SPX hourly update

My speculation
on what might happen to SPX short term played out quite well

 

below it today’s chart – I will start going short on any hourly close above 1796.41, but bear in mind there is an ongoing TDSellSetup and possible completion might be around noon time

 

 

China Chart Book (by Leisa)

I've been a lazy toad, and I've not done weekly sector reports.  I plan to resume them as some find them helpful.  I abdicated doing them because FINVIZ has them. However, I like the Stockcharts presentation better, plus compiling the sector report is a very organic way for me to interface with the market sectors.  I'll resume them next week.

To atone for my laziness, I offer this chartbook of Chinese stocks for those looking to do a little weekend homework.  It's a large file, so be patient with the download which you can here.

How to find the best option for your price and time strategy? (Guest post by chaugner)

Tonight's post is a complement of

•  

chaugner  (looking good, huh???)

and too keep an eye on future misdeeds visit blog

 

 

 

 

 

 

Before I start, let me ask two simple questions.

“How often have you bought a put contract just to see it loose 50% of its value even though you are still at the same price you bought it a week earlier?”

“How often have you bought a call at what you thought was the bottom just to see it down in your account while the market has rallied the next day?”

 

We have all been there trust me. When I first started with options it was not pretty, I had some lucky ones but when time, price and volatility are against you – boy can you end up with a bad trade. I clearly remember that one trade that forced me to read up on options because I obviously was missing something. I did a straddle (buying put and call on same expiration and same strike price) on AA just before earnings thinking of a big move, nothing happened overnight and price stayed exactly the same at the open – thinking to myself “oh well, no money on this trade” it turned 9:30 and all of the sudden both positions were down 50%. I am sure many had similar experiences so it is extremely important to understand what option traders call the “greeks”. The Greeks are often overlooked by many traders that tend to just buy straight “naked” puts or calls. As part of this post we will be focusing on trying to get a better understanding on those Greeks and also do an exercise to find the best option for a specific market outlook you have. As I am covering many different areas you will need some basic knowledge of options first.

• What is a naked option, put or call?
• What is a spread?
• In the money option
• At the Money option
• Out of the money option
• Bearish Put Spread

So before you continue, read up on those above points above in case you do not know what they mean. To make it easier the focus of this post will be on bearish put spreads (debit put spread). There are many other option strategies out there for different market outlooks so let’s keep it simple in this first exercise for us here. When it comes to options, especially longer term ones (lets say 2-3 months out) I use two mechanisms to try to find the best option package for me:

• TradeStation OptionStation Search
• ThinkOrSwim Trade Analysis

Please sign up for demo accounts for both of those platforms if you do not have access. So for now let’s use the exercise of trying to find the best put spread for SPX at 880 in August with an increase of volatility of 30%. The beginner’s way for this is generally finding an option with the expiration close to the date you are looking for. In this case a beginner would usually buy a “SPY August 88 PUT” (out of the money) or a “SPY August 107 Put” (at the money assuming that SPY is trading at 107). So let’s go to trade station first and use their wizard based option search. Entry window for Tradestation OptionStation Search. I am using SPY here with 10 expiration dates out and 10 strike prices from current price. Current Price is SPX close @ 1074.03. Tradestation offers you many options either by selecting the strategy directly or doing it based on market outlooks. We are selecting debit put spread. We are assuming we want to close this position out in Aug 17th (because we believe we will have reached SPX 880 by that day). I just picked this date randomly, make your plan and put in whatever date you want here. We are assuming SPY to be 15% below current price (you have other options but lets keep it simple). We are risking $5K on this trade. We are assuming VIX is 30% higher compared to today. There are two other screens after this, just select next until you get to your final window. Lets take the top position that tradestation came up with here. It’s telling us the following:

