If the Market has Bottomed

[DarterBlue]

First, let me say that I still think we are in a bear market, and the early innings at that. With that said, over the past two trading days, the action has led me to believe that we may be at or approaching a tradable bottom. What do I mean by this? It could mean that this bear market is over. If that is the case it would have proved to be a painful, baby bear that will soon to be forgotten. More likely, it may be just a strong counter trend rally that could last a few months within an ongoing secular bear market. In either event, if the intermediate trend is up, then, as a trend trader, it is incumbent on me to try and take advantage of it. For regardless of what one thinks, to win at this game, you need to recognize turning points and exploit them to the best of one's ability.

With the above said, three securities stick out. These have held up much better than the overall market and if this is a baby bear (in secular bears you actually want to buy the cheapest most oversold stocks coming out of the bear), then the strongest stocks emerging from it are the most likely to gallop on to new highs. The positions are: Merck (MRK), Crocs (CROX) and Atlassian Corporation (TEAM). Also of note is Salesforce (CRM), which I owned over the summer. In the case of all but MRK, I will buy the stock if I get a trigger as each of the three should have enough momentum for a decent gain. In the case of MRK, because it is a slow moving, mega cap, I will buy the January 2020, Leap Call Options. 

Please note that I am not recommending any of the above at this time. I am just drawing your attention to what I will most likely do if the market has made a tradable bottom. How will I know if it has? The answer is you never know for sure. However, i use certain indicator combinations as setups. If I get a setup that looks tradable, I will go long at that time. As usual, I will post the trades shortly after initiation.

[noonereal]

Think about the debt and the over stimulation of the market by Trump before you go thinking this is the bottom. 

It's run flat all year with all he "gave away." No more to give, Bam! it will draw back. 

Obie grew the economy responsibly, Trump did not. 

 

[concha]

13 minutes ago, noonereal said:

Think about the debt and the over stimulation of the market by Trump before you go thinking this is the bottom. 

It's run flat all year with all he "gave away." No more to give, Bam! it will draw back. 

Obie grew the economy responsibly, Trump did not. 

 

Here's a debt-to-gdp ratio chart I just finished in the ol' basement.

Look at the chart and then look at what you wrote.  🤣

[DarterBlue]

1 hour ago, noonereal said:

Think about the debt and the over stimulation of the market by Trump before you go thinking this is the bottom. 

It's run flat all year with all he "gave away." No more to give, Bam! it will draw back. 

Obie grew the economy responsibly, Trump did not. 

 

Our fundamentals have been bad since the latter part of Bush 2. The fix, such as it was, hatched by Paulson then Geitner and Bernanke did not address the core, root causes of our malaise. We will pay for that one day and it may be that we are paying now. However, as a technician first, I will trade where the averages take me. The one thing I am certain of, is that I will never get trapped in a bear market as I respect my indicators and trust them to keep me from being locked in to a bad position.

And, while I can be stubborn at times, my respect for my "trading system" outweighs my stubbornness, so I won't get caught, if you will, like some on this board, locked into a system or state of affairs that is not working. No, I am flexible enough when it comes to my trading capital to reverse my positions and/or move to the sidelines when my hypothesis proves wrong. 

 

[AztecPadre]

Has anybody wondered why trump has been going bat shit crazy on the Chair of the Fed for raising rates?

[DarterBlue]

1 hour ago, AztecPadre said:

Has anybody wondered why trump has been going bat shit crazy on the Chair of the Fed for raising rates?

There are two answers both equally plausible. 1. He is an idiot that has built his career on debt and sees the withdrawal of cheap money as a detriment to his agenda. 2. He, and I may add, Steve Mnuchin, are privy to information not widely known which if the current bubble bursts will manifest itself in a very ugly way. 

[noonereal]

5 hours ago, concha said:

Here's a debt-to-gdp ratio chart I just finished in the ol' basement.

Look at the chart and then look at what you wrote.  🤣

didn't I tell you to stop publishing this trash in your basement? 

[AztecPadre]

9 minutes ago, DarterBlue said:

There are two answers both equally plausible. 1. He is an idiot that has built his career on debt and sees the withdrawal of cheap money as a detriment to his agenda. 2. He, and I may add, Steve Mnuchin, are privy to information not widely known which if the current bubble bursts will manifest itself in a very ugly way. 

