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TLT

OPENING: TLT NOV 16TH 112/2X114/115 BROKEN WING BUTTERFLY... for a .71/contract debit. Small bet that treasury sell-off is overdone here and/or there will be some risk-off running into mid-term elections. Metrics: Probability of Profit: 51% Max Profit: 1.29/contract Max Loss: .71/contract Break Even: 112.71 (no downside risk) Notes: Will begin to look at taking the entire setup off as a unit at 25% max. You can also look to strip off aspects of the setup, with the ideal goal being to get what remains for free (e.g., strip off the short call aspect at or near what you paid for the entire setup, allow the long call vert aspect to "ride").
NASDAQ:TLTLong
by NaughtyPines
Is $SPY / $TLT Ratio Repricing Lower Inflation?U.S. equities bounce from initially being down 15 handles, but volatility is expected. However, is recent move expected? Yes, in my opinion, as markets are ultimately forced to re-price growth and inflation . Step back from the earnings headlines because that's literally old news. Although Q3-18 earnings growth is up nearly 20 percent, over 60 percent of companies that have reported are seeing negative FX impacts (i.e. rising dollar). There is also a solid concern on Q4-18 negative guidance going forward. That's not to say earnings will be horrible. Too early to tell, but the rising DXY will impact overseas earnings (remember 2014-15?). Furthermore, late cycle increases in wages and other employment costs will continue to crimp margins. If we look at D-R-I-P (disinflation/reflation/inflation proxy), the inflect is clear and largely impacted by the commodities and FX components and diverting from yields. This proxy is important when considering SPY/TLT ratio in terms of "risk-on/risk-off" market mentality. D-R-I-P has a strong intra-day correlation to the ratio r=.78 and intermediate-term correlation of r=.72. Given this, if we put up the proxy to the test of the TACVOL range, there is a strong probability of a 3.52 to 7.33 percent decline versus 2.5 to 4.92 percent to the upside. The ratio has been able to work off most of it's oversold move, but another three percent lower is in the cards. The COT data shows 209,584 contracts net-long of SPX, the second largest position of crude oil's massive 500,000+ contract net-long (bad idea). Compare this to the 30-year bond's net-short positioning of 118,924 contracts. If there is any disappointments on the macro front, this will get fuglier quickly.
AMEX:SPY
by TheMacroStrategist
Mid-Term elections and forecast based on game theory - A divide Game theory has the elections outcome pegged, and based on that, this is the market prediction. I have upgraded this AI to include the new chaos theory. Very interesting results and are playing out exactly. Such as "a divide within" Here's a taste: The democratic party division of the party itself. When and where? For more, you can contact me. Now custom game theory runs are available for corporate events, other parties, etc....
CME_MINI:ES1!
by Marek99
3
Oversold Conditions Deepen In Stock Market As Breakdowns WorsenAT40 = 11.2% of stocks are trading above their respective 40-day moving averages (DMAs) (oversold day #2) AT200 = 31.7% of stocks are trading above their respective 200DMAs () VIX = 23.0 (an increase of 44.0%) Short-term Trading Call: bullish (change from neutral) Commentary The market sell-off is unfolding quickly. AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), plunged ever deeper into oversold territory. This time AT40 fell from 16.7% to 11.2% to end the day at closing levels last seen during the epic January, 2016 sell-off. {AT40 (T2108) fell off a cliff these past two trading days!} Now that AT40 is so low, AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, becomes a lot more important to monitor as an indicator of longer-term health. The weekly chart below shows the multi-year overall downtrend is well-intact. So just like almost every other rally from oversold levels, I expect the next rally to end at an even lower AT200 high. For now, the question is just how much lower will sellers push AT200. {AT200 (T2107) last closed this low in early 2016. Sellers still have plenty of room for pressing their points downward.} As the breadth indicators continue to drop deeper into oversold territory, the major indices are following gravity into new or worse breakdowns. The S&P 500 (SPY) wasted little time in breaking down below its 200DMA. The index stretched further below its lower Bollinger Band (BB) as it neared flatline with its 2017 closing price. {The S&P 500 (SPY) lost 2.1% to close with a 200DMA breakdown and a 3-month low.