Market Update

[DarterBlue]

21 hours ago, DarterBlue said:

As I type this, the futures are looking very strong overnight. Should this hold up early into the trading day tomorrow, I will take my profits on the S&P 500 July Options.

Against my better judgment, I did not take profits on the S&P Options. If I regret this later on, it is solely a lack of discipline on my part. All my positions carryover into tomorrow. 

43 minutes ago, GardenStateBaller said:

DOW was up almost 300 today finishing at over 25,000. So many things to be thankful for these days. 

The headline stock indexes did way better than the overall market. I was a little troubled by the action today. Volume was low when the market was strong and picked up when things started to look wobbly. But a win as a win ... at least for now at any rate. 

[DarterBlue]

58 minutes ago, HSFBfan said:

1000 points off the high. If we can get back to 26k it might be able to take off. 

It needs to get past 26,617. That is still a ways off. If it can get through there, it will push higher. It has the Russell on its side. That index made its fourth consecutive all time high today. It is by far the strongest stock index at this time.  

[HSFBfan]

20 minutes ago, DarterBlue said:

It needs to get past 26,617. That is still a ways off. If it can get through there, it will push higher. It has the Russell on its side. That index made its fourth consecutive all time high today. It is by far the strongest stock index at this time.  

Would be something to see 27k or higher for the dow 

[DarterBlue]

36 minutes ago, HSFBfan said:

Would be something to see 27k or higher for the dow 

Eventually we will. How soon? It could be as early as June or as long as a few years. You never know for sure. But as of now, I do think it will happen this summer. We shall see soon enough, though. 

[HSFBfan]

4 minutes ago, DarterBlue said:

Eventually we will. How soon? It could be as early as June or as long as a few years. You never know for sure. But as of now, I do think it will happen this summer. We shall see soon enough, though. 

Yes we will....its been a hell of a ride to watch 

[DarterBlue]

I decided to post an update today for two reasons.

The first relates to the overall market itself. Today, it had every reason to have a very ugly day in light of the cancellation of the summit with the North Korean Government and the fact that there is continued talk of new tariff impositions on a number of our trading partners, specifically with respect to the auto industry. Despite the ugly start, by the close, although most of the indices were still down, they had recovered most of their losses. Now personally, I think the market is ignoring a number of negative things that it will eventually have to recognized. But to me, today's action, especially within the context of its recent strength, is conclusive proof that this market intends to work its way higher, probably making new all time highs in the process over the summer.

The second reason for the post is the action of one one of the stocks I own, Floor and Decor (FND),  in reaction to news that came out last evening which on the surface would seem negative. One of its early investors has filed with the SEC to sell 10 million shares. Given that on a normal day, this stock trades only about 500,000 share per day, this is quite a bit of new supply to be unleashed on the market. Normally, you would expect that the stock would give ground on such news, but instead it was up over 6% on the day on much higher than normal volume of over 4 million shares traded. To my way of thinking, here is why this happened. First, instead of pricing the stock to be sold, the selling stockholder filed to sell them in the open market or in privately negotiated transactions at prevailing market prices. Thus, though the selling stockholder has filed to sell, it will be at a time and price solely to be determined by the stockholder. Second, despite reporting banner earnings in April, the stock sold off on the news which I found mildly surprising.  Could it be that the selloff was occasioned by those in the know anticipating the announcement of the 10 million shares that were about to come up for sale? Regardless, with this news out of the way, I suspect that this stock will now work its way higher and I am very optimistic with respect to this trade being profitable. 

[DarterBlue]

On 5/24/2018 at 11:42 PM, DarterBlue said:

I decided to post an update today for two reasons.

The first relates to the overall market itself. Today, it had every reason to have a very ugly day in light of the cancellation of the summit with the North Korean Government and the fact that there is continued talk of new tariff impositions on a number of our trading partners, specifically with respect to the auto industry. Despite the ugly start, by the close, although most of the indices were still down, they had recovered most of their losses. Now personally, I think the market is ignoring a number of negative things that it will eventually have to recognized. But to me, today's action, especially within the context of its recent strength, is conclusive proof that this market intends to work its way higher, probably making new all time highs in the process over the summer.