Or 3) He has some variable rate loans for hundreds of millions from deutsche bank London,  that are now costing him millions more each year due to the increases. 

[concha]

16 minutes ago, noonereal said:

didn't I tell you to stop publishing this trash in your basement? 

Yes.

Of course, we should be relying on your ass.

Apologies.

[LT4Spartan06]

34 minutes ago, AztecPadre said:

Or 3) He has some variable rate loans for hundreds of millions from deutsche bank London,  that are now costing him millions more each year due to the increases. 

The Volatility of the stock market is helping to counter act that though, mortgage interest rates have dropped the last couple of weeks.

Lenders just released rate improvement sheets about 50 mins ago.

[ohio]

9 hours ago, DarterBlue said:

First, let me say that I still think we are in a bear market, and the early innings at that. With that said, over the past two trading days, the action has led me to believe that we may be at or approaching a tradable bottom. What do I mean by this? It could mean that this bear market is over. If that is the case it would have proved to be a painful, baby bear that will soon to be forgotten. More likely, it may be just a strong counter trend rally that could last a few months within an ongoing secular bear market. In either event, if the intermediate trend is up, then, as a trend trader, it is incumbent on me to try and take advantage of it. For regardless of what one thinks, to win at this game, you need to recognize turning points and exploit them to the best of one's ability.

With the above said, three securities stick out. These have held up much better than the overall market and if this is a baby bear (in secular bears you actually want to buy the cheapest most oversold stocks coming out of the bear), then the strongest stocks emerging from it are the most likely to gallop on to new highs. The positions are: Merck (MRK), Crocs (CROX) and Atlassian Corporation (TEAM). Also of note is Salesforce (CRM), which I owned over the summer. In the case of all but MRK, I will buy the stock if I get a trigger as each of the three should have enough momentum for a decent gain. In the case of MRK, because it is a slow moving, mega cap, I will buy the January 2020, Leap Call Options. 

Please note that I am not recommending any of the above at this time. I am just drawing your attention to what I will most likely do if the market has made a tradable bottom. How will I know if it has? The answer is you never know for sure. However, i use certain indicator combinations as setups. If I get a setup that looks tradable, I will go long at that time. As usual, I will post the trades shortly after initiation.

If this is a temporary bottom, and the market starts to rebound due to a China agreement and/or a re-opening of the Government and/or a FED change of heart on interest rate hikes ....

.....I will maybe play MRK, CROX, TEAM, or CRM.   Also, gonna keep an eye on the pot stocks, oil stocks(beat up too much as oil could rebound on news), BABA, ROKU, ETSY,  NFLX, LULU, and as they got beat up a little too much and have the highest potential to rebound of the larger caps.   AAPL, NVDA, CPS, and FB have potential, but also have issues.  Maybe if they drop lower.

Also TQQQ and SVXY have a lot of upward potential, as far as index ETFs go.   UGAZ could be a play if we have a cold winter.

Appreciate the info.

[DarterBlue]

2 hours ago, AztecPadre said:

Or 3) He has some variable rate loans for hundreds of millions from deutsche bank London,  that are now costing him millions more each year due to the increases. 

That, too, is a distinct possibility!

[zulu1128]

16 hours ago, AztecPadre said:

Has anybody wondered why trump has been going bat shit crazy on the Chair of the Fed for raising rates?

Nope. It's pretty obvious.

He knows his success is currently hitched to GDP growth, and he sees the rate hikes as an attempt to slow it. (And probably a personal attack on himself as well,  if we're being honest) If the Fed is successful in cooling the growth rate, he knows he's probably fucked. 

Pretty sure deutsche bank London doesn't figure into the equation. 

[noonereal]

2 hours ago, zulu1128 said:

Nope. It's pretty obvious.

He knows his success is currently hitched to GDP growth, and he sees the rate hikes as an attempt to slow it. (And probably a personal attack on himself as well,  if we're being honest) If the Fed is successful in cooling the growth rate, he knows he's probably fucked. 

Pretty sure deutsche bank London doesn't figure into the equation. 

on point

[DarterBlue]

19 minutes ago, noonereal said:

on point

Except for Deutsche Bank and the fact I am pretty sure Powell is not personally attacking POTUS. He is trying to cement his legacy in the sense that he does not want the mother of all bubbles to be blamed on him. 

