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Pre-Market Prep For April 19th, 2018

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The equity markets, despite a strong move up yesterday, are continuing to show signs of weakness.

As I noted in my last post, the technicals point towards some downside in the near future.

Geopolitical tensions and the whirlwind of news around the implications of these things have shoved the market violently in both directions.

Crude is pretty much running the show in terms of carrying/propping up the Dow and the S&P.

Tech looks pretty weak here and financials seem to be weakening a bit as well.

Things to Keep In Mind Today

  • – Initial Claims for Unemployment was slightly higher than expected; not much to note.
  • – The Philly Fed Manufacturing Activity Beat Expectations by a decent margin.

Those numbers were reported 30 minutes ago, the initial reaction was a jerk up on the indices which have since retreated. I think we push up from here into the open.

I took a look at the past few Thursdays and they all have very similar pattern…though with monthly options expiry, today could be different. That said, the pattern has been upward momentum into the open, a quick bear jerk down then a slow ascension through the day followed by selling at the end of the day that’s caught by some bullish order flow into the close.

  • – $VIX had a very bullish day of options trades yesterday.
  • – Most of the aggressive short-term bull plays yesterday were out to next Friday rather than this Friday, implying traders in most equity sectors are trading around a move lower today or tomorrow for the broader markets.

Some of my favorite unusual options activity from yesterday worth watching include…

  • – Bearish trades against several chip manufacturers…namely $INTC and $MU
  • – $QQQ MAY18 $150 Ps @ ASK
  • – $IWM MAY18 $165 Cs Swept @ ASK + Opening
  • – $YNDX MAY18 $40 Cs Swept Above ASK
  • – $SN MAY18 $5 Cs
  • – $$BEN MAY18 $37 Cs @ .05 ASK
  • – $SPY 25APR18 $280 Cs @ .07 ASK
  • – $VIX MAY18 $26 Cs

Watch markets at 10:30 AM [EST] for the Natural Gas Inventories numbers to decide the next direction of the major indices.

Keep an eye on the 10-year Treasury Notes and Gold as well, they’re both about testing pretty critical resistance levels.

Trade safe.

Cheers,

– dros

 

Today In History

The first Boston Marathon was held 121 years ago today and was won by John J. McDermott. Investing should never be a sprint, particularly in these market conditions. McDermott had the right idea.

 

first boston marathon

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Earnings Are Propping Markets But Something Bad Might Happen

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Earnings are clearly propping up the markets at this point.

Just a quick glance at the chart will show you that $ES_F was heading downwards pretty aggressively until the first red line; the first big E.R. reports of the season. $NKE and $MU crushed their reports, and the markets responded upwards…but not on weak volume.

[check out the chart in better detail over on tradingview here.]

The second red-line shows another save of $SPY … aided by beats by $RHT and $PAYX.

Rinse and repeat for a while…then the final line is on April 6th, when the first big bank earnings came out.
[Read more…]

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What’s Going On With The Markets? April 10th, 2018

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What Is Going On With The Markets?

Well… I don’t know. Anyone who claims to know with precision is probably guessing and pulling their claims out of their asses.

Here’s what I see…

Option flow is pointing towards a choppy week here, we may easily end up on Friday where we started at close on Monday.

The same options flow is pointing towards upside after this weekly options expiration coming Friday ( April 13th, 2018).

The options flow I’ve been seeing is implicative of downside towards the end of the week.

[Read more…]

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Avoiding Biases and Losing Money Because Of Them

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A member of my trading room asked me about my thoughts on the potential for a breakout in gold and the implications on markets.

I told him about avoiding biases…our 1 on 1 conversation went a little something like this…..

 

Avoiding Biases in Trading

 

That was my quick answer…at least in terms of the short-term potential for a spike in gold as markets get shaky here.

Here’s a bit more of an elaboration…

[Read more…]

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A Back-Door Hack Into Facebook Earnings

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Facebook Earnings

Afer the now infamous and ongoing Cambridge Analytica Scandal, Facebook ( $FB ) shares have been on a pretty volatile downside turn…

Facebook Daily Chart April 2018

Today the stock rose after hours on decent volume…but it ended that AH session with some fairly heavy selling. This movement was driven by a conference call Zuckerberg was taking at the time. It’s a tad odd CNBC cut the interview right before those sales started, but I’m sure that was just coincidence.

Regardless, what CNBC and the other talking heads have been talking about regarding $FB’s upcoming earnings is their user engagement data…several stating that this is the key metric to a bullish move in the stock after the report.

Which, it somewhat is.

