Premarket Wednesday, October 24th

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Administratia:

If you haven't read my update to the Twitter alert status, please do so.  The link is here:  https://greekgodtrading.blogspot.com/2018/10/update-on-twitter-csp-alerts.html

My real-time trades, specifically for the account that I trade my CSPs and CCs, are echo'd to the Twitter feed so you can see what I'm doing.  That link is here:  https://goo.gl/UoGgBg

The alerts files (monthly historical as well as the alerts generated as of the last trading day, after market open), are available here ( https://goo.gl/WbuJhS ).  The archive subfolder contains historical alerts files that you can review.

Real-time Q&A with me, if I'm available, is through this link:  https://discord.gg/4QAUqyd This is Dr. Jeffrey Scott's HGSI Discord forum and it's worth your time to join (free).  I am @PaulDuncan at Discord and I typically watch the #cashsecuredputs-n-coveredcalls channel.  Come say "hello"!

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My Crystal Ball

If you prefer to be long, here's what I'm thinking about today...

Many folks like to buy the dip (BTD), but the danger in this when the dip is still dipping is that we may all be dipshits... meaning... don't buy the dip until we have some indication of stability.

As of the close of markets last night we have no indication that there is stability in the market.

My tool to sample this is the Cumulative Tick:

Click on the image to enlarge.

This Cumulative Tick (CT) plot is of $TIKUS, which is a composite of all exchanges in the U.S. and shows what the broad market is doing.  Others, such as the NYSE ($TICK), the Russell 2000 ($TIKRL), and other larger groupings of stocks all show more/less the same picture, so I'll stick with the $TIKUS.

Yesterday's action is located on the right side of the figure.  The top plot is the 52w New Highs (green, almost flat), 52w New Lows (red, dominating), and the net between the two (yellow, very negative).  When red is dominating we are in a contracting market -- prices are dropping, and many stocks are making new 52-week lows.  I don't invest in new lows (I'm not a bottom fisher), so while you can go that route, I suggest that you seriously diversify before you put all your eggs in that strategy.  It doesn't work over the long haul.

The middle plot is a filter, and it requires the element of time to move the red trace up or down.  If buying/selling pressure is present, the red line will tick up (buying) or tick down (selling).  If it is sustained you'll see continued movement in one direction or another.

You can see that for most of the morning yesterday that the markets were bearish, and then after lunch, we started a push that more/less recovered for the day.  At the end we had some selling, as evidenced by the downward movement, but as we know, the day finished well off the lows of the day.  

The crystal ball portion of the CT is in the lower pane.  The white line is the instantaneous CT -- no filter, and it basically shows that there was an attempt to move upwards after the 10:30 am ET lows.  One day does not make a reversal, and we will need to see continued progress of this white line, eventually crossing ALL the downward trend lines and pulling them upward.  This often takes several days and is related to volume and conviction of the markets to step in and "buy the dip".

So, we're not seeing any indication that yesterday's action was a stability action -- we may continue downward quite easily from here -- or not.

Your crystal ball is as good as mine.

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Covered Call / Cash Secured Put Strategy

Only 4 stocks made the list this morning, meaning, they are showing enough relative strength and option action to warrant possible entry for selling a cash-secured put (CSP).  Follow my Twitter feed ( https://goo.gl/UoGgBg ) if you want to see any generated alerts on these stocks and of course, you need to conduct further diligence on the underlying.

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As with all my ramblings, you are responsible for your own investment/trading decisions and I am not.  Please do your own diligence, and please take ownership for your actions.  Please read and acknowledge the disclaimer that is listed on the left on the web site page.

Regards,

Paul