[noonereal]

7 minutes ago, DarterBlue said:

Except for Deutsche Bank and the fact I am pretty sure Powell is not personally attacking POTUS. He is trying to cement his legacy in the sense that he does not want the mother of all bubbles to be blamed on him. 

things could get very ugly very fast, agree. 

[DarterBlue]

As we close the year, the market is in no man's land. After the worst Christmas Eve on record, it is currently trying to take a stand. I have no idea how this plays out over the ensuing weeks as Wednesday's and Thursday's action was very promising from a bullish perspective. So, we may be in for at least a temporary respite from December's massive selling. My game plan is to take the remaining trading day of the year off. In the grander scheme of things, even if we get what  I consider to be a definitive buy or sell signal, one day won't make that much difference. 

As of Friday's close, my equity for the year increased by $58,261.99. Of this increase, $56,313.68 represents capital gains. Of the remaining approximate $1,960, $900 represents a net addition to the accounts (tax refund net of withdrawals). The remaining $1,060 represents interest on the cash balances and dividend earned from the investments. The results were attained on a starting equity of $$434,571. All in all, while not spectacular, I am satisfied with the year's performance, particularly in light of the fact that prior to January 30, 2018, I had not traded in 25 months.

Should I get the green light to go long, my game plan is to deploy approximately $136,000 on the following investments: TEAM, CROX, and CRM. I would expect to buy approximately $39,000 of each position for a total of $117,000. The remaining $19,000 will go into LEAP call options, strike 80, January 17, 2020 on Merck. A green light would be an overall market signal coupled with a breakout of at least one of the positions listed above.

On the other hand, it the current stand is brief and is followed by ensuing weakness, I plan on buying LEAP Puts on the following ETF proxies for the DJIA, S&P 500 and NASDAQ 100 averages: DIA, SPY and QQQ. The exact strikes on each will depend on the relative pricing of the options within a five point band on the day I make the trade. In short, they are to be determined. The total expected to be deployed on the short side, is approximately $51,000, with equal amounts in each vehicle.

Why the large disparity in the amounts to be risked long versus short? Does this mean I am more inclined to be bullish, at least at this stage? The answers to these questions are: 1. The short vehicles, which will consist solely of index options are way more volatile than the long vehicles. the difference is approximately 3.5 to one. Therefore, I would be essentially getting slightly more bang from the short positions than the long. 2. A secondary answer is that bear markets are inherently more volatile than bull markets, so, less capital can yield similar or superior results to the capital deployed in bull markets.

The long and short of it all (pun intended), is that to me, preservation of capital is essential to extracting long term gains in the game of trading. For as long as I possess an edge, over time, I will accumulate profits. Thus, there is no reason to rush it or push the envelope. Even if I die, I have a student who is well versed in what I do and is perfectly capable of picking up the mantle thrust on him if such an event were to occur. 

If I go long, then subsequent market posts will be in this thread till the trend again changes. If I go short, then I will continue the other thread: The end of the Obama Trump Bull Market. Stay tuned. 

[DarterBlue]

On 12/29/2018 at 7:34 PM, DarterBlue said:

Should I get the green light to go long, my game plan is to deploy approximately $136,000 on the following investments: TEAM, CROX, and CRM. I would expect to buy approximately $39,000 of each position for a total of $117,000. The remaining $19,000 will go into LEAP call options, strike 80, January 17, 2020 on Merck. A green light would be an overall market signal coupled with a breakout of at least one of the positions listed above.

As I type this, the market is wobbly after a great start. Still, TEAM (Atlassian) signaled a bullish buy signal moving past an $88.50 buy point. If the market closes higher and TEAM holds its gains, I plan on buying it and the MRK calls on Wednesday, as Merck is also having a good day. The other two, CROX and CRM will be added if the market's recent bottoming action sustains itself.

No need to rush in head first; however, if there is a money making opportunity there is also no need for me to let it pass by. 

[DarterBlue]

On 12/31/2018 at 10:56 AM, DarterBlue said:

As I type this, the market is wobbly after a great start. Still, TEAM (Atlassian) signaled a bullish buy signal moving past an $88.50 buy point. If the market closes higher and TEAM holds its gains, I plan on buying it and the MRK calls on Wednesday, as Merck is also having a good day. The other two, CROX and CRM will be added if the market's recent bottoming action sustains itself.

