stock earning ER option

How Do You Spot A Major Stock Market Top? Here’s The Easy Way [IBD]

You’ve likely seen or heard numerous talking heads and market experts say the current bull market, now in Year Nine, is extra-long in the tooth. That’s true.

William O’Neil, author of the growth investing classic “How to Make Money in Stocks” and chairman of IBD, has frequently noted that the typical market rally lasts three to four years, while a sharp correction runs for about nine months, possibly a bit longer.

That pattern has been tossed aside lately. The March 2000-to-October 2002 Nasdaq crash lasted for two years and seven months. A five-year bull run followed, which then set the stage for another violent decline. The January 2008-to-March 2009 bear market lasted for nearly 15 months from peak to trough.

Common sense would say that the extreme severity of decline in each of those bear markets is one reason why the rebounds in equity prices have lasted longer than average. The market simply needed more time to mop up those losses and stretch into new high ground. In the realm of equities, greed is slow yet steady most of the time; fear runs at a much quicker pace and thus tends to carry a sharp bite, like a habanero chili pepper that’s a little more picante than expected.

Many market pros stress that in the equities market, a bull doesn’t die of old age. Instead, the market falls in anticipation of a major economic decline. As an individual investor, you simply cannot read every quarterly report or digest every weekly and monthly report on the economy. You alone can simply not predict that the manufacturing industry is going into a deep freeze three months from now, that China’s real estate market will crash in November, or what the next country will be to default on its sovereign debt.

So is there a simpler way to take action when the market appears ready for a big fall? Absolutely. Watch the market itself. The market is the sum of buying and selling decisions by millions of money managers, both big and small. No one is smarter than the market as a whole. So why not track it on a daily basis and pay attention to instances of unusually strong professional selling? When the smartest members of the Big Money rush for the exit, you can see it. IBD calls it distribution.

Distribution days can be likened to a fine wine. A glass or two is fine. It’s social, and it’s probably good for your digestive system. But one too many will send you reeling.

A distribution day is defined as the loss of at least 0.2% (without rounding up) by a major index — the Nasdaq, the NYSE composite or the S&P 500 — as volume ticks higher than the prior session’s total. Tracking the accumulated damage is crucial to gauging a market’s health.

Why? Because distribution days almost always are signs that institutions are exiting the market. And, as the big funds control the bulk of daily volume and hence the overall market’s direction, you can’t expect stocks to rise without those big guns on your side.

How many is too many? For now, the market could probably withstand six or seven distribution days before rolling over — especially when most or all of those declines are small in scale. Indeed, the market has sometimes been saddled with as many as eight or nine technical distribution days, yet still lumber higher. Use the Market Pulse table in IBD’s The Big Picture Column every day to instantly track the exact distribution-day count. The column itself will go into the nuances surrounding the distribution as well.

Happily, a distribution day does not necessarily scar the market permanently. There are three ways a distribution day can fall off the count. The first is by the calendar. After 25 sessions, a distribution day expires. The count falls by one.

A second way a distribution day can fall off the count is for the index to rise 6%, on an intraday basis, from its close on the day the higher-volume loss appears. As with most problems, a bull market is a great curative.

The third way is far more painful. A broad market correction makes the distribution day count a moot point. Often, a high distribution-day count will presage that correction. Once the market falls into a correction, the big question is when it will regain its uptrend.

When a follow-through day arrives, signifying a new uptrend, the distribution-day count starts clean at zero for all three key indexes.

The distribution-day count could have kept you out of the market in early 2008, when a series of declines snowballed into the worst rout in recent memory. As it happened, the count rose as the indexes fell.

Look at the chart of the S&P 500 at the end of 2007. See how distribution days mounted just before the collapse: Dec. 11, 2007, -2.5% (1); Dec. 17, -1.5% (2); Dec. 27, -1.4% (3); Dec. 31, -0.7%(4); and Jan. 2, 2008, -1.4% (5). In each of these declines, volume rose on the NYSE.

On Jan. 4, 2008, you saw a 2.5% sell-off (6) and the sixth distribution day in 25 sessions. That’s the day the Market Pulse declared a market correction.

On Dec. 31, 2007, the S&P 500 finished the year at 1468. By Nov. 21, 2008, the large-cap index fell almost 50% to as low as 741. A six-week rebound didn’t achieve much, and in the first three months of 2008, stocks resumed their bear-market slide. By March 6, 2009, the S&P 500 notched a 12-year low of 666.79, a 54.5% slide from the 2007 peak.