} Note well that for 2018 there has only been ONE Fed meeting where the S&P 500 did not tumble soon thereafter. The February swoon was of course the worst incident as the panicked selling started the day after. This time around, the panic took six trading days to get started. The NASDAQ extended its 200DMA breakdown with a 1.3% loss. The Invesco QQQ Trust (QQQ) gave up its 200DMA support with a 1.2% loss. {The NASDAQ closed at a 5-month low as it confirmed its 200DMA breakdown.} {The Invesco QQQ Trust (QQQ) closed at a 3+ month low as it broke down below its 200DMA for the first time since June, 2016.} Small caps are leading the way in erasing 2018’s gains. The iShares Russell 2000 ETF (IWM) lost another 1.9% and closed just one point above its 2017 close. {The iShares Russell 2000 ETF (IWM) closed at a 5-month low and is nearly flat year-to-date. IWM confirmed its 200DMA breakdown.} Much to my dismay, the volatility index continued higher today. The VIX gained 8.8% and was up as much as 25.6%. While the volatility faders were active for the 5th of 6 trading days, the VIX’s momentum is clearly higher. I added to my put options on ProShares Ultra VIX Short-Term Futures (UVXY) by rule, but the prospects for profits by next Friday are dimming. {The volatility index, the VIX, closed at a near 7-month high with an 8.8% gain.} I made my first purchase of call options on SPY soon after the index broke down below its 200DMA. Per the aggressive oversold trading strategy, I will continue adding to this position during the oversold period. However, I started with an expiration for next Friday, so it is possible I will be forced to reset my strategy (likely for November expiration). Until then, I will only add after the VIX has spiked at least 10% from my last purchase. At some point (soon?), I will also buy shares of ProShares Ultra S&P500 (SSO) to hold through the extent of the recovery from oversold conditions. Given the extent of the technical damage across the entire market, I have to assume a new bearish phase is unfolding where I will be setting price targets for taking profits at important resistance levels. Still, shorting at key resistance will be very case dependent.
SP:SPXLong
by drduru
THE WEEK AHEAD: DAL, C, JPM, WFC EARNINGS; EWZ, TLT/TBTAlthough the earnings season has already kicked off modestly, a bevvy of financials announce next week: C, JPM, and WFC (all on Friday). I generally don't play these underlyings for volatility contraction around earnings primarily because the implied volatility just doesn't ramp up to the degree I'd like to see for a play. I thought I'd mention them here since there will be possible broad sector (XLF) impact depending on how these earnings go -- i.e., there could be a play that develops in one of these underlyings post-announcement or in the sector as a whole that may be worth playing. Other Earnings: DAL (rank 41/30-day 32) announces earnings on Thursday before market open. The metrics don't look promising here for a directionally neutral premium selling play, but I could see going for something bullish if earnings experience engine failure and crash into the 52-week low around 48 and implied volatility remains high such that a bullish assumption play would be productive (e.g., short puts, Jade Lizard, etc.). Although there are some other single names that are "ripe" for a volatility contraction play right here (TSLA (earnings in 31) comes to mind), my general tendency is to resist the urge to put plays on in single name with earnings announcements that are near the monthly and instead wait until the eve of the announcement. With a rank of 99 and implied of >100%, though, it's understandably tough to sit on one's hands and wait. On the Exchange-Trade Fund Front: Brazil is voting today, so it's likely that you're too late to get into a volatility contraction play that may evolve after the results are finalized (the time to have put that play on was last week). That being said, it's also possible that EWZ gets even more volatile depending on the outcome, even though implied volatility is at the top of its 52-week range at 56.2%. The financial media has returned to covering 10-year T note yield hand-wringing and/or the spiking of bond yields in general as a general, explanatory theme of why the broad market gave some up last week. TLT broke through long-term support at 116 last week, cratering to 113. I was previously shorting TLT from the 122 level via put diagonals, but it appears that play may have temporarily played out in the absence of some risk-off event that drives treasuries back up. I will continue to short TLT on retrace, but there is little that sticks out to me in terms of horizontal resistance other than 122 and 116, and I'm hesitant to short from 116, since it literally just broke that level "seconds ago" in the scheme of things.