User engagement and retention holds a fairly strong grasp on how much advertisers will spend moving forward. It is only ‘somewhat’ true because advertisers look to metrics such as ROI (return on investment) and KPIs (key performance indicators).

With that said…

What if we could look at those metrics the mainstream financial reporters are crooning about before earnings?

We can.

[Read more…]

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Active vs. Passive Portfolio Management Is Irrelevant For Traders

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Which is better, active or passive portfolio management?

This is a debate that was running pretty hot for the lovely cushion of a bull market Quantitative Easing & the Presidential cycle brought us.

Then we started pulling off the highs with aggression.

A ‘war’ threat with North Korea. Escalating tensions with Russia. Tariffs. Fed rate hikes.

In a (seemingly) over-extended market, pick a reason and you’ll start to see some selling as soon as panicked longs find a reason to get scared. MarketWatch was kind enough to state the reason for all this pullback was mere $VIX. Yet that makes no sense. At all.

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$TSLA – Tesla Inc. – This all seems familiar.

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Tesla shares slid hard this week.

While Puts would’ve been an easy enough trade, I didn’t take them because we’ve been here before with this stock. Quite literally.

I’ve ridden this stock up a few times now for some major gains. But the turn-around points tend to be harsh and immediate, so the loss of value on Puts can be quick.

The year is 2013…
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Volatility and an Unusual Options Activity – Recap – March 21st, 2018

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Ahh..these markets eh?

For some of the newer traders reading this, this may very well be the first time you’ve experienced moderate volatility.

Yes. I said moderate.

volatility all time chart

As you can see, volatility after 2009 (well o8 technically, aka Q.E.) has been pretty tightly based around $10.00.

So yes, quite moderate. Yet, while we’ve broken some of the 2000 levels… (think tech bubble)…this time it’s different.

Yeah. most people say that it’s never different…boom-bust…boom-bust…and continued. My fundamental response is, yes, that’s how markets work. Boom-bust. But allow me to introduce a quick clip from a great movie (Margin Call) to speak for me and you in that respect.

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Pre-Market Prep With Some Trading Advice and Ideas – March 15th, 2018

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The futures are slightly in the green territory as of now…but they’re fairly flat. [S&P +3.00 Nasdaq +6.00 Dow +59.00]

  • Economic data this morning was decent; nothing warranting a real heavy push
  • News cycle seems to be pushing the tech sector up, with $BABA offering on the Chinese Market being reannounced today and several Chinese companies receiving upgrades today. Beyond Ali-Baba, $BIDU $YRD and $JD are also up pre-market. You might want to try to catch upside on these via $FXI…or for individual names $BABA and $BIDU should be the leaders of the pack today.
  • Notable upgrades & earnings out include:
    • $FDX Maintained at Outperform and PT Raised to $280
    • $ASUR Reports record 4th quarter & raises guidance
    • $AVGO PT announced at $340 by BAC
    • $QRVO Cut to Underperform from Neutral by BAC
    • $NTNX PT Raised to $58 [from $45] at Raymond James
    • $ZION upgraded to outperform from market perform at Raymond James
  • Notable News from a report on The Video Ad-Sector says the industry has seen a 31% drop in fraud rate. This should move bode well for $GOOG $FB $TWTR $SNAP & $TTD amongst others

 

As for the trading the market today…be careful with monthly options expiring tomorrow. Typically, to play on retail sentiment, they’ll drive the market up at open, let it fade and idle for a while, then start buying to build bullish sentiment into the close. That might not happen today, but it’s something to watch for.

If you have any short-dated bullish options positions, I’d consider taking some profit off if the day goes as stated above…let’s wait and see.

 

My favorite options flow from yesterday include:

$LSI JUN18 $85 Cs
$CALX OCT18 $7 Cs
$MSFT MAR18 $ 100 Cs – SWEPT above ASK @ .044 [RISKY]
$SEED AUG18 $2.5 Cs
As always, stay safe out there and good luck.
– dros
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Why The Cohn Resignation Doesn’t Matter To Stocks

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Late yesterday afternoon, President Trump’s Chief Economic Advisor Gary Cohn announced his resignation.

Index futures gapped down when the session opened. The Dow was down over 400 points at its low.

People on StockTwits and Twitter were saying the world was ending. Even members of my trading room were calling this the beginning of the end.

That this was the crash.

Well, maybe it is. Maybe enough panic will be generated that we keep selling off. Futures have gone red to green and back to red now.

But here’s the thing about the Cohn Resignation….

It doesn’t matter to the markets.

What is going on, in my opinion, is the market overreacting. It’s the big money getting bigger by letting retail burn cash as they continue to overtrade or panic sell.

Why not? [Read more…]

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