(The original version of this story ran in the March 5, 2012, edition of IBD.)

Utilizing the Power of 1×2 Call Spreads

1×2 call spreads are a powerful tool that can be used even by traders who aren’t crazy about options or generally stay away since they view them as very risky. I will go into 2 simple uses that are basically the same play for 2 different purposes. Both of these scenarios are meant for situations where you are already long the underlying stock.

  1. Stock Repair – this is the nickname sometimes given to buying a 1×2 ratio call spread when you are underwater on a stock. Say you hold a stock that is -10% from your entry for example and you just want out at break even. Even though it may be better to take your loss and move on to the next setup, we’ve all been in the situation where you hope to get out break even though we know that’s just a mental mind trap that hurts more than helps in trading…Bad habit: the desire not to take a loss or having to admit you had a bad trade. Anyway…

 

Let’s use $GDX for our example. Assume you bought 100 shares of GDX at $28 and it’s now at $25 so you have ~11% loss and you just want out at break even. Today, 2/9, you could buy the March $25 call for $1.24 and sell to open (or short) double the amount of March $26.50 strike calls for 65c (collecting $1.30). So you would be able to put the 1×2 package on for a small credit, 6c credit before commissions in this scenario (a credit is always desired as explained below). Important to note is that the 2nd call you sold is “covered” by the stock you own so it is not a “naked short”. Each call controls 100 shares so if you owned 100 shares of stock the stock repair size would be simply +1 x -2. If you owned 500 shares you would put on +5 x -10.

The reason this is called stock repair is because now you have the opportunity to make 2x the return from $25 to $26.50 ($26.50 = max profit level). So where before you needed a 12% rally to break even, now you only need 6% since you have effectively double the shares from $25 to $26.50 due to the calls. Break-even is now $26.50, not $28.

Important to note the trade-off with this strategy: if the stock goes to $30 you are capped at $26.50 max gain…you won’t lose above that but you also won’t make anything additional either. Timing is also an issue if the move happens too fast as the max profit level gets paid fully only on expiry so it pays to not go too far out with expirations otherwise you may have a situation where you are at max profit price wise but need to wait til expiration for it to fully pay and we know that the stock can obviously fall back below the upper strike again.

Also, the reason it is effectively a free option play…if the stock closes below $25, you lose nothing on the options since you put them on for a credit…both strikes expire worthless…that’s why putting it on for a credit is smart…you paid nothing (or even received $) for the 1×2. You still lose on the stock…but you would have regardless.

Below is a screen grab showing real prices that were used for the examples.

2) Press Your Bet – while the above 1×2 strategy works great for stock repair you can also use it to press your bet for a current position that is not under water or to initiate one that’s turbocharged for the first 6% . It is basically the same play but from a position of strength instead of weakness.

This works especially well when you have a price target say 5-10% higher that you would likely sell your position at. Either buy stock or have an existing stock position that you now pair up with the same 1×2 call spread. Now from $25 to $26.50 you make 6% effectively twice (6% on double the standalone position). Again, if stock is below $25 at 1×2 expiry then you only lose on the stock, not the options. The strategy adds additional gains than the standalone position would have with the stock above $25 at expiry with the Max profit capped at $26.50 and you make nothing more above that. But keep in mind that by not adding the 1×2 option press you would need over a +12% move in the standalone stock before you were better off without the 1×2.

The further out in time you are willing to go the wider the strikes you can use and more potential gain you can play for since the further out of the money strikes can be sold for either more credit or you can use even higher strikes for the same credit as an earlier expiry, lower strike, would get you.

