull is Most Likely Just Taking a Nap.
Weeding out people before huge profits are made is what the market does best.

Today’s Number(s)

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Yesterday

The Dow closed up 19 points despite IBM falling 12.95 on a bad earnings miss. IBM being down 12.95 is equivalent to 91 Dow points, so the market would have been up a lot more had IBM been unchanged. This is proven in the SPX which was up 17.25 to close RIGHT AT the 1904 number I spoke of yesterday in the morning update.

After the close AAPL came out with record iPhone sales and the stock was up $1. Keep in mind that the stock was up $2.09 going into earnings so the real move was about $3. We will see how it really opens today.

TODAY

This is an important day with the SPX closing exactly at the old 200 day moving average we went through on the big drop. To me this feels like a see-saw and the market could go in either direction for a while. We have to see how the market opens in the morning.

China’s economic numbers came out at 10:00pm eastern and apparently they were not great as the E-minis began to sell off and at down 6.50 at 12:30pm with the Dow futures down 56. We shall see.

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Option Trading Newsletter: October 20, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

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Earnings Today

Below is a list of some of the bigger earnings announcements today

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Don’t Worry – The Bull is Most Likely Just Taking a Nap.
Weeding out people before huge profits are made is what the market does best.

Today’s Number(s)

NO NUMBERS TODAY

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Yesterday

A big up day on Friday after a large gap opening. What is unusual about this rally is that the media is claiming that it was because gas prices were going up and interest rates were going up. Think about that insane explanation for a minute. In reality it went up because it was over sold and we have to test 1904 in the SPX, the 200 day moving average we broke through like butter. Sometimes there are no explanations and making up one is more stupid than admitting you don’t know why.

TODAY

We are most likely going to test that 1904 number. I doubt that the markets move, and stay, above it. POT people, you will be getting an update as well that goes into my game plan at that number. But I really believe that the market has to test that number to make a determination of which way to go from here. Had we not had the bounce on Friday I would have suspected we continue to fall, but since that bounce the market is feeling for walls to move along like a blind person in a new home.

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Option Trading Newsletter: October 17, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

MU10172014I1

Earnings Today

Below is a list of some of the bigger earnings announcements today

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Today’s Number(s)

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Yesterday

A roller coaster ride was the sensation people experienced yesterday with the Dow opening up down 207 points and then bouncing. By lunch the market was still gyrating around; however, the ranges were smaller and slower moving than the previous two weeks.

Some of the bounce occurred when one of the Fed members suggested/hinted that more bond buying would be appropriate if the selling continues. Despite those lullabies to the market the bonds fell pretty good with the TLT closing down -0.78 at 121.75. Remember that the highs were 127.68 on Tuesday, so the TLT is down almost $6 from there.

TODAY

Probably a bounce up. We will see if it sustains or is just a false door. Remember that in the past 16 drops we have had over the last 3-4 years the first move up was the best buying opportunity in the world. Yesterday we saw the E-minis up 21 points for a bit before selling back off to close up $5.

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Option Trading Newsletter: October 16, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

Earnings Today

Below is a list of some of the bigger earnings announcements today

A LOT OF BANKS REPORT TODAY

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Today’s Number(s)

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Yesterday

A WILD RIDE. The Dow opened down 362 points on what appeared to be forced liquidation. As that was going on the TLT opened up $5.80 in what also looking like forced liquidation. Immediately after the open the Dow climbed from the gutter to a negative -108 points (or up 254) within 30 minutes.

After that the CDC decided to hold a press conference to prove what people feared- they are clueless. Immediately after they finished pulling the Ole Sgt. Schultz the Dow fell 150 points and was down 459 points.

After sitting at the lows and the Dow falling below 16,000 the sellers dried up and the market staged a walk back up the stairs. With the Dow down 155 at the end of the day the market backed off a little to close down 173 points.

After cash closed NFLX dumped a bomb on the markets with poor earnings causing the stock to fall 26% in after hours trading. The E-minis followed falling $10 points in the 4:00 to 4:15pm eastern time period. Obviously the cash and Dow stocks were closed so they didn’t fall, but would have fallen 70 points on the news. The Nasdaq fell1% on that news.


So if E-minis are unchanged the Dow will be down about 70 points to catch up. Please adjust accordingly in your head when you see the Dow under or out perform the market.

