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Jeff Pierce
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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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  • How We Close Tomorrow Will Be Important

    By Jeff Pierce

    Tomorrow isn't going to be a game changer by itself but it could be the start of something if we get a strong close. However I wouldn't start to call it a victory for the bulls because many of my internal signals are still pointing down and there has been a severe lack of new leaders during this earning season.

    Below is my outlook on the 2 tech bell weathers that dominated the after hours news.

    Tags: AAPL, FB
    Apr 24 2:53 AM | Link | Comment!
  • Caution For Long Stocks When Long Calls Fail

    By Chris Ebert

    With the U.S. markets currently in a long holiday weekend, many traders are likely enjoying a break from market analysis. So here is something to consider that will only take a few moments, but may prove to be an immense help during the week ahead.

    A type of option trading, known as Long Call* trading, is usually profitable whenever a strong Bull market is underway. Conversely, whenever a strong Bull market is underway, Long Call trading is profitable.

    Although the S&P soared 2.5% higher this past week, a holiday-shortened week no less, Long Call trading remained unprofitable. Thus, this is not a strong Bull market, at least not from the perspective of a Long Call trader.

    A weak Bull market can strengthen - that is always a possibility - so it would not be beyond comprehension if stocks continued to rally during the coming week. But, at the same time, traders should be prepared in case the already weak Bull market weakens further.

    "Buying stocks when Long Calls fail to profit is tantamount to fighting the tides of the sea."

     

    (click to enlarge)Click on chart to enlarge

    *All strategies involve at-the-money options opened 4 months (112 days) prior to this week's expiration using an ETF that closely tracks the performance of the S&P 500, such as the SPDR S&P 500 ETF Trust (NYSEARCA:SPY)

    When Bull markets become weak, pullbacks can be both swift and severe, and they can occur with or without accompanying economic news. If a significant sell-off does indeed occur in the next few weeks, readers here may want to consider that the reason for such a sell-off may be nothing more than weakness, as evident in the S&P's failure to climb any higher than Bull Market Stage 3 this past week.

    You are here - Bull Market Stage 3.

    On the chart above there are 3 categories of option trades: A, B and C. For this past week, ending April 12, 2014, this is how the trades performed:

    • Covered Call trading is currently profitable (A+). This week's profit was +2.7%.
    • Long Call trading is currently not profitable (B-). This week's loss was -1.5%.
    • Long Straddle trading is not currently profitable (C-). This week's loss was -4.2%.

    Using the chart above, we can see that the combination, A+ B- C-, occurs whenever the stock market environment is currently at Bull Market Stage 3. For a description of Stage 3, as well as a comparison to all of the other stages, the following chart is provided:

    (click to enlarge)Click on chart to enlarge

    What's next?

    As can be seen on the chart above, the stock market tends to progress through a Bull market in a "textbook" manner - beginning at Stage 0, then 1, 2, 3 and 4, before bouncing higher at Stage 5 and then repeating the process all over again beginning at Stage 0.

    The market, however, occasionally is not as well behaved as a textbook example. Occasionally Stage 4 is followed by a reversion to Stage 3 instead.

    While Bull Market Stage 5 is often an "all clear" signal that the S&P 500 has bottomed out and has completed a "correction", a reversion to Stage 3 offers far less confidence that such a bottom has occurred. While by no means mandatory, a market that reverts to Stage 3 prior to reaching a major support level may be setting itself up for a test of support in the near future.

    (click to enlarge)

    Quite simply - if a Bull-market correction brings the S&P down to the very line that divides Bull from Bear - the red line in the chart above - then a bounce higher sends a strong signal to all traders that the Bulls have defended their territory and won, and it is a time for celebration. The battle was fought and won, which may increase traders' confidence, in turn leading to higher stock prices and resumption of the Bull market trend.

    On the other hand, if buyers step in to "buy the dip" before the S&P reaches the dividing line between Bull and Bear, nobody can say for sure whether the Bulls would have won that battle. The battle was never fought, so traders may lack confidence as they may be unsure whether strong support exists, or will exist, if the S&P was to approach the red line. The market may rally; but any sell-offs, should they occur, could be exacerbated by the lack of confidence.