Gap rules

Gap rules are in:
1. Go with all gaps that don’t fill right away. That means that you don’t fade it if it’s not fading!
2. Larger gaps often don’t fill all the way or at all on the first day.
3. If the gap fills (which means we get to Friday’s RTH HIGH, not CLOSE) and value cannot get to at least overlapping, then the odds of an afternoon rally increase.
4. Gaps of larger than $10 are often difficult to trade especially early and will often spend the day going sideways as the market digests the gain. Better opportunities for day timeframe players are often found in individual stocks rather than in S&P or Nasdaq futures.

tick date preDayClose open gap high low close intrDayChg preChg pctChg ndpctchg
SPY 2001-09-24 97.28 99.72 2.44 101.16 99.06 100.70 0.98 -1.45 3.52 1.04
SPY 2008-10-13 88.50 93.87 5.37 101.35 89.95 101.35 7.48 -2.43 14.52 -1.48
SPY 2008-10-20 93.21 95.35 2.14 99.10 94.09 98.81 3.46 -0.60 6.01 -2.99
SPY 2009-03-23 76.71 78.74 2.03 82.29 78.31 82.22 3.48 -2.82 7.18 -1.97
SPY 2010-05-10 111.26 115.81 4.55 116.65 114.91 116.16 0.35 -1.49 4.40 -0.28
SPY 2011-08-22 112.64 115.17 2.53 115.23 112.41 112.73 -2.44 -1.63 0.08 3.29
SPY 2011-10-10 115.71 117.68 1.97 119.63 117.67 119.58 1.90 -0.67 3.34 0.10
SPY 2011-11-28 116.34 119.54 3.20 120.18 118.82 119.71 0.17 -0.19 2.90 0.28
SPY 2011-12-05 124.86 126.84 1.98 127.18 125.44 126.22 -0.62 -0.09 1.09 0.03
SPY 2016-02-22 192.00 193.87 1.87 194.95 193.79 194.78 0.91 -0.05 1.45 -1.26
SPY 2016-06-20 206.52 208.82 2.30 209.61 207.75 207.85 -0.97 -0.89 0.64 0.28

 

 

Best winner trades by 2017-03-03

Top Expiring Put Gain by 2017-03-03

tick industry acqDate expDate corp strike acqVol oi acqVal shortAt lOPrice optionGain totalGain
BAC Money Center Banks 2017-01-13 2017-03-03 P 23.50 -10000 15859 1120000 1.12 0.01 99.11 1110000.00
DLTR Discount, Variety Stores 2017-02-27 2017-03-03 P 74.00 -6000 7073 660000 1.10 0.13 88.18 582000.00
C Money Center Banks 2017-02-14 2017-03-03 P 60.00 -3000 5565 318000 1.06 0.01 99.06 315000.00
PCLN Business Services 2017-02-08 2017-03-03 P 1580.00 -75 364 311250 41.50 0.03 99.93 311025.00
PCLN Business Services 2017-02-08 2017-03-03 P 1580.00 -75 364 310500 41.40 0.03 99.93 310275.00
TSLA Auto Manufacturers – Major 2017-02-01 2017-03-03 P 245.00 -183 4344 166530 9.10 0.01 99.89 166347.00
PCLN Business Services 2017-02-14 2017-03-03 P 1700.00 -20 1175 164000 82.00 0.01 99.99 163980.00
CTSH Business Software & Services 2017-02-28 2017-03-03 P 59.00 -4000 5366 200000 0.50 0.10 80.00 160000.00
TSLA Auto Manufacturers – Major 2017-02-01 2017-03-03 P 245.00 -151 4344 151000 10.00 0.01 99.90 150849.00
MBLY Application Software 2017-02-21 2017-03-03 P 45.50 -1147 2622 160580 1.40 0.10 92.86 149110.00
TSLA Auto Manufacturers – Major 2017-01-31 2017-03-03 P 240.00 -200 6787 143000 7.15 0.01 99.86 142800.00
BAC Money Center Banks 2017-02-24 2017-03-03 P 24.50 -2500 14725 140000 0.56 0.01 98.21 137500.00
DLTR Discount, Variety Stores 2017-02-27 2017-03-03 P 72.50 -2250 2369 146250 0.65 0.11 83.08 121500.00
WMT Discount, Variety Stores 2017-01-24 2017-03-03 P 68.50 -480 848 120000 2.50 0.01 99.60 119520.00
AVGO Semiconductor – Broad Line 2017-02-22 2017-03-03 P 212.50 -225 786 109125 4.85 0.02 99.59 108675.00