• Buy 63 SPY Aug 101 Puts @ 4.14
• Sell 63 SPY Aug 98 Puts @ 3.35

(Keep in mind we are buying a total of 126 option contracts here). So now that we have the position, let’s switch to ThinkOrSwim where the real fun starts. Most people here use TOS so I assume you know how to put in your positions for analysis. After you put in your positions on the analyze tab (or go to add simulated trades) you should see a standard graph. Before we continue go to the top right section (red rectangle) and change it to the values that I put there. “+4 @ Day Step” and put something higher then 15 on the step. This will give us more visibility of where the position will be on different time scales. I also have a green rectangle around the Greeks (Delta, Gamma, Theta, Vega) – again we talk about this later. Your TOS should looks like this now: Now that your position is in the platform and you have your time slices properly mapped, you can drag the red-dotted line to different price points. So as an exercise lets take a look at our position when SPY is 108, double click on the graph around the 108 SPY price point. At this price point you can see your PL in the price slice window for today, but you can also see how much you would be down if we were to reach this price on different time scales (white rectangle left bottom). Next exercise is moving the red dotted line to 88 on SPY. Again the price slice window shows your PL and the bottom left side would show you how much you would be up if SPY 88 will be reached in different time windows. Final exercise, uncheck your spy short put position (left bottom) and change the quantity on the Long Put to 12 because that is how many naked puts you could buy with a $5K at risk (remember we only want to risk $5k on this trade so we assume that those 12 puts will go to zero). Now the graph here is drastically different, and heavily weighted against you. Take the example of SPY 100. If you had a spread you would be in the money on this position at any time until expiration, however, on the straight put you can see that if time works against you – not so nice. You may have heard this before in relation to options “you are racing against the clock”. This is a perfect example to show how time will affect your “naked” option. Ok, what next? Well first, play around with the following and see how the graph changes. After each change go back to your red-dotted line and move them to price slices where the trade went against you, slightly for you, and when you have reached your price target.

• Quantities (add more long puts, add more short puts)
• Option Cost (change price on your long put to something smaller, meaning you were able to buy them lets say at $3.00 each instead of $4.14)
• Change Strike Prices – maybe a 105 put on the long side
• Expiration Dates – change expiration dates to move them closer, or further out
• Change the time step (at the top where it currently says 21)
• Remove the short put and just use the long put with quantity of 12 and move left and right on the price via the red dotted line

Every option change you make, make sure to change the quantities to match the risk profile we are using. In this case $5000. For example changing the strike price will increase/decrease the cost of the option so you have to adjust the quantity accordingly. Cool stuff right? Now before you continue, go read up on the greeks, Delta, Gamma, Theta, Vega, just some casual 10 minute reading via google (focus on the delta and theta for now). After this go back to TOS and see how the greeks change based on the above changes I had asked you to do. Now go back and read that same information on the greeks again (oh yeah I am not making fun here). This is just an intro and if you guys and girls like it, I can go into a lot more details to be able to figure out how to get positioned, scale in and out and how to change your portfolio outlook on a dime by adding positions to your current holdings. As I am going into a lot of detail here it may also be helpful to do a “beginners guide” here first in case some of this is a bit over your head (don’t be afraid to ask, its your money, trust me, the more you know when it comes to options the better). The beauty with options is the usage of greeks. You have to make them work for you, not against you. If you can make the greeks work for you, you can create amazing option strategies that allow you to manage any type of outlook you may have. We may be bearish long term, but what if something where to happen on the short term that may change your outlook to short term bullish? Yes you can close out positions but sometimes you can add to your existing positions to change your portfolio behavior. Heard of delta-neutral, delta-negative or delta-positive before? Yeap its those same greeks and we can make some amazing short term changes to those core holdings to squeeze every last penny out of this market without exposing your hard earned cash to more risk. One final exercise to take just to show you one more way of how greeks affect your positions. Create 2 new positions:

• 10 x SPY JUNE 107 PUTS @ 2.00 (something you may have purchased a few days ago)
• 10 x SPY JUNE 107 CALL @ 2.50 (something you may have purchased today)

Lets take a look at that graph. The only thing missing from this TOS platform here is an option to give your money directly to the Market makers and forget about trading. That is what this graph is telling you. Until next time and be careful out there !!!

 

 

[Posted by DavidDT on behalf of chaugner ]

Gold | Gold Miner Stocks (by Leisa)

As the world wrangles with trying to determine what is "safe", gold is yet again in the spotlight. I don't plan to tell you what I think that gold is going to do...but it is worth noting that the USD is up and gold is up. That says much.

