Live: Thursday, Oct. 11, 2018

11:20 a.m. New York time

I have entered a short iron fly position on C.

10:45 a.m. New York time

I have entered a short bear call spread position on SPY.

10:10 a.m.. New York time

In an update to Wednesday’s Live feed, I posted an analysis of the S&P 500 last night, in the wake of a sharp one-day decline in the markets. I concluded that my prior analysis was spot on, and the markets indeed entered a major decline beginning with the Sept. 20 peak.

Based on that analysis, I shall be re-entering a bear position on SPY today.


Today’s Book

Elliott Wave Principle: A Key to Market Behavior

by A.J. Frost and Robert Prechter

The morning after is always a time for questions. This morning’s question: What happened with te markets and their sudden sharp decline on Wednesday, Market news reports, as always, were unsatisfactory. Trader panic over rising interest rates, they said, despite the fact that interest rates have been rising for quite some time now. When assessing the market decline, I turned immediately to Elliott wave analysis and to Frost and Prechter’s textbook on the subject, which has guided my trading since I first began in the early 1980s. I highly recommend it. 

More about the book


I shall also be looking at an earnings play. Five banking companies will have earnings announcements up for trading today and on Friday. I shall pick one of them only for the two days, since I want to keep cash in reserve for trading other sectors as the earnings season progresses.

The five are C, JPM, PNC, WFC and BAC. The top picks, based on high implied volatility ranks, are C, JPM and WFC. Of those, C has the largest market cap, and so is my top pick for a full analysis.

Here is how my options positions stand this morning.

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 1.02 38.27 (18.6) (0.16) 36
JBL 2.08 23.70 (51.8) (0.71) 8
LEN 3.45 43.58 (6.8) (0.22) 36
STZ 8.80 220.28 (4.8) (0.40) 36
WBA 3.13 71.82 12.1 0.43 36

And this is how things stand with my share positions

sym share price net result % net profit $ days held
AAPL 215.01 -4.0% (8.95) 27
CHK 4.37 9.3% 0.37 27
FXI 39.41 -4.4% (1.80) 27
SPXU 36.97 -8.9% (3.59) 149
TSLA 256.20 -16.0% (48.79) 10
VNQI 53.15 -6.4% (3.66) 28

By Tim Bovee, Portland, Oregon, Oct. 11, 2018

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WBA Analysis

Walgreens Boots Alliance Inc. (WBA)

I have entered a short iron fly options spread on !S, using options that trade for the last time 37 days hence, on Nov. 16. The premium is a $3.56 credit per contract/share and the stock at the time of entry was priced at $73.60.

I made the decision to enter the trade in my account to coincide with an earnings announcement, on Thursday, Oct. 11, before the opening bell. 

The profit zone for this position is between $78.06 on the upside and $71.06 on the downside.

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Live: Wednesday, Oct. 10, 2018

7:20 p.m. New York time

After the Fall

Given the magnitude of today’s events, I’m taking an analytical look at the S&P 500 now, freeing up my time for trading on Thursday.

The markets took a dramatic fall today, and the market news reports are filled with all sorts of reasons why. Which I ignore entirely. I focus on the charts and the options, and leave the news — always a trailing indicator — to others.

All of the major indexes took a tumble, although in the general scheme of things, it wasn’t The End of the World As We Know It — 3% plus change.


Today’s Book

Talking to My Daughter About the Economy: or How Capitalism Works — and How It Fails

by Yanis Varoufakis

World renowned economist, Greek parliamentarian, Minister of Finance of Greece — Yanis Varoufakis steps down from his Renaissance person resumé to the role of father, as he teaches his 13-year-old daughter about the core questions of our age: How the economy works, how things fall apart. Fundamentally, his topic is, How the World works. My first contact with Varoufakis in his economist role was The Global Minotaur, his 2015 discussion of the Great Recession, and what came before and after. I found it to be one of clearest and most insightful explanations I had read. Much has happened since. Such a lucky daughter! And lucky us, to have a chance to eavesdrop on their father-daughter conversation.

More about the book


I’m going to show two charts. Both are Elliott wave analysis — big picture first and then up close second. The Elliott wave charts are for active traders, like me.

The first chart is a one-year chart of SPY, the S&P 500 exchange-traded fund, with a bar for each trading day.

spy20181010B

I’m happy to say that my analysis has stood up to the actual course of prices. This chart is unchanged from the last time I posted it, on Oct. 4. By this analysis, the decline from the peak on Sept. 20 is the beginning of a major downturn that will last a long time and cover a lot of distance, with the usual upward corrections to keep things interesting.