Top Expiring ETF Put Gain by 2017-03-03

tick acqDate expDate corp strike acqVol oi acqVal shortAt lOPrice optionGain totalGain
SPX 2017-01-13 2017-03-03 P 2175.00 -13458 21821 15476700 11.50 0.05 99.57 15409410.00
SPX 2017-02-01 2017-03-03 P 2250.00 -1000 20707 1680000 16.80 0.03 99.82 1677000.00
IWM 2017-02-01 2017-03-03 P 134.00 -8500 12530 1530000 1.80 0.02 98.89 1513000.00
SPX 2017-01-12 2017-03-03 P 2075.00 -2754 7804 1487160 5.40 0.05 99.07 1473390.00
SPY 2017-02-07 2017-03-03 P 229.50 -5760 25638 1192320 2.07 0.01 99.52 1186560.00
SPX 2017-02-02 2017-03-03 P 2200.00 -1389 20258 1166760 8.40 0.05 99.40 1159815.00
SPX 2017-01-31 2017-03-03 P 2125.00 -2600 18600 1170000 4.50 0.05 98.89 1157000.00
IWM 2017-02-06 2017-03-03 P 134.00 -5000 12530 775000 1.55 0.02 98.71 765000.00
NDX 2017-02-01 2017-03-03 P 4925.00 -440 541 748000 17.00 4.15 75.59 565400.00
XLE 2017-02-23 2017-03-03 P 70.50 -18000 19200 468000 0.26 0.01 96.15 450000.00
SPX 2017-02-15 2017-03-03 P 2250.00 -2000 20707 450000 2.25 0.03 98.67 444000.00
SPY 2017-02-22 2017-03-03 P 235.00 -5000 81266 420000 0.84 0.01 98.81 415000.00
XLI 2017-01-31 2017-03-03 P 63.00 -5000 5081 400000 0.80 0.02 97.50 390000.00
SPY 2017-01-17 2017-03-03 P 220.00 -2457 35527 385749 1.57 0.01 99.36 383292.00
SPY 2017-02-23 2017-03-03 P 235.00 -4500 81266 342000 0.76 0.01 98.68 337500.00

Top Expiring Call Gain by 2017-03-03

tick industry acqDate expDate corp strike acqVol oi acqVal shortAt lOPrice optionGain totalGain
COST Discount, Variety Stores 2017-02-10 2017-03-03 C 175.00 -5800 6887 806200 1.39 0.01 99.28 800400.00
TWTR Internet Information Providers 2017-02-08 2017-03-03 C 17.00 -3153 16854 655824 2.08 0.01 99.52 652671.00
AVGO Semiconductor – Broad Line 2017-02-27 2017-03-03 C 220.00 -2500 4184 412500 1.65 0.02 98.79 407500.00
TGT Discount, Variety Stores 2017-02-24 2017-03-03 C 65.50 -2000 2425 384000 1.92 0.01 99.48 382000.00
DLTR Discount, Variety Stores 2017-02-27 2017-03-03 C 85.00 -4000 5253 400000 1.00 0.05 95.00 380000.00
TGT Discount, Variety Stores 2017-02-24 2017-03-03 C 66.50 -2000 2831 280000 1.40 0.01 99.29 278000.00
TSLA Auto Manufacturers – Major 2017-02-22 2017-03-03 C 255.00 -101 5331 261691 25.91 0.01 99.96 261590.00
HES Independent Oil & Gas 2017-01-20 2017-03-03 C 60.50 -1421 1654 252938 1.78 0.01 99.44 251517.00
M Department Stores 2017-02-13 2017-03-03 C 32.00 -1250 2693 250000 2.00 0.02 99.00 247500.00
M Department Stores 2017-02-15 2017-03-03 C 32.00 -1250 2693 228750 1.83 0.02 98.91 226250.00
WYNN Resorts & Casinos 2017-02-15 2017-03-03 C 100.00 -2370 2938 438450 1.85 1.01 45.41 199080.00
WDC Data Storage Devices 2017-02-10 2017-03-03 C 77.00 -1058 4206 246514 2.33 0.51 78.11 192556.00
UNP Railroads 2017-02-21 2017-03-03 C 110.00 -1265 2332 170775 1.35 0.01 99.26 169510.00
FB Internet Information Providers 2017-01-26 2017-03-03 C 142.00 -1197 1648 161595 1.35 0.01 99.26 160398.00
CVX Major Integrated Oil & Gas 2017-01-20 2017-03-03 C 118.00 -1148 1428 163016 1.42 0.03 97.89 159572.00