Update Based on Today's Action: 2018, is increasingly resembling 1994. That year, the market topped in February, and yo yo'ed back and forth, with many very big ups and downs within a clearly defined range through shortly after Thanksgiving when it finally bottomed. It was very hard for a trend follower (position trader) to make money in that market and its proving  equally hard in this one. As of the end of last week, I felt that the last retest of the lows (we have found support in the same general areas on the averages on three occasions) was the final one for this cycle. However, with today's negative action, the question begs itself, are we heading for a fourth retest? As of today's close, the DOW was just over 3.5% off its lows for the year, while the S&P and NASDAQ were 5% and about 6.3%, respectively off their lows. My feeling is that we will not have a fourth retest. I expect tomorrow may again be a weak day, but feel the current weakness ends there, as another bad day will put the Oscillator I follow in oversold territory.

Having said the above, one thing that has changed over the past four months is that the manic behavior of the current administration seems to be finally affecting market action. For much of last year, despite DJT drama, the market ignored the manic behavior, shrugging it off on its way to new highs on optimism and exuberance over tax reforms and a reduction in regulations (Concha this is your bag). However, as of late, despite getting the tax reform (tax cut giveaways is a more apt term), the market has started to react to the volatility in the White House. With that said, in a show of its resilience, despite selling off many times, it has continued to find support at or near its February lows. And that is the reason I feel strongly that a bear market is not yet here. 

With that said, I had a very negative day with the S&P Options once again turning negative on me. After the close, I got some respite as CRM blew away its earnings numbers and was up over 4% in the after hours session. However, given the volatile behavior of the market and individual stocks, this may or may not hold during the regular session tomorrow. 

[DarterBlue]

Sell Calls to Close: Today at approximately 1:17 pm, I sold the sixteen options contracts I had in the S&P, Strike 267, Expires July 20, 2018. The 16 contracts were sold from prices ranging from 8.72 to 8.81. I, therefore, netted approximately $14,090. The positions were opened for a total cost including commissions of $11,290. The profit from this trade was approximately $2,800 or about 25%.

Post Mortem: While successful, this trade had several flaws, listed below:

1. The position was initiated too soon causing me to overpay for the options. I purchased them for about $7.02 per contract (x100). A better entry would have been in the $5 range. 
2. I should probably have liquidated them in the $10 range well over a week ago.
3. The S&P was not the best vehicle to purchase options on in this situation. The NASDAQ, NASDAQ 100, Russell 2000 and S&P MID Cap Indices would have yielded far more profitable trades based on their relative strength.

Why did I liquidate the position at this time? Does this mean I am now bearish on the market? I liquidated for the following reasons only:

• The market has been very volatile recently in the sense that we don't have a sustained trend. Thus this week, for example, we get one day nicely up followed by one day down, etc.. 
• Given the market action noted above, and with expiration on these options to occur exactly 7 weeks from today, I feel that any forward progress in the S&P index over the next several weeks would at least in part be offset by the continued time erosion in the price of these options as we approach the exercised date.
• Finally, as mentioned in item 3 above, the S&P has not been as strong as several of the other indices. Thus, the sale frees up capital which I can deploy in options on one of the stronger indices. 

For the record, I am still optimistic that the market continues to work its way higher through the summer. Thus, sometime next week, I will probably put the money I freed up today to work in options on a different vehicle. I will post my decision once I decide on it. 

 

[dan in daytona]

I'll watch from the safety of the sideline, coach  

[DarterBlue]

2 minutes ago, dan in daytona said:

I'll watch from the safety of the sideline, coach  

Come on in, man, the water's fine!

[dan in daytona]

1 minute ago, DarterBlue said:

Come on in, man, the water's fine!

I see sharks in the water...

[DarterBlue]

48 minutes ago, dan in daytona said:

I see sharks in the water...

Yes, but they don't normally eat humans! Jaws was just hype!

[dan in daytona]

47 minutes ago, DarterBlue said:

Yes, but they don't normally eat humans! Jaws was just hype!

It's the two legged variety that's my concern