AMEX:XLF
by NaughtyPines
5
All You Head and Shoulders Suckers are Going to Get Owned!Head and Shoulders patterns are the most over predicted one in existence, meant to suck in the Dumb Money before Kapow!!!!!! The market whips the other way, fleecing said Dumb Investors of their money… LOL We’re all Turning Japanese, and long-term rates are going to Zero! Time to Get Long the TLT, so when all your Buddies are riding FAANG stocks to their intrinsic value and their Cryptos to the grave, you’ll be clipping your coupons quarterly… Good time to pick up the TLT is down around 110. Don’t get Pooped on, Time to go long the TLT! ;]
NASDAQ:TLTLong
by Cincinnatuus
2
Extremes Prime Prospects for Market Bounce, Oversold LoomsAT40 = 33.8% of stocks are trading above their respective 40-day moving averages (DMAs) (was as low 31.9%) AT200 = 47.8% of stocks are trading above their respective 200DMAs VIX = 14.0 (was as high as 15.8) Short-term Trading Call: neutral Commentary The S&P 500 is only 1.0% off its all-time high, yet extremes and critical tests of support abound. AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), dropped to a fresh 6-month low and closed at 33.8%. AT40 has warned of underlying weakness in the stock market since it sliced through 40% and broke the lower bound of a multi-month range. At the time, I was more focused on the potential bullish implications of the S&P 500’s ability to hold 20DMA support at the same time AT40 slipped… “So on a relative basis, the S&P 500 (SPY) is not likely to go much lower from here without a specific and very bearish catalyst. The S&P 500’s ability to levitate above its uptrending 20DMA adds to the impression that support will hold.” The S&P 500 is only a mere 0.4% lower from that point BUT 20DMA support gave way. It was a rare down day on which the S&P 500 lost more than 1% at one point. Buyers stepped in at the lows and closed the index with a 0.8% loss. The S&P 500 even came close to recovering its 20DMA support. The Invesco QQQ Trust (QQQ) DID break through 50DMA support but buyers managed to close the index right on top of it. The S&P 500 managed to bounce away from 50DMA support, and the Invesco QQQ Trust (QQQ) held 50DMA support, yet the NASDAQ was not so fortunate. These major indices effectively created a cascade toward critical 50DMA support. Along the way, small caps continue to roll over with 50DMA resistance fading away in the rear view mirror. The iShares Russell 2000 ETF (IWM) lost another 1.4% and closed at a 3+ month low. A test of 200DMA support seems imminent. Together, this selling looks like a recipe for a larger sell-off with small caps and now the NASDAQ leading the way lower. However, AT40 closed at 33.8% and was as low as 31.8%. For the last two years in particular, these levels have represented “close enough” to oversold with two important exceptions from the February swoon and the election related sell-off in 2016 (see longer-term chart at the bottom of this post). The volatility index, the VIX, added to the case for an imminent bounce. The VIX soared as much as an extreme 36.4% before volatility faders stepped in to push the fear gauge to a 20.7% close underneath the 15.35 pivot. If recent patterns hold, this move suggests the latest surge in fear has already exhausted itself. In deference to the volatility faders, I quickly took profits on my latest tranche of call options on ProShares Ultra VIX Short-Term Futures (UVXY). I also did not want to make a bet on the jobs report delivering news strong enough to sustain higher volatility. Noted VIX expert Bill Luby also thought the market hit extremes and called for a bottom. I agree with Luby that a bottom here is very likely, but I do not think it will be a sustainable bottom. Soaring interest rates have made me more circumspect. I think financial markets need to adjust to an environment where the 10-year U.S. Treasury stays above 3% and continues higher. That is, more fear needs to appear. As long as the market leaders are able to keep the S&P 500 levitating above 50DMA support, I am doubtful such fear can get exorcised. Thursday’s spike in rates cut iShares 20+ Year Treasury Bond ETF (TLT) by 0.7% and sent it to a 4-year low. The weekly chart below shows the speed of recent losses. This move seemed quite extreme, so I decided to triple down on my TLT call options in anticipation of a potential snap back bounce. Friday’s jobs report should play an important role in determining whether rate fears take a break or not. Any strength pointing toward higher inflation will grease more skids across the market. If the jobs report stays out of the way, then the technicals have the market set up for a bounce. The market just needs an excuse. Beaten down stocks are likely to benefit greatly from a bounce whereas the S&P 500 could be tightly capped by its recent all-time high. In other words, I suspect that a rally from here will be short-lived and the ultimate destination for the market is a true oversold reading (AT40 below 20%). I left the short-term trading call at neutral to reflect my expectation for a small bounce. Assuming AT40 rebounds sharply enough to at least 50%, I will likely look for fades at or near the S&P 500’s all-time high and downgrade the short-term trading call accordingly.