Top Expiring ETF Call Gain by 2017-03-03

tick acqDate expDate corp strike acqVol oi acqVal shortAt lOPrice optionGain totalGain
SPX 2017-03-02 2017-03-03 C 2370.00 -5000 24951 8600000 17.20 8.50 50.58 4350000.00
SPX 2017-03-02 2017-03-03 C 2375.00 -5000 7070 6500000 13.00 7.00 46.15 3000000.00
SPX 2017-01-10 2017-03-03 C 2400.00 -2752 12351 522880 1.90 0.05 97.37 509120.00
GDX 2017-02-03 2017-03-03 C 22.50 -2084 8307 464732 2.23 0.01 99.55 462648.00
SPX 2017-02-24 2017-03-03 C 2380.00 -2500 9484 850000 3.40 1.80 47.06 400000.00
VXX 2017-01-24 2017-03-03 C 28.00 -12698 28687 355544 0.28 0.01 96.43 342846.00
SPX 2017-01-12 2017-03-03 C 2400.00 -1377 12351 234090 1.70 0.05 97.06 227205.00
GDX 2017-02-08 2017-03-03 C 22.50 -600 8307 186000 3.10 0.01 99.68 185400.00
XRT 2017-02-15 2017-03-03 C 44.50 -3750 5369 187500 0.50 0.02 96.00 180000.00
GDX 2017-02-28 2017-03-03 C 23.00 -5609 23534 179488 0.32 0.01 96.88 173879.00
NDX 2017-03-01 2017-03-03 C 5360.00 -48 541 178080 37.10 4.15 88.81 158160.00
SPY 2017-03-01 2017-03-03 C 237.50 -2500 14802 385000 1.54 0.93 39.61 152500.00
SPY 2017-03-01 2017-03-03 C 237.50 -2500 14802 375000 1.50 0.93 38.00 142500.00
VXX 2017-01-24 2017-03-03 C 28.00 -5000 28687 140000 0.28 0.01 96.43 135000.00
TLT 2017-02-28 2017-03-03 C 119.00 -500 2001 140000 2.80 0.15 94.64 132500.00

Meet The Man Behind The Market’s Relentless Ramp

Tyler Durden's picture

In an ironic twist of fate, it appears the catalyst for many of the biggest and most incomprehensible market ramps of the last few years is a fund called “Catalyst.” With around $4 billion under management (before the latest collapse), the levered options fund is run byEdward Walczak who “uses options to create a better risk/return profile.”

The Catalyst Hedged Futures Strategy Fund is an open-end fund incorporated in the USA. The objective is capital appreciation and capital preservation in all market conditions. The Fund invests primarily in long and short call and put options on S&P 500 Index futures contracts and in cash and cash equivalents, including high-quality short-term (3 months or less) fixed-income securities. 

A ‘great/lucky’ year in 2008 and solid returns since…

Until recently…

  • 1 Week -14.07%
  • 1 Month -12.61%
  • 3 Months -16.96%
  • YTD -13.56%
  • 1 Year -10.11%
  • 3 Year -1.08%

Things have not gone well since the election…

As we noted previously, the melt-up in the S&P is the result of “a purported / murky melt-down over the past week in a large trade by a multi-billion Dollar (open-ended) futures fund which sells vol on S&P.  Without going into specifics, there is market speculation that the entity is effectively short upwards of ~$17B of SPX (deltas to buy) through selling February expiry upside 1×5 (or 1×4) call spreads.”

And here is the man that runs the show…

As FuturesMag.com detailed previously, Edward Walczak began his trading career after 25 years in business operations and supply chain management. It was Walczak’s experience running Chicago-based candy manufacturer Brach’s commodity hedging operation in the late 1990s that got him deeply involved in the markets.

At one point, Walczak’s boss asked him about position limits and he had no idea what he was talking about, Walczak says. “You only get embarrassed once and I spent a week with my trader [learning] the business and became intrigued by it.”Walczak is a math guy with degrees in Physics and Economics from Middlebury College and an MBA from Harvard, so naturally he was drawn to options. By 2005 he was making more money trading than in his day job, so he began trading proprietary money full-time and set up a commodity pool for friends and family. In 2006 his proprietary trading returned 52.68% and in 2007 he added customer accounts to the Madison, Wis. based Harbor Financial LLC.