TODAY

I am starting to get close to thinking the worst is over. The Dow did NOT like being down below 16,000, and the TLT move was what I would bet big money on being a short squeeze and/or forced liquidation. Crude didn’t like be at $80 and bounced.

We have a lot of bank stocks out with earnings today before the open. If there are no negative surprises I think we can shrug off the NFLX disappointment. We will see.

Positives –

  • Octobers are usually up months, even when they start out down.

  • Earnings are coming out and there are not a lot of big negatives, other than NFLX.

  • People are exiting European investments and have to put the money somewhere.

  • People were looking for a drop that has never come. Well, it came. And with bonds yielding never ending low yields who would want to be in a 30 year for 3% or a 10 year for 1.98%?

Negatives

  • Russia is barking again and making threats.

  • People are shaken up and we didn’t hit any really crappy hard bottom. Yes 450 down was big, but that is really only a 3% drop. We had 500 down days many times.

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Option Trading Newsletter: October 15, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

Earnings Today

Below is a list of some of the bigger earnings announcements today

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Today’s Number(s)

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Yesterday

Nothing…
The market attempted to stage a come back towards 1904 (200 day moving average in the SPX) before a late day sell-off came back in. This has been the model for the last 3 – 4 days and it squashed down a 100+ Dow gain to negative territory.

Crude Oil fell almost $4 after inventory numbers came out. In addition Saudi Arabia decided it was going to sell oil in the market place competitively instead of running to OPEC to attempt price fixing. This has been a major drop in price, but even at 82.prices are high. Remember that the average price of gas when Bush left office was $2.52. The only thing surprising is that all the turmoil in the Middle East is concerning the stock market but not the oil market.

The US dollar was strong against other major currencies again after taking a short break. We are still below the SPX 200 Day moving average and the channel for the last 3 years.

TODAY

Today is the first day of the week with economic numbers out. The E-minis at 8:00pm are poised for $7 higher and Dow futures 62 points higher. INTEL had earnings after the close and they barely beat. The news is mixed on if this is good or bad based on who you as (as demonstrated by headlines below). But it is enough to show signs of optimism for the markets after the tech sector got beaten down so bad last week.

There is certainly a bearish trend going on, and the fact that yesterday’s bounce could not sustain itself is not positive. Yet we did not have any economic numbers or positive news to fuel the rally. We will see what is in store for the markets after bank earnings come out today, and the economic numbers hit.

It doesn’t matter what the numbers are (good or bad), but the numbers will be the catalyst for the move that is coming. Despite the markets being up $7.50 in the E-minis I think that will come back down. People are scared. But when super scared, then I am getting long.

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Option Trading Newsletter: October 14, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

If anyone is watching the markets more than we are, it is politicians. They have NOTHING going for them other than the Dow as at record highs. If this market keeps falling it will hurt every incumbent – both republican and democrat.

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NO NUMBERS

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Yesterday

Kaboom Part V

Another down day. This time the media was again fishing for reasons and they came up with……ta da…..”EBOLA”. First they are telling us it is nothing to worry about and it is as hard to get it as getting AIDS, and then they make it sound like it is going to be the Black Plague.

The truth is….We closed 2 points above the 1904 SPX 200 day moving average. We vacillated around it all day with traders giving the markets every chance in the world to run higher. When it could not bounce people threw in the towel and sold everything off in the last 45 minutes.

It was NOT because of Ebola, ISIS, the elections, flying saucers on Mars, Yellen, the Fed, China, Russia or the dengue fever.

Below is the 3-year chart I have been showing everyone in POT for the last year+. We broke through the 3-year trend line that took this market to stratospheric levels and a pullback was due. It is normal and even healthy.

TODAY

Listen to the sound of confusion……..

Who knows what is going to happen today. We are oversold in the short run, but could lose another 4% over the short run before we have washed out all the people who are long the market but don’t have the brains or stomach to be in it. I would say that a bounce is needed to scare everyone or all the bears (me included) will have too much fun in the downdraft. The market’s job is to make itself as confusing as possible, and if we keep falling without an up day then the market is not doing its job.

As a matter of fact I tried to sell put spreads on the close in POT but was not filled. I would love to see us open 200-300 points lower. Then you will hear the sound of laughter. But this probably wont happen and I will be doing LIQUID (Random Walk text on adjusting winning and losing trades) adjustments to wiggle out of things.

