Investment Rationale

Stocks did a solid turnaround yesterday from early weakness, and it was pretty much on cue, as yesterday’s DP suggested a trading bottom was very possible – given the lineup of concentrated support levels between 3950 and 3923 – along with a daily Setup -9 count.

SPX – Daily

We have an XLF long $35.5/$32.5 put that expires today.  Yesterday’s decline in it finally put the $35.5 put in the money – albeit by only a small amount.  I leave it in your hands whether you want to exit early today or hold this late into today’s session to have a chance of those $35.5 puts being worth something to recoup the bulk of the time premium we saw erode from our original purchase price. (I’d not worry about exiting the $32.5 put as it’s some 8-9% away from price.)

Here’s an idea that we might be able to make some quick money on, but as calls are too expensive and selling puts aren’t taking in enough credit, consider buying the iShares Nasdaq Biotechnology ETF (IBB). Wednesday marked a Setup -9 and its Lagging Line bounced right from the bottom of its cloud. At ~$126 per share, stay in our guidelines of approx. 2% of your portfolio for position sizing.  Stop out the long on a close or consecutive daily ones (your choice) under $127.39. Play for a move up to $133.25/.75.

IBB – Daily

Closing Trade

• CRWD – 30.15% Gain: Sell to Close 1 Contract (or 100% of your Contracts) Mar 10th $94/$130 Call Vertical Spread @ $23.18 Credit. DailyPlay Portfolio: By Closing the 1 Contract, we will receive $2,318. 

Investment rationale

UST 10-yr. rates are now just a tick under the 4.0% level, and equity investors are not taking kindly to the recent surge in yields. Yesterday saw further S&P 500 selling, with the benchmark index down to 3951, just 11 points above its 200-DMA and now only about 110 points above the Dec. 31 closing mark – meaning that investors have now seen the market give up 240 points from its 2023 closing high. Those who have stayed bullish have paid the price of sticking with their conviction in a market that I do not think will yet pay steadfast bulls or bears.

SPX – Daily

As I mentioned yesterday morning, the SPX would likely mark a daily Setup -9 count on Wednesday, and with it also having sold down to its TDST Line support (3949) and near its 200-DMA (3940) and cloud high and low (3933 and 3923, respectively), we are at an important inflection point.

I don’t know which way this is going to trade from here, but I’d be carefully watching the dollar and fixed income markets for clues, because I don’t think the SPX is gonna stick around here very long at all. Either a kerplunk comes in the next few days, or a rally back to 4025-4050 will likely occur. (BTW- the ICE BofA credit spread we always watch has widened out 10 bps. from its recent low. That came right from its major uptrend line, suggesting some increased macro concerns.)

We have an XLF option that expires tomorrow. We’ve lost the bulk of the debit cost on the put spread, but price ($35.60) is right near our long strike price of $35.50, so I think we need hold this position till tomorrow to have a chance of recouping some of the premium paid.

We are also long a single CRWD March 10th $94/$130 call spread. The stock marked a +13 signal three days ago, and these past three days has also stalled right at the top of the daily cloud as well as against its TDST Line. If we had multiple contracts on, I’d be taking half off, but as we only have one, you need make a decision as to possibly seeing this breakout upside now and running to $126/$130, or seeing it fall to $115ish. (Personally, I’d now exit on any daily close that is less than the close from four days prior.)

CRWD – Daily

CLX Bearish Opening Trade Signal

View CLX Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 8 Contracts Apr 21st $155/$145 Put Vertical Spreads @ $2.72 Debit per contract..

Total Risk: This trade has a max risk of $2,176 (8 Contracts x $272).

Counter Trend Signal: This stock is currently experiencing bullish exhaustion, and a pullback is expected.

1M/6M Trends:  Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 145

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Stocks attempted gains yesterday, but higher rates created enough fear to make sellers win the session, and the SPX lost another 12 pts. (30 bps.) to again close at 3970 (also last Friday’s close), and the lowest close of the pullback that started in early February.

SPX – Daily

Today will be a daily Setup -9 count on a close < 4012.32, and along with the yellow highlighted rectangle support zone, we may be closer to a minor pop higher in the index.  However, be aware that there is talk on the Street that some $50 billion of stocks will supposedly be sold from algos and CTAs (Commodity Trading Advisors) into the market if the 200-DMA (currently 3940) gets breached, likely then sending the indexes even lower as dealers get stuck long buying what these funds would sell, and then the dealers need immediately turn around and hedge their long exposure by selling futures – thereby sending the market lower.