 

Fortunate breaks come in all forms. For Walczak his biggest break may have been a painful February 2007  drawdown in his mainly option writing S&P 500 program. The drawdown was not fatal, 17.93% for the month, and the program was positive for the year, but it made Walczak rethink his overall approach. “Back in ’07, VIX was trading around 10 and all of a sudden the S&Ps dropped 50 handles in a day,” Walczak says. “A 50-point drop at the time was a big deal but historically was not that bizarre. It could have been a lot worse and I could have been wiped out, so I had to do something different.” He spent the next year researching. “How do I cover these other risks that are out there and how [do I] use options to have a better risk/return profile?” he asked himself.

 

He began a study of volatility and decided to move away from pure premium collection. “If you are strictly a premium collector, you have a couple of issues. If you collect $2, then $2 is the best you can make if everything goes right. Second, if that is the only way you can make money, then you often are tempted into doing a collection trade when the edge is not with you,” Walczak says.

 

What he discovered was a volatility trading strategy that could exploit rising volatility. “A simple example is you sell a front-month option and buy a back-month option. If you do that at a credit, you have the opportunity for the front-month option to decay in value or go away entirely and the back-month option still has value,” he says. “The secret sauce for us is in the placement. If you are correct with where you place these things, then you get the best of both worlds. You don’t just have residual value in that long option, the long option actually could explode in value while the short option goes away.”

 

The February 2007 wakeup call came enough in advance of 2008 for Walczak to complete his adjustments and earn 50% in 2008, a year that completely wiped out a number of option writers. “We found that rather than trying to trend-follow price to the downside, it is better with options to trend-follow volatility to the upside,” Walczak says. “Usually those are two conditions that go hand in hand.”

 

While the volatility trading strategy helped diversify the program and turn 2008 from a potential disaster to a home run, Walczak still was having problems in sharply uptrending markets. “Those really caused us a lot of problems with the techniques we were using, so I spent a lot of time [on that] and in 2010, we [began] to do some trend-following price wise.”

They still were using only options and found they could exploit trends more safely this way. The strategy uses a wide variety of ratio spreads, butterflies and offset butterflies. “It is basically 1 x 2s, 1 x 3s, 1 x 2 x 1s, where you are buying one, selling two, buying one,” he says. “That allows us to put trades on for little or no cost, so if the market tanks we are not long the market. We don’t lose money, the trade just goes away.” Walczak says, “It is not that we changed so much as we evolved: Premium collection, to premium collection plus volatility trading, to premium collection plus volatility trading plus upside trend-following price-wise.”

Walczak uses all three approaches but emphasizes the one appropriate to market conditions. “I can construct a spread that gives me the exposure I want. It is not a make-it-up-as-you-go-along [approach], we have established position templates for different types of market environments. If I want to go long volatility, I don’t scratch my head and say, ‘What do I do now?’ We go into our tool box and pull out the long volatility spread and do some analysis around where to put that on.” It is a combination of a discretionary and systematic approach that has produced solid returns in different market environments. Harbor has had no losing years and has produced a compound annual return of 22.07% with a 1.22 Sharpe ratio, and Walczak is still making improvements.

*  *  *

So major leverage on billions of AUM and a look at the unprecedented ramps in US equity markets over the last few years shows that perhaps Walczak and his fund did not fully figure out the “problems in sharply uptrending markets.”

The Bullard Bounce?

The Brexit Bounce?

 

The Trump Bounce?

Of course, Walczak’s strategy is not alone and if not the catalyst it is these levered options strategies that are the reflexive forced buyer that appears to be driving such self-reinforcing and seemingly incredible moves in stock markets as volatility has collapsed and the cost if funding massively levered strategies is de minimus. In a different world of considerably lower leverage, LTCM nearly blew up the world; in the new normal of as-much-leverage-as-you-can-eat, even a mid-sized fund’s positions can be the butterfly that flaps its wings and become the forced ‘ax’ in world equity markets… even if it doesn’t know it.

Just how much of the last 150 S&P points are due to the liquidation of ‘Catalyst’ (and strategies like it)?

As RBC’s Charlie McElligott warned:

This equities upside short-gamma grab has taken out a ton of ‘bid on the downside’ in equities index, in the case that we were to see any sell-off post a Trump speech disappointment.  This lack of cover-demand on a vacuum-move could see sloppiness develop, as it seems that the data and Fed itself are no longer dictating the market story at this stage – whether stocks, fixed-income or vol.  “Policy” is now firmly “in the driver’s seat,” and that is where I see the least degree of confidence in the market.

