Has The Big Bull Finally Hit The Wall?
On Friday March 9, 2009 I was playing golf with my brother on the Merit course in Palm Springs California when I got a call from my trading partner. He said that the DJIA had turned around and rallied over 300 points in the last hour of trading. 300 points is nothing today but with the market trading around 6600 then it represented a 4% rally in less than an hour. Of course, I was short and was having a nice day until the call.
Markets never announce themselves, they just happen. As it turned out, that Friday March 9, 2009 was a capitulation bottom. The market has rallied for the past ten years. There have been corrections and mini panics but at some point the market is going to find a top and it will turn around. A bear market will ensue and the whole process will start all over again. When this will occur, no one knows for sure, but it is possible to see this being a top.
So far the market has completely ignored all of the political turmoil in Washington, ignored the possible trade war with China and Mexico and the problems with immigration. Instead it has concentrated on corporate earnings, unemployment rates, average hourly wages, housing prices, inventories and all the boring things that economists love. We are now at 50-year highs/lows in all of those categories, and that is the part that brings fear into play.
It has been my observation over the past 40 years that it is at this time that the market should really worry the participants and we have seen that over the past six weeks as the major indexes continue to go lower. There has been little panic selling but a general malaise with price. The thing that really scares me is the IPO market that is bringing companies to the public that have spicy names and reputations but have never made a dime. While the investors have cashed out there is still no business plan in place to make money.
I hope that I am wrong and “this time will be different”. There will be no “new economy old economy” stocks and any idea that you can get enough people to believe in, will turn into an IPO which will bust out in six months with a lot of angry investors. I see many of the signs right in front of us. As always time will tell and of course in hindsight everyone will be right!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
Question: Do horizontal spreads present unlimited risk?
Answer: Horizontal spreads can have unlimited risk if they are put on with a short ratio. But vertical spreads would have the same risk if they were put on as a short ratio. It is the same with straddles and strangles and the writing of naked puts and calls. They all present unlimited risk if you do not buy an equal or greater number of long options. If you buy a horizontal with a debit your risk is limited to the amount of the debit. If you put it on as a credit your risk is limited to the credit minus the strikes involved. So, remember, as long as the horizontal spread does not have naked options, your risk is limited,
The Wise Guy Report: The View From The Floor
Each week I talk about what I think the Wise Guys (floor traders) are up to with the Big Three commodity contracts: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). I also track the Market Edge (www.marketedge.com) ‘Market Posture’ which has a twenty-six year record of forecasting the intermediate-term direction of the stock market as measure by the DJIA with around 70% accuracy.
T-Notes
Interest rates have been rallying for the past few weeks as the equity markets continued to move lower. However, we have seen no flight to quality until Friday. Even though the general markets were quiet on Friday the ten year had its biggest up day in months advancing almost 100 basis points. It is the first panic buying since Santa failed to show up in December. I have been long the market since April, but I now need to think about locking in the big gain. The next few days should determine if it is time to get on the sidelines.
Crude Oil
Crude got smacked this week. On Friday it had its worst day in seven months. Although my cover looked weak it turned out to be a good spot to take a nice gain. I am now looking at the other side of the market. The rig count was much lower this week which means that U.S. Frackers are worried that crude prices are headed lower. This market is always volatile and although it has been quiet for months, it showed it colors last week. I am looking for a blow off pattern to get long,
Gold
This market woke up in a hurry on Friday. It seemed that suddenly the world is worried. It has been a tough trade, but it was never able to take out support so we hung in there and now we may get rewarded. The big gap higher on Friday may have been the top, but it is my experience that we should probably get a continuation move next week. We have a long way up to resistance so next week should be interesting.
| The Big Three Commodities Contracts
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The Market Edge ‘Market Posture’, which has been Bullish since the week ending 04/18/2019 (DJIA 26559.54) remains Bullish at this time.
The Optionomics Scoreboard – YTD Traders Results
| Week Ending: | 05/31/19 |
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| Risk Capital: | $20,000 | |||||||||
| $ Win For Week: | $574 | |||||||||
| $ Loss For Week: | -$359 | |||||||||
| $ Total Profit/Loss For Week: | $215 | |||||||||
| % Total Profit/Loss For Week: | 1.1% | |||||||||
| Win % For Week: | 80.0% | |||||||||
| Average # Trades Per Week: | 5 | |||||||||
| Performance Since Week Ending: | 01/04/19 | |||||||||
| YTD Number Of Trades: | 86 | |||||||||
| YTD Number Of Weeks: | 21 | |||||||||
| YTD S&P 500 % Gain/Loss: | 13.7% | |||||||||
| YTD Optionomics % Gain/Loss: | 26.6% | |||||||||
| YTD Annualized % Gain/Loss: | 65.8% | |||||||||
| Win % YTD: | 63.8% | |||||||||
| Bullish Trades | Bearish Trades | |||||||||
| Blow Off Bottoms-Bullish Trades | # | Blow Off Tops-Bearish Trades | # | # Of | ||||||
| Stock | Profit | Loss | Spreads | Stock | Profit | Loss | Spreads | Trades | ||
| DE* | $315 | 1 | NONE | 50 | ||||||
| QQQ | -$359 | 1 | ||||||||
| One-Day Wonder-Bullish Trades | # | One-Day Wonder-Bearish Trades | # | # Of | ||||||
| Stock | Profit | Loss | Spreads | Stock | Profit | Loss | Spreads | Trades | ||
| NFLX | $38 | 1 | NONE | 19 | ||||||
| Bullish Verticle Put Credit Spreads | # | Bearish Verticle Call Credit Spreads | # | # Of | ||||||
| Stock | Profit | Loss | Spreads | Stock | Profit | Loss | Spreads | Trades | ||
| UNH | $153 | 1 | XOM | $68 | 1 | 25 | ||||
| Bullish-Earnings Trades | # | Bearish-Earnings Trades | # | # Of | ||||||
| Stock | Profit | Loss | Spreads | Stock | Profit | Loss | Spreads | Trades | ||
| NONE | NONE | 6 | ||||||||
| The SPY Short Term Bullish Power Plays | # | The SPY Short Term Bearish Power Plays | # | # Of | ||||||
| Stock | Profit | Loss | Spreads | Stock | Profit | Loss | Spreads | Trades | ||
| NONE | NONE | 3 | ||||||||
| Transaction Fees & Dividends Not Included In Results. | ||||||||||
| * After Symbol Denotes 100% Profit Instead Of Friday’s Closing Price. | ||||||||||
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