This is a 3rd wave of the Intermediate degree {+3}, which means it will typically be a very active wave that will cover lots of territory. The 2nd wave of the Intermediate last seven months, which shows the order of magnitude were looking at. The actually can vary significantly from that, especially if the 3rd wave shows an extended pattern.

The second chart, also of SPY and covering 30 days with 10-minute bars, shows the detail of what has happened since the Sept. 20 peak.

spy20181010

The chart shows that SPY has moved into a 3rd wave of a lower degree. I’ve labelled it as the Minuette degree, but it could be lower still. Time will tell.

The small degree 3rd wave could be almost complete, but it could also go lower still. Hard to tell this early in the game.

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Live: Tuesday, Oct. 9, 2018

12:45 p.m. New York time

I’ve spent the morning prepping for the earnings season.Here’s a look ahead at the rest of this week.

I have two potentials I’m looking at for Wednesday, DAL and WBA. Both have implied volatility ranks above 50.

For Thursday, I’m looking at two with IVRs of 50 or higher, C and WFC. Three other symbols are on the list but with lower IVRs: JPM, PNC and BAC. I’ll consider them if their IVRs rise to 50 or higher.

Next week, the earnings season floodgates open, and we can start to have fun.

10:20 a.m.. New York time

I have no trades in sight today, neither exits nor new positions.


Today’s Book

Factfulness:

Ten Reasons We’re Wrong About the World — and Why Things Are Better Than You Think

by Hans Rosling et al.

Bill Gates, someone whose opinions I take very seriously, said of this book, “One of the most important books I’ve ever read — an indispensable guide to thinking clearly about the world.” 

I don’t know about you, but every morning when I fire up my iPhone X, I’m greeted with a hammering chorus of doom. Things are awful. They can only get worse. And there’s nothing we can do about it. Factfulness rationally challenges that neo-apocalyptic world view that has become like the toxic air we breathe. In an age of increasing confusion and uncertainty, the clarity of Factfulness must surely be the most valuable of goods we can seek.

More about the book


As I noted on Monday’s Live feed, things will get more interesting later in the week. Meanwhile, here’s where my options positions stand now.

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 1.25 39.10 (45.3) (0.39) 38
JBL 1.98 24.84 (44.5) (0.61) 10
LEN 3.06 45.59 5.3 0.17 38
SPY 2.31 287.81 24.8 0.76 38
STZ 10.53 225.85 (25.4) (2.13) 38

Here’s where my shares positions stand.

sym share price net result % net profit $ days held
AAPL 224.13 0.1% 0.17 25
CHK 4.77 19.3% 0.77 25
FXI 40.42 -1.9% (0.79) 25
SPXU 33.15 -18.3% (7.41) 147
TSLA 259.74 -14.8% (45.25) 8
VNQI 54.13 -4.7% (2.68) 26

By Tim Bovee, Portland, Oregon, Oct. 9, 2018

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Live: Monday, Oct. 8, 2018

11:50 a.m. New York time

The bond markets and banks are closed today for the government’s Columbus Day holiday. While the stock market are open, they are deprived of their most important leading indicator: Market prices of the 10-year Treasury bonds at the Federal Funds rate. Absent that important data, I would anticipate a fairly slow day.


Today’s Book

The Total Money Makeover

by Dave Ramsey

Let’s face it. The way we manage our household money? Pure habit. The money comes in, as a paycheck or a pension, and if you were ask a month latter  where the money had gone, we wouldn’t a a clue. Did we at least make a profit for the month in running our personal finances? Beats me. Dave Ramsey shows how to take control of that great financial enterprise that each of us in engaged in, keeping ourselves and our loved ones fed and sheltered, with money for emergencies and to educate the youngsters, and to provide for that interesting time called old age. Ramsey provides a straightforward plan, based o results, not dreams.

More about the book


Certainly I have no trades in sight. None of my positions are at the point where I must exit, and my next potential earnings plays come on Thursday, when I’ll be considering two of the financials, WFC and JPM. Until then, or until the situation changes, i plan to happily drift along in the land of easy living, occasionally rousing myself from sloth to improve the way I manage my finances.