I do plan to help you scout for some opportunities. Let's take a look at the chart of gold with an integral window of the metal divided by the gold miner sector. As you can see the ratio is sloping downward: miners are performing better than the metal.

And, for your reading enjoyment, I prepared a chart book of the miners for you. It is in weekly format, so that you can see a longer term view. You can download it here . Some of these names (see SA for example) are extended, so prudent trade strategies (e.g. do not chase) are warranted.

Positions: No stocks mentioned, but author is long GBG.

"Lasciate ogne posizione [speranza], voi ch'intrate"

Kid you NOT or SP500 Evil Ways As Of February 20th 2009

Yup…that was THAT post…but I am not going to brag about how good I am, but, what is quite unusual for me, I will talk about how good someone beside mightily ME is…
In fact – knowing (theoretically) that market continues to go up (to 1300 something) and trading against my own analysis does not make me a good trader…it rather makes me a …bad … not so great trader…
Anyhow – lets talk about good trader

Fujisan
http://trading-to-win.blogspot.com/2010/02/kid-you-not-or-sp500-evil-ways.html#comment-35772434

On the very same day (Feb 20th) she did analysis (of something I don't understand…I am one DeMark tracked mind), but her analysis looked pretty…accurate, convincing…and proved to be …ehh…dead wrong…


http://content.screencast.com/users/Fuji-san/folders/Jing/media/bec68652-2bbc-4a6f-b46a-1388cc02c0f7/2010-02-21_1901.png

But hear me up – did she pay any attention to her mistake prediction that did not materialize? (we all do our best trying to predict direction/action and we all have our share of failures) Nope – she turned 180 around like nothing ever happened  and continued successful trading based on yet new variant perception/charting.

Moral – if we wrong (and we are wrong a lot) – cut your damn losses/position/change mindset and go on with trading life…or stop trading if you cannot do that (have to admit – as I age it is becoming more and more difficult to recover from mistakes mentally and financially)

Now back to my usual DeMark-ian mambo-jumbo
Here is an updated (Kid you NOT or SP500 Evil Ways As Of February 20th 2009) chart – do not take it literally – this is JUST A CONCEPT with the final destination for up ugly leg we are in.



Really wanted to plug video here with detailed analysis of my as wrong as possible trading of Thursday's selloff, but it will be too much for one post – remind me and I will do that video – loss could have been avoided very simply…it is always something simple – is not it?

P.S. Guest posters – please coordinate with me when you will write/post so we would not post 3 posts within 2 hours – that would diminish the whole idea of keeping blog busy.  As of now I have 1 post which I will publish Sunday night/Monday morning (THANK YOU Leisa!!)

Kid you NOT or SP500 Evil Ways

He did not complain in any way about the bad reputation he enjoyed all over the world, assured me that he himself was the person the most interested in the destruction of superstition, and admitted to me that he had only been afraid for his own power one time, and that was the day when he had heard a preacher, more subtle than his colleagues, shout out from the pulpit:

"My dear brothers, never forget, when you hear the progress of enlightenment vaunted, that the devil's best trick is to persuade you that he doesn't exist!"

Baudelaire  "Le Joueur généreux," pub. February 7, 1864;

translation by Cat Nilan, 1999

For the "memory impaired" (such as myself) here is a pointer to my old, as of August 2009, post  What is next for SPX?  with one …err with two/too cool state of the art charts (and as mentioned in that post – second was MY preferred scenario).  Do spend 3 minutes – look and read that post.  (Just don't get too cocky looking at the dates – I did put a note at the bottom of the chart stating that "all times are ideal and WILL change)

Without further due I am presenting you with the chart of S&P500 which will cause great distress and a lot of critique around Blog-O-Sphere and, once again, will cause some bears to hate me because they are not beautiful (Shut the hell up, yes, you, yes – I did not ask if I am handsome, it is NOT the point)


If I am wrong – so be it, I am not a long term trader anyways, but if I am right – I hope never hear anyone mentioning Pee on The Three and similar "gurus" ever again ( we are here to use OUR analysis, our skills acquired based on personal learning and understanding of different methods of technical analysis – not for blind repetition.)