SP:SPX
by drduru
The Stock Market's Anchors Ignore Over-Stretched Conditions AT40 = 38.9% of stocks are trading above their respective 40-day moving averages (DMAs) AT200 = 51.6% of stocks are trading above their respective 200DMAs VIX = 12.1 Short-term Trading Call: neutral Commentary Looks like I had good reason to give a tepid endorsement to the upside potential for the stock market off the over-stretched conditions on display in AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs). The S&P 500 (SPY) had every reason to rally robustly in the wake of a trade deal among the U.S., Canada, and Mexico. Instead, the index only gained as much as 0.5% or so before reversing almost the entire gain. Only a desperate bounce in the last 15 minutes of trading took the index to a 0.4% close. The S&P 500 sustained a hollow victory with AT40 sinking on the day to close below 40% again. AT40 has not looked this bad since April. Now I think the risk of going even lower is somewhere higher than 50%. The anchor from small caps weighed quite heavily on AT40. The iShares Russell 2000 ETF (IWM) opened up and promptly faded from resistance at its 50DMA. IWM closed with a 1.3% loss and a 6-week low. A downtrend continues from IWM’s last all-time high. The market did not worry about the broad, underlying weakness betraying the small gains on the S&P 500. The volatility index, the VIX, closed LOWER by about 1%. I went ahead and bought a small amount of SPY call options expiring October 8th that I plan to sell on the very next bounce or a fill of Monday’s gap up, whichever comes first. Beyond that trade, I am even more wary about the market than I was in the last Above the 40. I am still keeping the short-term trading call at neutral just out of deference for the relatively low level of AT40 while the S&P 500 remains above important support at its uptrending 20DMA. CHART REVIEWS General Electric (GE) Last week I made the case for waiting on GE before making a fresh trade on a bottom. Then out of nowhere, GE replaced its CEO with former Danaher (DHR) CEO and current GE board member Larry Culp. The market’s initial reaction was extremely positive and easily cleared the thresholds for more safely playing a bottom. However, the stock failed to hold the best levels at the close and thus shut the down the buy trigger. GE even closed under its downtrending 20DMA; GE went from breakout to fakeout. This sharp fade makes a more aggressive trade even more risky than it looked on Friday. CNBC Fast Money’s Karen Finerman made a case for a GE bottom from a fundamentals perspective. Like me, she likes the January 2020 call options. She is targeting the $13 strike while I have $15 strikes from an earlier dip. iShares 20+ Year Treasury Bond ETF (TLT) Speaking of bottoms, TLT violated the bottom that I thought was secured with last week’s Federal Reserve announcement on monetary policy. Still, I doubled down on my TLT call options as they have suddenly become a very cheap hedge on bullishness. I fully expect TLT to soar again if the market sells off at some point this month. Tesla (TSLA) TSLA delivered major relief in line with CEO Elon Musk coming to his senses and settling fraud charges from the SEC. In keeping with the tantalizing theme, TSLA nearly perfectly filled Friday’s gap down. As is its habit, the stock even closed at an obvious technical level which in this case was 50DMA resistance. United States Oil (USO) I suddenly see an elephant in the room: oil. Oil prices soared today perhaps in sympathy with Canada and the U.S making nice on a trade deal that includes Mexico. Whatever the reason, oil sitting around 3-year highs is NOT good news for consumers. Moreover, inflation watchers are likely starting to worry about inflation expectations creeping higher along with oil prices. I am now watching oil a lot more closely. — – — FOLLOW more of Dr. Duru’s commentary on financial markets via email, StockTwits, Twitter, and even Instagram!