Why would may actually be at a bottom?

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Option Trading Newsletter: October 13, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS

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Great Morning

Closing Prices From Yesterday

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NO NUMBERS

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Yesterday

Kaboom Part IV

The return of volatility

It was a quiet day with the market spending most of the day with the Dow up about 40 and the E-minis down about -4.00. It was not until the end of the day and the endless talk about the 200-day moving average being at 1904 that the markets went to the magnet.


LESSON

This is a PERFECT example of how numbers are worthless, meaningless and stupid – BUT if enough people are looking at them they become a self-fulfilling prophecy at times.

TODAY

The SPX closed at 1906.13, but about $2 away from the moving average everyone is anticipating. The Dow is now down for the year. The RUT is way under water. Now everyone is starting to get concerned. IN the past you could tell the sell-offs we have had were stupid because the VIX could barely get to 17%. No one was really scared, instead of looking at selling as a “buying opportunity”. Now the VIX traded on Friday above 22%, and is probably going to open at 24% today.

I felt (on Friday) we had to open a little weaker today because we didn’t officially test the 1904 number. Some people get real picky with those numbers. We now have ISIS cooperating with the markets going lower as they approach Baghdad and major battles going on. I can’t say the word “war” because Obama said that this is not a “war”. But then he did say it was? Then he said it wasn’t. Kind of sounds like Vietnam, huh?

There are no numbers out today, and news that the market is not officially down for the year may get some people selling out of their positions on the open. This will force the markets down, and we will see where we go from here.


Do keep things in perspective. The Dow is only 460 points away from 17,000 still. That means you can say we are still in the bull market, or you can say we have a lot of room to fall. For POT people, it doesn’t matter. See below.

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Option Trading Newsletter: October 10, 2014

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Prepared by the good people at Random Walk, LLC. (and Scott)

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Great Morning

Closing Prices From Yesterday

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Yesterday

Kaboom Part III

It was an amazingly shocking day to most traders. It is hard to catch this many seasoned traders off guard, and I admit I was caught too. I would have bet most anything that after Wednesday’s run up there was NO WAY we would have fallen 2.07% in the SPX the next day. The speed at which we climbed after the Fed announced was indicative of massive short covering, and an indication that the path of least resistance was obviously to the upside.

But the biggest rally higher of the year was followed by an equally nasty drop. Mario Draghi of the IMF was the cause of this one. He essentially said he would ease if the politicians did economic reform. But since the politicians in Europe are obviously not going to do that, it was taken for granted/implied that he was not going to add any stimulus.

That sent things spiraling down 100 points (Dow) where we sat, and would 9 out 10 times bounce. When we didn’t bounce the stress and confusion from the previous days obviously had traders worn out emotionally and many took their chips off the table.

Oil was down $2 during the day, and is down again in the after hours markets having gone through the MAJOR support of 85.60.

TODAY

I am NOT a big fan of charts, but I have to admit that they are relevant on BIG numbers as there is a self-fulling prophecy component to them. The above one is the best road map I can think of to predict today’s movement.

1 – 1925 SPX

Above you see that we have made HUGE lows at 1925. The first was on 10-2-2014. The second was at 1,926 on Tuesday. Yesterday we closed at 1,928. It is OBVIOUS traders are looking at this as a probably bottom and buying there.

2 – 1904 SPX

Should we go through that “triple bottom” it is clear sailing to 1904.

NOTICE how we bounced off of that which was the 100 day moving average back on August 7th. That exact point is now the 200-day moving average. It is there that I would love to see the market go to. WHY?

A – We have on in POT a condor that makes the most at 1905 in three different expirations, one of which expires tomorrow. We make $17K alone in the front month expiration.

B – Volatility will likely peak above 20% and I will let a ton of it fly in POT.

C – It would be about 5.7% off the highs, which is more than the 4% corrections we have been averaging in the post 2009 banking crisis. That would have people scared, talking about a 10% move, and probably a bottom. The SPX highs were 2019.26.

D – It would be the bottom of the channel we have been in for the last 3 years, and more indication that we are going to bounce from there.

If we go through that it is obvious that the next psychological support would be 1900. If we break that, this thing is DONE.

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