With that I'll leave you to have plenty of time to scratch your heads and discuss "what head doctor that Mad Russian needs now" and while you are doing that – read latest from our DeMark-ian compadre:

Wallfly


Here's an updated D-Wave chart showing the Daily overlaid on the 30 -- the only two that seem to be working together at the moment. The hourly has the same profile as the Daily at the moment which seems odd. I have a scenario for that which is kind of far fetched, but if it should start to play out Ill explain it.

$SPX video review as of January 23rd 2010

This is mostly “historical overview” with some direction for Monday/Tuesday

 

I am working in XLF Financial Spiders Video with more in depth “where from now” dart throwing – stay tuned.

 

$SPX video review as of January 23rd 2010

 

What now? Now we wait… (SPX), (SPY)

  Back in August 2009, no matter how difficult that was to write something like that (when everyone was expecting “immediate" continuation of collapse”) I wrote at SP500 DeMark D-Wave page of .com site (to prevent repetition of the very same questions):

wA completed yet again, wB is in progress with possible completion of minimum requirements for WB in November 2009.   “Possible completion of minimum requirements”…that is the word and not "completion ". 
September/October monthly closes might be higher OR lower than August close, but as long as November's close will be the highest of 8 months - bingo - we got wB printed.
I AM a curious George, but none of my trades ever lasted for years and this is as much attention as Monthly D-Wave will receive from me.  Below is a chart of current state of D-Wave Monthly. The only thing I will have to add is that there might be TDSetup 9 Sell completed in January 2010 - when definite top for this rally might take place

Not to overlook that (SPX) 1120 target was introduced right here on July 9th …

It does not matter if DeMark methods work better or our corrupt Gubermint uses DeMark services to apply pressure when outcome may be amplified/changed – but now is January and SPX is in the vicinity of 1120 (1136.52 as of today’s close)

What NOW?

I suddenly found myself in the position “I have no desire to continue to look for the signs of long awaited January selloff” based on

1. TDSetup Sell Monthly 9 (perfected on bar 8 in December and it is here to stay unless SPX will close January below 992)


2. TDSetup Sell Weekly 9 ( part of 9-13-9 setup)


3. Fibonacci Extension 161.8% (off high/low of wave A or 1 – whichever you like) right here at 1135.10
4. Bearish rising wedge (those yellow lines)
5. Continuing descent from one Fibonacci fan level to yet another lower.


6. Completed today Countdown 13 sell and possible Combo Sell tomorrow (today was 12) – when I use NinjaTrader charts I get totally different setups a lot, but I trust it more than screwed to the extremes ThinkOrSwim data (according to TOS staff they have been typing in closing prices for futures for a while now – their data vendor “having problems” – what would you expect from TDAmeritrade that got rid of short interest data  long time ago and Advanced Analyzer become practically unusable)

 

7. The most severe failure swing I’ve seen in a long time


In spite of all aforementioned I have become “numb” (that is how Keirsten put it in reply to my email when I started to complain about “loss of interest”)

May be this is the time, the time when even the most stubborn male on Earth (I am Taurus after all) is not interested in shorting this market and all I really want from it is to hear something similar to these famous last words:
“A king should die standing.” —King Louis XVIII (1755—1824).”

May be this is what this market wants… “to die standing”, I think it is tired of being manipulated, who knows – it might just pull few [not such] good people with it…

What do I know – I am just a gigolo of this market…whatever pays…

It’s the New Year, it’s the new day, it’s the same BS

Just 2 charts – my guess on “WHEN” is as good as anyone’s (I suspect Tuesday/Wednesday), as for “WHAT” – gonna have correction here. Weekly 9-13-9 sell SPX this week, plus hitting 162% Fibonacci Extension based on low/high of daily waves 1 or A (around 1135 and SPX is at 1133+ now)

 

Today’s “feel good”musical clip

 

3 is one cool number! (CBAK)

Sometimes, we really have to slice and dice and flip and turn and toss and … you know what I am talking about – you’ve done it many times, don’t even bother to say “no, we did not” – we all did, when we don’t see what we think might be “there”



On 12/10/2009 I posted quick note on XING and CBAK (I just searched if I stole the glorious idea from someone – nope, no other people as I can see posted anything about CBAK on Disqus)

http://trading-to-win.blogspot.com/2009/12/whole-lot-of-nothing.html#comment-25494802

DavidDT 12/10/2009 11:40 PM
looked over few charts (no, did not break PC and not going to stop trading...yet)
longs - XING and CBAK

Leisa 12/11/2009 08:07 AM in reply to DavidDT
HPJ is also in the space of CBAK....It is one of the many rocketships that I jumped off!