The status of my options positions:

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 1.20 38.80 (39.5) (0.34) 39
JBL 2.03 25.27 (48.2) (0.66) 11
LEN 3.10 45.23 4.0 0.13 39
SPY 2.27 287.20 26.1 0.80 39
STZ 10.58 225.79 (26.0) (2.18) 39

And of my shares positions.

sym share price net result % net profit $ days held
AAPL 223.11 -0.4% (0.85) 24
CHK 4.65 16.3% 0.65 24
FXI 40.38 -2.0% (0.83) 24
SPXU 33.44 -17.6% (7.12) 146
TSLA 254.75 -16.5% (50.24) 7
VNQI 53.74 -5.4% (3.07) 25

By Tim Bovee, Portland, Oregon, Oct. 8, 2018

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The Week Ahead: Inflation

The U.S. Treasury and the American bond markets will be closed on Monday for the government’s Columbus Day holiday. The stock markets will be open as usual, although without bond trading, they will be lacking access to the most important of the leading indicators.

The prospects of inflation are the theme of the week’s economic reporting. The consumer price index, the most watched inflation measure, will be published on Thursday, and the producer price index (final demand) will be published on Wednesday, each at 8:30 a.m. New York time.


Today’s Book

The Return of High Inflation: Risks, Myths and Opportunities,

by Wolfgang H. Hammes

Preternaturally low inflation has been with us for a decade, and memories are fading of the long years of rapidly rising, sometimes runaway, prices.. As the Federal Reserve raises interest rates in defense against inflation, many voices can be heard muttering, “Inflation? What’s to worry? Don’t bring back the recessoin.”. Hammes argues that the risk of inflation is real, and in this well researched book provides a map of the world we’ll be trading in when (not if) inflation once again returns.

More about the book


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Live: Friday, Oct. 5, 2018

4:30 p.m. New York time

And that’s a wrap for the week. On Saturday I shall post The Week Ahead, my discussion of the economic reports and other externals that sometimes impact the markets.

A reminder that Monday is a U.S. government holiday to mark the landing in North America of the Spanish expedition led by Christopher Columbus. The Treasury Dept. and bond markets will be closed; the stock and options markets will be open for business.

10 a.m. New York time

I have no potential earnings plays in sight for today. The S&P 500 is trading narrowly within yesterday’s range, and none of my holdings are close to the point where I would head for the exit.


Today’s Book

Science, Strategy and War: The Strategic Theory of John Boyd,

by Frans P.B. Osinga

This book is a potential change agent within any trader’s life. The primary job of a trader is no different from that of a military leader, what the level: To make tactical decisions within a strategic framework that provide a winning edge. John Boyd revolutionized strategy within the American military, and has slowly worked its way into business strategy, particularly in the form of Boyd’s OODA Loop decision cycle: Observe, Orient, Decide, Act. Boyd lectured extensively within the military, but left only notes and lecture slides. Working from that material, Osinga has written the most complete accounting of Boyd’s approach.

More about the book


Here is where my options positions stand. JBL is the next to reach expiration, two weeks from now. The others are all more than 40 days away from expiration.

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 0.99 36.87 (15.1) (0.13) 42
JBL 1.98 289.94 (44.5) (0.61) 14
LEN 3.19 26.25 1.2 0.04 42
SPY 3.01 44.51 2.0 0.06 42
STZ 10.33 224.05 (23.0) (1.93) 42

And here is the stats of my shares positions.

sym share price net result % net profit $ days held
AAPL 226.43 1.1% 2.47 21
CHK 4.51 12.8% 0.51 21
FXI 40.94 -0.7% (0.27) 21
SPXU 32.54 -19.8% (8.02) 143
TSLA 269.54 -11.6% (35.45) 4
VNQI 54.17 -4.6% (2.64) 22

By Tim Bovee, Portland, Oregon, Oct. 5, 2018

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Live: Thursday, Oct. 4, 2018

2:35 p.m. New York time

Today’s decline in the markets — the Dow had dropped more than 300 points within the final two hours of grading — is a confirmation that the whimsical wandering market top has indeed dropped anchor, and we are now, at long last, in what Elliott wave analysis calls the 3rd wave down in the Intermediate degree.

And if the WWMT (whimsical wandering market top) again picks up anchor and drifts to a later date, i may blush slightly but will still feel satisfied with my analysis. A rapid decline of this magnitude almost always means that a change has occurred at one of the higher Elliott wave degrees.

The SPY chart covers one year with daily bars.

spy20181004

The peak was reached on Sept. 20. SPY traced a 1st wave to the downside at one of the much lower degrees. Today’s decline appears to me to be a 3rd wave within an impulse movement.

Implied volatility rose from 13% to 16%. Volume, though higher, had not spiked up by an amount comparable to the Sept. 20 peak, although today’s market day is not yet over, so any conclusion from volume — and IV — must be tentative.