    Whether last week's bounce for the S&P pushed the market ahead into Bull Market Stage 5, or back to Bull Market Stage 3, is open to debate. We will know soon enough which one is correct. Stage 5 is highly-bullish, buoyed by strong support below. Stage 3, though bullish, is weighed down by brick-wall resistance from above. Therefore, Stage 5 is likely to quickly lead to new weekly highs above the current brick-wall resistance level in the 1880s; while Stage 3, at best, is likely to slam into that brick wall, and at worst could easily evolve into a Bull-market correction that tests for support in the 1790s over the upcoming week or so.

    Weekly 3-Step Options Analysis:

    On the chart of "Stocks and Options at a Glance", option strategies are broken down into 3 basic categories: A, B and C. Following is a detailed 3-step analysis of the performance of each of those categories.

    STEP 1: Are the Bulls in Control of the Market?

    The performance of Covered Calls and Naked Puts (Category A+ trades) reveals whether the Bulls are in control. The Covered Call/Naked Put Index (#CCNPI) measures the performance of these trades on the S&P 500 when opened at-the-money over several time frames. Most important is the profitability of these trades opened 112 days prior to expiration.

    (click to enlarge)

    Covered Call trading did not experience a single loss in 2013, and the streak endures so far in 2014, continuing a streak of nearly lossless trading extending all the way back to late 2011. That means the Bulls have been in control since late 2011 and remain in control here in 2014. As long as the S&P remains above 1776 over the upcoming week, Covered Call trading (and Naked Put trading) will remain profitable, indicating that the Bulls retain control of the longer-term trend. The reasoning goes as follows:

    • "If I can sell an at-the-money Covered Call or a Naked Put and make a profit, then prices have either been going up, or have not fallen significantly." Either way, it's a Bull market.

    • "If I can't collect enough of a premium on a Covered Call or Naked Put to earn a profit, it means prices are falling too fast. If implied volatility increases, as measured by indicators such as the VIX, the premiums I collect will increase as well. If the higher premiums are insufficient to offset my losses, the Bulls have lost control." It's a Bear market.

    • "If stock prices have been falling long enough to have caused extremely high implied volatility, as measured by indicators such as the VIX, and I can collect enough of a premium on a Covered Call or Naked Put to earn a profit even when stock prices fall drastically, the Bears have lost control." It's probably very near the end of a Bear market.

    STEP 2: How Strong are the Bulls?

    The performance of Long Calls and Married Puts (Category B+ trades) reveals whether bullish traders' confidence is strong or weak. The Long Call/Married Put Index (#LCMPI) measures the performance of these trades on the S&P 500 when opened at-the-money over several time frames. Most important is the profitability of these trades opened 112 days prior to expiration.

    (click to enlarge)

    Long Call trading became unprofitable this past March, and those losses intensified during April. Losses for Long Calls are a sign of weakness for a Bull market. Such weakness can be dangerous because it lowers the perceived reward potential for stock owners, which makes stocks less attractive, in turn lowering the price stock sellers are able to obtain from buyers.

    Failure of the S&P to close next week above 1887 would be a sign of continued weakness; and weakness always has the potential of putting downward pressure on stock prices. If the S&P fails to close the upcoming week above 1887, Long Calls (and Married Puts) will fail to profit, suggesting the Bulls have lost confidence and strength. The reasoning goes as follows:

    • "If I can pay the premium on an at-the-money Long Call or a Married Put and still manage to earn a profit, then prices have been going up - and going up quickly." The Bulls are not just in control, they are also showing their strength.

    • "If I pay the premium on a Long Call or a Married Put and fail to earn a profit, then prices have either gone down, or have not risen significantly." Either way, if the Bulls are in control they are not showing their strength.

    STEP 3: Have the Bulls or Bears Overstepped their Authority?