No need to rush in head first; however, if there is a money making opportunity there is also no need for me to let it pass by. 

Last evening, the nascent rally suffered its first real challenge, when economic data coming out of China showed contraction in December. Asian markets which had been up prior to the news quickly reversed, and as I type this, Europe opened the New Year broadly lower. This has negatively impacted the futures here in the USA. With that said, while we have not abandoned the idea of buying TEAM and the MRK, LEAP Calls, we will spend the early part of the day observing the Wall Street's response in real time. 

Should the US market shrug off this challenge to its new found strength, it would be a clear signal that at least, for now, we are in a new uptrend, and I will buy the positions with confidence. On the other hand, should we crumble, then the new rally attempt may die a quick death and I will go short the LEAP PUTS on the indices. Stay tuned ...

[DarterBlue]

7 hours ago, DarterBlue said:

Last evening, the nascent rally suffered its first real challenge, when economic data coming out of China showed contraction in December. Asian markets which had been up prior to the news quickly reversed, and as I type this, Europe opened the New Year broadly lower. This has negatively impacted the futures here in the USA. With that said, while we have not abandoned the idea of buying TEAM and the MRK, LEAP Calls, we will spend the early part of the day observing the Wall Street's response in real time. 

I have placed limit orders to buy both TEAM and the Merck, January 2019 Call options. The limit prices are $88 per share on TEAM and $405 per contract on MERCK. I will post the results later today regardless of whether I get filled or not. The market has recovered nicely from its early selloff providing further evidence that for now the path of least resistance is up. 

[DarterBlue]

1 hour ago, DarterBlue said:

I have placed limit orders to buy both TEAM and the Merck, January 2019 Call options. The limit prices are $88 per share on TEAM and $405 per contract on MERCK. I will post the results later today regardless of whether I get filled or not. The market has recovered nicely from its early selloff providing further evidence that for now the path of least resistance is up. 

Purchased 453 TEAM at 88. Total cost of $39,893.70 including commissions. The Merck Leaps are still open. Currently up about $100 on the filled order. 

[DarterBlue]

The Merck Leaps order expired unfilled. At the close, TEAM closed $1.03 above my purchase price. So, I was up $436.89 on the trade. However, Apple's news after the bell will impact the entire market at tomorrow's open. So, I expect to take a hit at the open. How the market trades tomorrow will say a lot about the strength and stamina of the current rally. If the market is able to shake off the early anticipated weakness and close up or at least in the upper third of the day's range that would be very promising.

On another note, Crocs (CROX), which is another stock I had highlighted as a possible buy, also broke out today. Should the market show solid signs of recovery tomorrow after early weakness and if I can get this stock for a 2% or greater markdown from today's close, I may buy it. As for the Merck Calls, I will evaluate tomorrow as the trading day plays out. 

[DarterBlue]

16 hours ago, DarterBlue said:

The Merck Leaps order expired unfilled. At the close, TEAM closed $1.03 above my purchase price. So, I was up $436.89 on the trade. However, Apple's news after the bell will impact the entire market at tomorrow's open. So, I expect to take a hit at the open. How the market trades tomorrow will say a lot about the strength and stamina of the current rally. If the market is able to shake off the early anticipated weakness and close up or at least in the upper third of the day's range that would be very promising.

I resubmitted the Merck Calls order today and was filled at $410 per contract. I will post the details later. I now own the Merck calls and TEAM. Both will be kept on a relatively short leash as it is still an open question whether the new, attempted rally has staying power. 

If it does not, I will cover both positions and take a small loss.  

[DarterBlue]

Bought 46 Leap, Call contracts of Merck, strike 80, expiring in January 2020 at $410 per contract plus commissions. Total cost exclusive of the commissions was $18,860. With commissions add another $40 of approximate cost. My broker charges more for options trades than stock trades. 

[DarterBlue]

Today was a bad day for me as both the Merck Leaps and TEAM got hammered. On the day, I was down $3,271.35. The total cost of the Merck Leaps including commissions was $18,920.20. 

Both of the above positions will be kept on a tight leash. If the market complies they should make money. However, despite signs of a bottom, it is not clear that even an intermediate one has been put in. It could just as easily be another small, bear market bounce within the context of ongoing weakness. Should the next two trading days end up being weak, I will probably cover both positions. No need to fight the trend if we can't even get a two week counter trend rally.