 

I’m worried that this stock ‘melt-up’ move is extraordinarily mechanical right now – almost entirely the aforementioned forced-covering, not high conviction induced-buying – and may be sending a “false signal” which is potentially dragging-in new buying on the breakout to new highs.

As he concludes: “This could lead to a scenario where a market can “collapse under their own weight.

Indeed, because if one removes the forced buying from the “blowing up fund”, there is certainly a long way do

Capture a quick rebound after ER

利用财报之跳空下跌的机会捞好股

 

本季度财报之后当天或者第二天有某些“好”股票跳空下跌。为什么跳空下跌?
(一)从基本面上解释可能是财报比预期差,
(二)从技术面上解释也有可能是庄家在杀止损单。

“技术分析”教科书通常是教大家把止损单通常会设在同时间级别的前一个低位之下。造市商”Market Maker” 想低价买入散户的股票,可以选择直接跳空开盘。吃掉止损单,然后再拉回。华尔街有没有阴谋论?信则有。炒股教科书是谁出版的?想想。

本贴还要讨论怎样用均线和 Stochastic 指标去找支撑,接住飞刀。
(一)用 Stochastic 指标,默认的参数12-3-5。通常在20以下属于“卖超区”;
如果 Stochastic 指标以很快的速度跌入卖超区,再从卖超区 V 型反弹,有可能是一个买点。
本贴的四个K线图,用绿色圆圈标出了符合这个描述的可能买点。目测有效。
这是不是马后炮?你说是就是。

(二)用均线,看中期均线或者长期均线,在趋势中都有可能成为回调的支撑位。
均线的参数看个人喜好,有 5-10-20, 或者 20-50-200,或者 9-34-100。
不要问为什么,只是习惯,没有为什么。

(三)结合均线和 Stochastic; 二合一增加概率。

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好了,我们先来复习 Stochastic 指标,看截图省略2万字:

1)Stochastic 属于震荡指标,默认参数 12, 3, 5 (类似 KDJ);
2)所谓震荡指标(Oscillator) 意思是该指标在一个范围内0-100来回震动。
3)大于 80 属于“买超区”,有回调向下的可能;
4)小于20属于 “卖超区”,有反弹向上可能;
5)上文提到从卖超区 “快速的V型反弹”,什么是才是快速?这个只能靠多看图去理解。

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学完 Stochastic 马上再看几个实例:

从 CL “高露洁” 的日线图看到,
1)2017-1-27 财报之前股价遇到 100天均线的阻力。
2)财报之后直接跳到黄色支撑线之下,扫走所有止损单。
3)跳空下跌两天后,Stochastic 在卖超区 V 型反弹;股价开始反弹

从 SBUX “星巴克” 的日线图看到,
1)2017-1-27 财报之后直接跳到红色100天均线之下,扫走所有止损单。
2)跳空下跌5天后,Stochastic 指标在卖超区 V 型反弹;股价开始反弹

从 AMZN 亚马逊的日线图看到
1)2017-2-3 财报之后跳空下跌
2)跌了两天到绿色中期均线开始“平走”
3)Stochastic 从卖超区 V 型反弹;股价开始反弹

从 SYY 小时图可以看到
1)2017-02-06 开盘前出财报
2)开盘后连跌3个K线,“暴力洗盘”
3)Stochastic 从卖超区 V 型反弹;股价第二天跳空开盘

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本技术贴纯属马后炮。抄底之后是继续下跌或者马上反弹要看天意和个人造化。
这里说的所有股票不代表投资意见,风险自负。

ERTrack Money Flow 2017-02-10

Continue previous PK.  In Day two MF picks, we made a bad small biotech short and loss the game to WSJ and SPY.  For day 3, ERTrack MF beat WSJ again, but still loss to SPY. In a hindsight, as we used a Delta Neutral trading way, we could not beat SPY if the market is in up trend. We may need buy 7 and short 3, instead of being fully hedged. Here is the Day 3 result:

ERTrack Money Flow 2017-02-09

Continue previous PK.  We made a bad small biotech short with ERTrack MF due to the announcement of positive results from a Phase 3 clinical for ACOR, this lead to ERTrack loss the game for two day.  With the two day result sum, both ERTrack and WSJ loss to the S&P500 return.  Some thoughts,  be very careful with Small Cap biotech stock, it is very volatile to news.