Live: Monday, March 2, 2020

7:40 p.m. New York time

I set a short stop over the weekend on my TLT shares positions. The stop/loss was triggered today shortly before the market close, as the 20-year U.S. Treasury bond interest rates rose, sending their capital value — their price — into a fall. So the funds removed from shares last week and now back in cash.

The results: I exited TLT for  a $153.95 credit per share, up $1.21 from the entry price, producing a 0.8% return over four days for a +72% annual rate.

Also, I do believe that I made the ex-dividend date, so a dividend payment will be coming in soon.

3:50 p.m. New York time

TLT declined and triggered my rather tight stop/losses, and my positions were sold. Details and results tonight.

10:50 a.m. New York time

I wrote a rule for resuming my long stocks trades and have posted it and an explanation of the metric I’m using in an essay, “After the Coronavirus Crash — What’s next?

The metric is Elliott Wave theory, which I’ve used and posted about in the past. The essay gives a review of how the theory works, so I’ll jump into the discussion here without further explanation.

I’m looking for five waves to the downside, at the Intemediate level, which I generally think of as a months-long movement. It was last October that the Intermediate level set of five waves that culminated with the high of February 19 on the S&P 500, from which point the present decline began.

What has happened to the markets since February 19 is a lower level than Intermediate. Until the patterns have played out more, there’s no way to know just what level we’re watching. My guess is that it’s a Minor wave — two levels below Intermediate. The patterns of this level will eventually provide a definition, and one thing it an do for us today is help us confirm that Intermediate pattern ending February 19 actually did end. It’s possible — although unlikely in my opinion — that this the prior rise isn’t complete and that this is a correction within that wave. We’ll find out soon.

The wave down from February 19 has subdivided into lower level five waves, and today’s rise, if it continues, appears to be the start of wave 2, an upside correction. Second waves tend to be a zig-zag, meaning they move directionally rather than sideways.

They often end a Fibonacci points. With a low of 285.54 for SPY, the most likely Fibonacci points are 61.8% above the low, at 418.63; 50% above, at 312.31, or if the movement is directionally weak, 38.2% above, at 305.99.

Second waves subdivide into three lower level waves. Wave A contains five waves within it, B has three waves and C again has five waves.

Wave 2 will, under the Elliott rules, be followed by an energetic 3rd wave to the downside. Typically, the 3rd wave is longer than the 1st wave, so we likely have quite a dizzying ride ahead.

Options. Oh my poor options!

My short iron condor positions in the March series– all nine of them — remain beyond their profit levels. The XBI position is closest to its profit zone, about a tenth of the fund’s average daily range. XLB and XLI are furthest away from profitability, each more than five days out.

Tomorrow — March 3 — is when I enter the April options positions. However, the March options still have a tight grip on cash, so my April trades are likely to be sparse.

By Tim Bovee, Portland, Oregon, March 2, 2020


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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