I went further at the expense to look like a fool and pressed CBAK over cell phone email sent to Keirsten on 12/14/2009

We all know what happened today (well, I had CBAK in my “secondary” account – so, I just found out that I had nice lotto ticket – plays like that keep me interested)

Now, WHY I kept pondering CBAK and what was so special about it on the first place?

Well, first of all – it is junk, POS company, just like thousands of companies stocks of which double and triple when market nearing tops on low volume – retail and boiler room shops having fun.  Look at the last days of 2007 – from $4 to almost $7 in the blink of an eye, I know – history does not repeat, but…sometimes it does

Next, weekly chart was a beauty in the eyes of DDT:
Completed TD Countdown Buy (AND new TD Buy Setup as well) AND right at the area of prior TDST (Hell YES – they do act as support/resistance lines long after they have been crossed few times already).
Worth noting – that TDST line was from initially “non perfected” setup – perfection was achieved quite brutally in the beginning of March.
Anyhow – weekly – BUY – check mark.

trading off daily chart would put us in the poorhouse, but then again – why would we be  trading daily if weekly provided wider DTRL incompatible with daily setup? 

Next – one of my favs – 3 days interval (if you remember 3 days was decision maker on short gold call…which I did not take due to being heavy long dollar at that time

DavidDT  · http://trading-to-win.blogspot.com/
12/02/2009 01:55 PM
for goldbugs
http://screencast.com/t/OWNjMzQyNzMt
$YG_F Gold $$
Posted on Fly Me to the Moon.)

AND, to be fair – Fujisan posted this on the same day:

It's interesting that Person is pointing out that Gold would peak tomorrow on Dec 3 (seasonal tendency) in his presentation at TOS right now.

Finally – why have I wasted so much time for “horn tooting”?
There is always another trade we might be able to find by looking at multiple timeframes/correlated sectors – we just need to look hard enough … without forcing it.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Different topic – Small Cap – (IWM)
my 2c:  bar 7 (not 6 closed above TDST Res) and sustainable move could be expected if it had happened on bar 3-4.  Also, two consecutive bars after perfecting sell setup closed under TDST Res – signifies loss of momentum.  Thou, we shall not overlook benefiting small cap from strengthening dollar.

And here is another “3 days” – how ‘bout that 9-13-9 forming??
P.S. May be I read too much of DeMark – I am beginning not to understand what I am saying myself

“Looking Back OR Forgotten opportunities” - (NRG)

 

While our friend “Crowe” is keeping himself busy with top secret project “DM9” – I’d like to  use a chance for slightly higher level of attention to my, yet another, ingenious idea, than I can get during highly active market.

 

Before I introduce this idea I would have to look at the rear view mirror, which I hate to do – we all are so selectively smart in the hindsight, but I really have to do that to illustrate the “practical need” for…but history first.

 

On the night of October 16th (yes, during that famous “rectusangle on SPX” when we, at least, most of us, tried to trade direction of the market overlooking individual stocks’ action) I wrote in my “trading journal” (you really need to see my trading journal – it is state of the art magnificent achievement of organizational science – and I never paid a dime for that – all I need is ANY ENVELOPE from yet another bill) – “NRG – go long Nov 27 puts tomorrow on the open”.

 

Next day this particular part of my trading journal was used as a stand for hot cup of coffee and then, as always, it has gotten out of the way to the place where all pages of my trading journal go till I throw them away – behind the screen of my laptop.  Today I finally wiped dust from the table and found this “page” and a lot of other  no less profitable pages – IF I remembered about their existence.

 

In the best traditions of Jerome K. Jerome’s “Three Men in a Boat” I tried to talk to another Dave and point to the funny part of situation such as “while you were busting your ass chasing “big move on the indexes” you could have made a lot of $$$ by looking behind your laptop once every other day”. 

