The market continues to be resilient, with only a small dip this week of .77%. While we technically have one more week of October, it’s unlikely that any real downside materializes. Some sources include the first week of November in this window, but even with two weeks, the lower end of what’s possible would be around the 50-day SMA around SPX 5680. That’s about a 2% drop from where we are. Big deal. With that knowledge, how do we proceed from here? We will talk that and more this week.
Market Review
We sort of fell back into the rising wedge this week. At this point, I consider that formation played out. MACD appears to have bottomed for now, and RSI in good shape. From my perspective, it looks like we could move up from here.
The top three strikes will expire today and be removed from my account. I will most likely have to enter some more long calls on Monday, unless we drop some, to increase available buying power. Today I entered 2 more short puts, this time at 5700. I did FOMO into them and entered near the top, so I am currently down. I also rolled up and out my short calls. I will feel more comfortable when they are above 6k. For now, I will continue to hold for about 2 weeks, and then roll them again. Once buying power usage calms down, and I have more wiggle room I will hold deeper into expiration, so that I can bleed more extrinsic value out of them. I am currently sitting at 53.8% YTD, up decently from last week when I was sitting at 38%
Tweets
I agree, but I’m not overly concerned either. I cover this later, but it looks like we could turn around here, and it provides more room to run if these tickers are rested.
I just found this interesting. I covered in previous letters that more companies are choosing private funding (venture capital), so the number of publically traded companies is staying pretty static. Meanwhile, there are ETFs for every type of trader. Meme ETFs, if you will. Inverse Cramer, etc etc.
This to me is potentially an outdated indicator, dreamed up in a time when things were less made up. We are kinda passed that point. You can either bitch about how nothing is based in reality anymore, or you can hop on the wagon and ride it till the wheels fall off. In other words, I expect this to continue to increase, and who knows, eventually we may need to use log scale.
I’m honestly expecting more of these, as symbols break out of their current ranges/formations and start making new highs. We are a long way from overbought territory, and I expect things will be running red-hot to end the year.
The past year has been very bullish, and no reason to think that’ll stop.
Quick Charts
The market said it wasn’t quite ready to support a rally yet. That’s not unexpected, so we dropped back down and continued to build the base. It’s nothing that looks concerning, just building up more momentum. Down 1.45% this week.
IWM same as Apple, back in the wedge, down 3% this week.
VIX up over 13% this week. I expect this to stay elevated (relatively) through elections.
From 76.6 to 75.8 and now to 62.8, we are seeing a small dip in stocks above their 50 week ema. If it stops near here, it’ll be another higher low. It’s important to note that the market has held its position generally, while individual names rest. This provides more room to move higher in the coming months.
We are relatively oversold here.
Nice move down. We are sitting at 59, which is just above neutral (55), in the greed area.
Decent sell off from 90.26 down to 81.68, and now at 79.13.
Earnings and Events
Last Week
Winners from Sprint season: ELF, FSLR, CHWY, CRWD, AVGO, ADBE, ORCL, FDX.
Winners from Fall season: GS, SPOT, LMT, ENPH, TMO, RTX, MCD, PYPL, PLTR, UBER, UPST, SHOP, LLY, TTD, SE, ORCL, MU
Losers from Fall season: UPS, QCOM, LRCX, MBLY, W, INTC, ROKU, SMCI, ABNB, DG, AVGO
Winners from winter season: TSLA
rtx -.6%
lmt -8%
enph -8.5%
tmo -7.9%
tsla +22%
lrcx +6.6%
ups +1%
aal +.5%
This Week
Interested in: mcd amd googl cmg fslr lly cat msft meta hood roku cvna sbux uber ma amzn aapl intc w
This past week was slow, and that results in only a small loss overall. As you can see from the schedule above (and the earnings schedule before it), it’s quite a busy week. We are at the point in the year when non-bad news is reason to continue moving higher.
Last letter we were getting to a resting rate of 325-350, now we are pricing in a resting rate of 350-375 starting next July.
Thoughts
I stuck to my plan, and added short puts every Friday, so that at this point I’m at an almost full position of 6 contracts, out of a potential of 7. I have been more aggressive on the strikes, typically I sell for around $10, and these have been around $60. I’ll look to add the last one next Friday.
This fall so far has been a non-event. I’m throwing in the towel and moving on with my life. I’m sure now’s about the time the correction will come, eh. I’ll just weather the storm, and count my blessings to be able to get out of my calls.
Earnings season really picks up this upcoming week. We’ve got all the big names. The earnings so far have been either flat (+/-10%) or winners (TSLA). I expect that to continue and provide momentum to float higher.
There are a lot of events coming up, and as stated, so long as nothing is majorly wrong, we will move higher. While I don’t expect any earnings to rock the boat, if there is any unknown, it’s with these events. They do still have the potential to come in way out of line and cause a dip.
A lot of symbols are at or near highs, and looking productive.
Rating
My attempt at being clearer on my expectations for the upcoming week:
Bullish
Bullish/Neutral
Neutral/Bullish
Neutral
Neutral/Bearish
Bearish/Neutral
Bearish
I rated last week as a #3, looking back I’d rate it a #4. Hard to call a less than 1% move down anything but neutral.
For next week, I’ll go crazy and rate it #2.
Conclusion
My portfolio is almost neutralized, from being very bearish. I have one more put to write in order to become balanced as far as contract count, and my call deltas are around 40, while my put deltas are around 30, so even that isn’t too far off. We have a busy week ahead of us and plenty of excuses to break out. I think we will see volatility before elections, but once they are finally over we will have nowhere to go but up.
Good luck out there!
As always, staying realistic and nimble is key to moving forward productively.
Leave a comment to say hello or a like to boost the newsletter.
Socials
Twitter: @toddhorst
Discord: https://discord.gg/gt7WaZN
Affiliate Links
Tastytrade - My primary broker. I have my primary margin account and IRA here where I trade strangles on /ES.
Robinhood - For dead simple charts (without the noise) of spy daily. I keep my dividend portfolio here because it’s a simple platform. I do not use for options.
WeBull - I use for charting and news. I do believe they will be the new “it” broker eventually when they finish implementing options and futures. I have some spill over long-term holdings here.
Tradingview - The best charting platform period.
Disclaimer
This newsletter is not trading or investment advice but for general informational purposes only. This newsletter represents my personal opinions, which I am sharing publicly as my personal blog. Futures, stocks, and bonds trading of any kind involves a lot of risk. No guarantee of any profit whatsoever is made. In fact, you may lose everything you have. So be very careful. I guarantee no profit whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission, CFTC, or with any other securities/regulatory authority. Consult with a registered investment advisor, broker-dealer, and/or financial advisor. By reading and using this newsletter or any of my publications, you are agreeing to these terms. Information and quotes shared in this blog can be 100% wrong. Markets are risky and can go to 0 at any time. Furthermore, you will not share or copy any content in this blog as it is the authors’ IP. By reading this blog, you accept these terms of conditions and acknowledge I am sharing this blog as my personal trading journal, nothing more.