    The performance of Long Straddles and Strangles (Category C+ trades) reveals whether traders feel the market is normal, has come too far and needs to correct, or has not moved far enough and needs to break out of its current range. The Long Straddle/Strangle Index (#LSSI) measures the performance of these trades on the S&P 500 when opened at-the-money over several time frames. Most important is the profitability of these trades opened 112 days prior to expiration.

    (click to enlarge)

    The LSSI currently stands at -4.2%, which is very near the level of 6% normally considered excessive. Such levels have historically been followed by major breakouts in which the S&P moves out of the trading range of the past several months, and either soars to new highs or else makes lower lows than it has experienced for quite some time.

    Profits on Long Straddle trades will not occur this coming week unless the S&P exceeds 1942. While nothing in the stock market is impossible, reaching 1942 this coming week is highly unlikely. The S&P exceeding that level this upcoming week would indicate that Bull market of 2013 was once again underway and the recent correction was simply a pause in the uptrend.

    Excessive profits on Long Straddle trades, such as those exceeding 4%, will not occur this coming week unless the S&P rises above 2016. Despite the presence of euphoria if the S&P was to reach that level, anything higher than 2016 this coming week would be absurd and would likely to result in some selling pressure. Historically, such absurd bullishness has been associated with subsequent pullbacks and, occasionally, Bull-market corrections. In any case, 2016 is almost certainly out of reach this coming week.

    Excessive losses on Long Straddle trades, such as those exceeding 6% will not occur this coming week unless the S&P nears 1832. At or near 1832 a subsequent breakout is likely. Since the S&P is currently not terribly far from that 1832 level, the chances of a major breakout are elevated now. As mentioned in Step 1, if a breakout brings about a lower trading range, especially below 1776, it could be a very, very bearish signal, while a bounce higher from the 1776 area would be a strong indicator that the market had put in a bottom, at least temporarily, at a level of strong support.

    The reasoning goes as follows:

    • "If I can pay the premium, not just on an at-the-money Call, but also on an at-the-money Put and still manage to earn a profit, then prices have not just been moving quickly, but at a rate that is surprisingly fast." Profits warrant concern that a Bull market may be becoming over-bought or a Bear market may be becoming over-sold, but generally profits of less than 4% do not indicate an immediate threat of a correction.

    • "If I can pay both premiums and earn a profit of more than 4%, then the pace of the trend has been ridiculous and unsustainable." No matter how much strength the Bulls or Bears have, they have pushed the market too far, too fast, and it needs to correct, at least temporarily.

    • "If I pay both premiums and suffer a loss of more than 6%, then the market has become remarkably trendless and range bound." The stalemate between the Bulls and Bears has gone on far too long, and the market needs to break out of its current price range, either to a higher range or a lower one.

    *Option position returns are extrapolated from historical data deemed reliable, but which cannot be guaranteed accurate. Not all strike prices and expiration dates may be available for trading, so actual returns may differ slightly from those calculated above.

    The preceding is a post by Christopher Ebert, co-author of the popular option trading book "Show Me Your Options!" He uses his engineering background to mix and match options as a means of preserving portfolio wealth while outpacing inflation. Questions about constructing a specific option trade, or option trading in general, may be entered in the comment section below, or emailed to OptionScientist@zentrader.ca

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    Apr 22 10:38 AM | Link | Comment!
  • Key Dates For Financial Astrology

    By Astrology Traders

    I have been stressing the likely charade of the global elite, involving the Ukraine, to distract Americans, remove the dollar as reserve currency, only to replace it with some other distorted form of money, or digital currency. The current scenario may have been worked out some time ago to divert attention from who is really orchestrating and choreographing this stage play. About 1-1/2 years ago Obama was caught on a live microphone saying to Medvedev, "tell Vladamir I'll have more flexibility after the (2012 presidential) election". We may be seeing these plans unfolding now, but perhaps everything is not going as planned!