 

Somehow I have not found any of that funny and therefore I decided to ask TTWinners: “Would creation of public Google Spreadsheet where everyone has own sheet with stock ideas coming and going on/off the list, would such idea have practical value for TTW community?” (So many good traders, great ideas, a lot of time goes into research – can we put it to good use somehow?)

 

IF after discussion we will find it useful I might be able to plug it right into the blog at the very bottom, so everyone may have constant access.

Of course, in this case, people like me would have to remember about that spreadsheet…yeah… sure…

 

P.S.  If any smart ass will point out that I was on the cruise till October 20th and it was absolute impossibility to write down anything on any envelope on my table at my house – I will take great pleasure in banning his/hers “Nick/email/IP” forever – I am telling a story HEA* just to make a point!

Merry Christmas!

Merry Christmas

and a very Happy

New 2010 Year

to you and your

families!


From today till after New Year’s Eve postings on this lonely blog may suffer inside interruptions, hardened irregularities, unscheduled fountains of nothing and delays lasting longer than 4 hours. 

P.S. If any of the “regulars” is anxious to waste his/hers Holiday time on writing post for TTW community – just let K. or me know

P.P.S. Finally the ad I liked – the guy (Shawn Penn) rolls the ribbon of dollars over the floor
First 700B “Wall St Bailout”
Next 600B “Stimulus”
Then 200B EUR – European Bailout
last (and least) 3B to help starving children

Like George Carlin used to say:

“We have war on everything, but not on poverty – no money in it”

DDT here
Dec 23rd 4:40PM EST – cannot get enough of it.
Tell me – does this chart make any sense whatsoever?  Looks like PERFECT trading chart (and not only in hindsight, there is a rule to that madness)




Chart above - there is a catch 22 and question (may be I called it "feedback" not quite appropriately) would be:
1. What are the points of origins for Fibonacci retracements and Fans (it has to do with DeMark stuff, but not Sequential.

Setting Goals

Hey... even this guy had a goal that day while loading up his bag. It seems we're all on the same page to set at least one new goal for the 2010 trading year and this was sparked by Osi last night when he posted, "

The Proposed DeMarkian Project
Let us start a project to create a master list of DeMarkian stocks. When I can, I will post these, and we vote on which are truly DeMarkian. We will go until we get about 120 stocks which will be the master list, scanned everyday for which have been perfected.”

We're up for the challenge, Osi! There is nothing better, and for that matter more fun that finding some specific focus and it seems we're all on board to do this. Obviously the holidays are going to put a crimp in it for some of us until we get that out of the way, but that won't stop anyone else who's ready to dive into the dumpster right here, right now. The gauntlet has been thrown,and we don’t even need Arnold to pump us up- we’re pumped for a great profitable year ahead!   Here is DDT’s Google Doc Template in the meanwhile. There is no slow time of the year for traders, only slow tapes. That’s the time to take advantage of a lull to prepare to battle.  If you missed DDT’s chart on VIX, take a long look at it now:


Nothing much else to say today because to be honest, my own focus is waning while I prep to take off early tomorrow morning for the holiday. I'll be back on Sunday night unless the weather holds me hostage. I wish you all a very happy Christmas, and for those of you not celebrating, I wish you all a restful weekend while the rest of us wear ourselves out silly for a one day event. Who's smarter here? ;-) I'd just like to say one little sappy thing too.... you have all been a gift this year, IMHO. You really are the gift that keeps on giving and you're not taken for granted around here.  DDT, that goes for you too.  Your generosity to let us come here every day to trade and play has been an absolute joy for all of us, and a complete privilege for me to post and share every day. Okay... and one more sappy song too. Hey! It's Christmas, cut me some slack. I'm not a fan of Country Muzak, but this song always brings me to tears and brings it all into big time focus. Did you know some soldiers are also traders too? They’re good too- they understand what fear is and how to face it. If you guys read this, just want you to know we’re thinking about you and your families too. See you all on Sunday, I will miss you all ‘til then… and thank you again for everything you all do around here.  Peace and virtual hugs to you all.