SP:SPX
by drduru
A Suspect Breakout for the S&P 500A Suspect Breakout for the S&P 500 AT40 = 52.7% of stocks are trading above their respective 40-day moving averages (DMAs) AT200 = 56.7% of stocks are trading above their respective 200DMAs VIX = 11.8 Short-term Trading Call: neutral Commentary The stock market is not quite out the (short-term) woods yet. Last Wednesday I pointed out why the latest bearish divergence forced me to back down from my cautiously bullish short-term trading call. My neutral stance reflected a fresh wariness over an S&P 500 (SPY) grinding higher without the confirmation of a higher AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs). The S&P 500 (SPY) proceeded to bolt higher on Thursday to a fresh all-time high with a close that stretched above its upper Bollinger Band (BB). AT40 traded higher along with the S&P 500, but my favorite technical indicator failed to break out from its two week range which itself is at the bottom of a 5 month range. The stretch above the upper-BB was enough to prevent me from chasing the S&P 500 against my change in short-term trading call. The lack of confirmation from AT40 sealed the deal and even increased the risk for an imminent pullback by my calculation. On Friday, the S&P 500 (SPY) pressed higher intraday only to fade to a slightly lower close. AT40 broke out and then faded right back into its trading range. With a Federal Reserve meeting as a potential catalyst, I go into the coming week wary of the next short-term pullback. In an on-going change of fortunes, the tech-laden NASDAQ and Invesco QQQ Trust (QQQ) are lagging the S&P 500. Both indices last hit all-time highs almost a month ago. Tech stocks have been unable to regain momentum since then even though the uptrending 20 and 50DMAs continue to guide tech stocks. The volatility index, the VIX, remains a very interesting part of the stock market’s divergent behavior. The VIX ended a down week at 11.7, just above recent lows and just above the 11 level which marks “extremely low volatility” (ELV). This level of complacency underlines the market’s overall bullish mood. It also makes portfolio protection very cheap. October is the last month of the year that includes a history of danger for the stock market, so it makes sense to load up on the “bargains” on SPY put options and long volatility trades. Since I am not (yet?) bearish, I chose with the long volatility trade. I bought yet another tranche of ProShares Ultra VIX Short-Term Futures (UVXY) call options at the same time I let the last tranche wither away to nothingness. A falling U.S. dollar index is helping the bullish mood by offsetting the negative impact of trade tensions on stocks with international sensitivities. There is likely a virtuous circle going on as the (surprisingly) positive response to heightening trade tensions is taking steam out of the dollar. A lower dollar is helping boost the outlook beyond U.S. borders. Commodity-related stocks were on fire (I clearly sold my call options on BHP Billiton (BHP) too early) and emerging market currencies did very well. The dollar weakened despite a fresh surge in long-term interest rates. The iShares 20+ Year Treasury Bond ETF (TLT) sold off hard this week and allowed me to take profits on my last tranche of TLT puts. Still, if I am to believe the other signals in the market, long-term rates are not going much higher from here, and the Federal Reserve this coming week is set to reassure markets about future monetary tightening. If instead the news upsets the market, I will pounce on fades of many of the trades that assumed otherwise.
SP:SPX
by drduru
Bond H&S = risk off deflationary + curve inversionMeasured moved based on H&S break has this moving approximately 10%. We're currently looking at a retest of the break, but it's fading fast. When combined with the record net-short interest here, this could be a fast move, and could even invert the yield curve in one fell-swoop. If so, this would be reminiscent of the 2000 yield curve inversion, which happened extremely quick, and occurred around the same time the bear market started. Note that the big drop after the head that occurred around May 25th was a global collateral call. That alone is reason to realize that liquidity is not what we thought and there may be more problems in the global dollar funding system than many would know.
TVC:US10Y
by GTStockmaster
2