From an options trading strategy standpoint, I shall follow my position management rules — at 50% of maximum potential profit for short iron condors and vertical spreads, and at 25% of max for iron flies. Otherwise, everything has pre-defined risk, so there’s no temptation for me to go blundering out at what proves to a turning point.

2:20 p.m. New York time

Here is how my options positions stand this afternoon. As is apparent, SPY was the only position impacted in a major way by today’s decline of the broad indexes.

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 0.86 35.85 0.0 0.00 43
JBL 1.98 26.22 (44.5) (0.61) 15
LEN 3.28 44.62 (1.5) (0.05) 43
SPY 2.55 288.22 16.9 0.52 43
STZ 8.45 219.40 (0.6) (0.05) 43

And this is how my shares positions stand.

sym share price net result % net profit $ days held
AAPL 227.99 1.8% 4.03 20
CHK 4.58 14.5% 0.58 20
FXI 40.56 -1.6% (0.65) 20
SPXU 33.03 -18.6% (7.53) 142
TSLA 278.86 -8.6% (26.13) 3
VNQI 53.99 -5.0% (2.82) 21

2:15 p.m. New York time

The major market indexes kept a steady decline beginning with the opening bell. My exposure to the S&P 500 is an options position in SPY and a shares position in SPXU.

The SPY position is presently at about 17% of maximum potential profit. My goal for the position, a short bear call vertical spread, is to manage it at 50% of max. The SPXU was fairly deep in loss and remains in loss, although shallower.

Bottom line: No action needed at this point. I shall be posting a SPY chart shortly with an Elliott wave analysis and discussion of today’s move.

10:25 a.m. New York time

I plan no exits from current positions today. Also, there are no potential earnings plays on the calendar. Bottom line: I anticipate no trades.


Today’s Book

Mastering the Market Cycle, by Howard Marks

We are more than nine years into the economic recovery, making this one of the longest recoveries ever. Today, every thoughtful trade must ask: Is it time for the next recession? Marks parses the cycle that is writing the markets’ future and our future net worth to gain a sense of what lies ahead and to help us get the odds on our side.

Order here


Here’s the status of my options positions:

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 0.96 36.28 (11.6) (0.10) 43
JBL 1.98 26.43 (44.5) (0.61) 15
LEN 3.10 45.22 4.0 0.13 43
SPY 3.11 290.39 (1.3) (0.04) 43
STZ 8.93 220.74 (6.3) (0.53) 43

And my shares holdings:

sym share price net result % net profit $ days held
AAPL 229.81 2.6% 5.85 20
CHK 4.70 17.5% 0.70 20
FXI 41.03 -0.4% (0.18) 20
SPXU 32.35 -20.2% (8.21) 142
TSLA 288.48 -5.4% (16.51) 3
VNQI 54.34 -4.3% (2.47) 21

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Live: Wednesday, Oct. 3, 2018

11:10 a.m. New York time

I’ve entered a short iron condor position on STZ.

10 a.m. New York time

I shall be considering one earnings play today: STZ, with an implied volatility rank (IVR) of 62.6. STZ announces on Thursday before the opening bell.


Today’s Book

The Fifth Risk, by Michael Lewis

Just out: A new book by the financial writer who always finds new, and often surprising, insights into the world of money and systems. In The Fifth Risk, Lewis dives into the most contentious issue of our times, the functioning of government in a time of attack and change. He asks, What are the consequences of handing government over to people who have no idea how it works. On the answer to that systems question hinges our prosperity.


Two other companies are publishing earnings today and tomorrow, but I’m passing on them without analysis because of low IVR: PEP and COST.

No exits in sight today.

Here’s the state of play on my options holdings:

sym option debit share price curr % max profit net prft/shr $ option days left
EWZ 1.08 37.62 (25.6) (0.22) 44
JBL 1.78 27.21 (29.9) (0.41) 16
LEN 2.93 47.24 9.3 0.30 44
SPY 3.84 292.62 (25.1) (0.77) 44

And my shares holdings:

sym share price net result % net profit $ days held
AAPL 231.75 3.5% 7.79 19
CHK 4.50 12.5% 0.50 19
FXI 42.17 2.3% 0.96 19
SPXU 31.57 -22.2% (8.99) 141
TSLA 301.50 -1.1% (3.49) 2
VNQI 55.45 -2.4% (1.36) 20

By Tim Bovee, Portland, Oregon, Oct. 3, 2018

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