    There are three dates, and then a forth date, that I have stressed in past Astrology Updates. They are:

    (click to enlarge)

    January 16, 2014

    April 16, 2014

    October 12, 2014

    November 5, 2014

    I write about a lot of future dates, as long term subscribers know, they are key for certain cycles in the markets, as well as political turning points. Some of these dates are more important than others and I try to stress that as best as possible without sounding over jealous. When my very critical dates materialize the markets appear to be the 'thumbs up, or down' in terms of how the prevailing market participants view the global leaders management of events on these dates. Sort of like a vote of confidence. Last year there were critical dates that I wrote about in the Easter Sunday Astrology Update:

    December 21, 2012

    April 6, 2013

    September 18, 2013

    Looking back, we can acknowledge December 21, 2012 as the epic Mayan calendar date. The following dates, April 6th was the death of Margaret Thatcher (she was known to have strong ties to the Russian Oligarchs), and September 18th marked the end of the unjust war attempt on Syria. These dates were written in the heavens, as Saturn marked the return to the degree in Scorpio, a dispensation from July 4, 1984, as a block to an injustice and judgement for the global elite. The failed war attempt brought humiliation to the president, his administration, and adviser Leon Panetta, while the markets gave a vote with the Dow Jones falling -870 points into the first week of October.

    Fast Forward 2014

    The rout in emerging markets and currencies that began to escalate on January 16th, suggests international cooperation was unraveling as the global bankers moved to unplug the dollar. The result was on February 3rd, the system broke down, global banking and emerging markets were at risk of collapse, while the markets technically violated key levels for a very short period of time. The media seemed caught off guard and began floating comparisons to 1929. On February 5th India's central bank head, Raghuram Rajan, stated in a Bloomberg TV interview, "international monetary cooperation has broken down."

    I should also note that on January 16th the government in Kyiv Ukraine passed legislation to block the freedom to assemble in public protests. The Deputies violated the voting protocols and it appears the vote was not valid. The law bluntly violates the basic human rights of the Ukrainian citizens, such as freedom of speech and freedom of association, turning Ukraine into one of the most authoritarian regimes in the post-Soviet space. The precedent here, while not being challenged by the US or EU nations is very disturbing.

    DO NOT UNDERESTIMATE WHAT HAPPENED ON FEBRUARY 3RD, THE WORST IS YET TO COME!

    April 16th

    I predicted we would see volatility in the currency markets again at the end of last week. This is a very clear sign for me that the global elite are moving forward with their agenda at all costs, but consternation is in the air. They will secretly continue to try to wreck the international status of the dollar near April 8th, but they will get another road block and that is what is coming in April. April 16th is the next date where a dispensation will likely bring another setback. India is the nation to watch as the country is the counterpart to America should they decide to take up the mantle and leave off from their fascination with World Communism. I will take Rajan's comments as a step in the right direction.

    A lunar eclipse on April 15th, tax day for all who actually do pay them, making a square to the Pluto/Neptune opposition in the US and Fed charts. The eclipse is opposite the degree of the lunar eclipse in October 2013. the Pluto/Neptune opposition in the US and Fed charts signifies the very secret banking operations and creation of paper money. Both eclipses are a warning and serve to expose to the public the hidden banking operations. Since October this is already happening as more revelations are coming to light regarding the manipulation in the Forex markets. April 16th will bring another setback, or algorithmic glitch, to the currency manipulation. Again, watch India.

    Pluto is geodetically over Washington DC (13 degrees Capricorn) until mid-July. This will likely bring intensified draconian, or plutocratic decisions throughout 2014.

    I am not including my thoughts regarding November 5th in this update. There is much to convey about this date and I will have to save it for a future update.

    This is an excerpt from this weeks premium update concerning this pullback we are experiencing and when it will likely end. Within our service we provide trade setups complete with real time buy/sell trade alerts. We offer a complete 30 day refund policy, no questions asked refund on our service. Below is our trade performance on closed trades since joining Marketfy.

    • 29 winners with an average gain of 10.10%
    • 7 losers with an average loss of 6.70%

    Sign up here to see the different Astrology Traders can make in your trading.

    Apr 16 12:50 PM | Link | Comment!
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