DailyPlay – Conditional Opening Trade (GLD) Closing Trade (GE) – January 5, 2023

Closing Trade

• GE –92.35% Loss: Buy to Close 1 Contract Jan. 6th $85/$90 Call Vertical Spreads @ $3.77 Debit. DailyPlay Portfolio: By Closing the last Contract, we will be paying $377. We partially closed this trade on December 16 with 3 Contracts at a $0.37 Debit, then on December 29 with 1 Contract at $0.49 Debit, and then again on January 4 with 1 Contract at $1.21 Debit. Our average gain for this trade is therefore 44.05% and our average cost basis to exit this trade is $1.10 Debit.

Investment Rationale

On Wednesday, stocks gave back some of their early gains, as Fed minutes once again gave little to the bulls to grab onto. 10-yr. UST benchmark yields dropped 8 bps. on the day to 3.71%, while gold rallied nicely to near $1860, and it continues to look like it’s heading higher. (You should be looking to start or add long positions on pullbacks. I expect a good year for it in ’23.)

The SPX remains above the short-term level I am leaning on (3814), so I will keep my early-’23 bull bias until proven otherwise. (This is no way changes my overall bearish outlook for the year.) Be mindful that a downside breach of that level following an up-close day (like Wednesday was) that then sees a lower open/lower low/lower close the following day does up the odds that the market likely heads lower.

SPX – Daily

We have one GE short call spread left that expires tomorrow. GE spun out its new healthcare stock yesterday, which unfortunately gave a boost to the stock price at an untimely time for us. We will cover the last spread we have on today.

I have a new idea for us (though something I’ve mentioned in both yesterday’s and Tuesday’s webinars I hosted) that gold is looking good, especially after zooming higher from its false breakdown in the fall. (A major false breakdown usually comes back to test the high end of the trading range it was previously in, or in this case, essentially to a move up to near all-time highs.)

GLD – Weekly

We see that it has now reached both the weekly cloud bottom and 50% retracement level (i.e., the bold red horizontal line) this week. With the GLD now also having gone 8 weeks without touching its moving-higher Conversion Line (in magenta), we may see a pullback in the next few weeks down to it. When and if it gets there, I’ll want to buy that decline that touches the Conversion Line (it may be higher than where it is now). You can do that by simply buying the stock outright, or selling a then ATM/$162 put spread (with a three-month expiration), or buying a call spread (but only if able to buy for no more than 30% of your chosen strike differential). Right now, calls are priced quite expensively.

Generally, conditional trades that I recommend have a one-week time period to enter. This one, I will leave open longer than that given my belief that gold will be a good winner this year.