Looking at names that showed up as possible upside exhaustion candidates, I see that Clorox (CLX) is at the top end of a year-long trading range, and just posted a daily Setup +9 count against the Risk Level from a prior Sequential +13 reading. To me, this is not a bad place to consider a bearish play, looking for a partial or full closing of the unfilled gap that I’ve labeled on the chart below.

CLX – Daily

With liquidity only in the March 17th or April 21st series, the former is too close to expiration, and the latter is farther away from how much time premium I’d generally like to pay for a put spread. However, as of yesterday’s closing mid prices, the April 21st $165/$155 put spread only costs $2.73 – some 27% of the strike differential.  Earnings are not out till May, so we needn’t worry about those. Given the very choppy trading we’ve seen in this name, I’m betting that we can see that gap played within the coming month.

ABBV Bearish Opening Trade Signal

View ABBV Trade

Strategy Details

Strategy: Short Iron Condor

Direction: Bearish

Details: Sell to Open 5 Contracts Mar 17th $160/$165 Call $150/$145 Put Iron Condors @ $1.19 Credit per contract.

Total Risk: This trade has a max risk of $1,905 (5 Contracts x $381).

Counter Trend Signal: This is a stock that is currently bullish but expected to trade sideways or bearish.

1M/6M Trends:  Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 134

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Stocks started off with nice gap opening gains yesterday, but gave back a decent chunk of them by the close, with the SPX settling at 3982, up 12 points on the day after being up almost 50 at the high of the session. Your chart and the media will report a gain, but frankly, that session wasn’t anything to write home about.

SPX – Yesterday (5 min. bars)

You’ll recall back in January that I gave you a bearish long put spread play in ABBV (we made nice money on it). In that idea, I had used the $145 strike as the lower strike in the spread, as I had seen TDST Line support there. We see that not only did that level hold and also get an Aggressive Combo -13 count at that same level, but it has now moved up into its 2023 mid-range and is currently bounded on its top by its 50-DMA and bottom by its 200-DMA.

ABBV – Daily

In yesterday’s weekly outlook webinar, I said that it wouldn’t surprise me to see the market churn and go somewhat sideways in the near-term. As such, let’s look to put on a bearish iron condor spread, selling the March 17th $160/$165 call spread and selling the same dated $150/$145 put spread for what on Monday’s closing mid prices netted a $1.21 credit per condor.

Our goal is to hopefully collect the premium and watch this stay inside the $150 to $160 range over the next few weeks. Earnings don’t come out till late-April, so there’s no major catalyst I am aware of during our planned holding period. (I would have gone out a few more weeks, but there is no open interest at all in those other series.)

GLD Bullish Opening Trade Signal

View GLD Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 9 Contracts Mar 17th $168.50/$176.50 Call Vertical Spreads @ $2.15 Debit per contract.

Total Risk: This trade has a max risk of $1,935 (9 Contracts x $215).

Counter Trend Signal: This is an ETF is currently bearish and is expected to bounce higher from a level of support.

1M/6M Trends:  Bearish/Neutral

Technical Score: 6/10

OptionsPlay Score: 91

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Gold has been selling off as the dollar (DXY) bounced from the 102 to 100.5 level that I called for a dollar rally to start. Now the gold futures posted a daily Setup -9 count this past Friday, and the SPDR Gold Trust ETF (GLD) is a hair from its TDST Line support and, basically right on its prior breakout level (the horizontal dashed purple colored line), now let’s look for a quick rally in gold from here.

GLD – Daily

As such, let’s look to buy the March 17^th GLD $168.5/$176.5 call spread (the higher strike is right where the top of the daily cloud is for most of March). On Friday, this spread went out at $2.15 mid, and represents about a 27% cost of the strike differential – a number I can easily live with for an ATM spread. 

Investment Rationale

Quick story: On Tuesday I was in Manhattan attending a meeting at the NYSE. About 30 mins. before the start, I went to a sandwich shop nearby to the exchange to grab a quick lunch. This shop – like many other places in the city have added an extra temporary vestibule area in the wintertime outside their front doors to keep cold air from rushing into their establishments every time customers walk in or out.

I opened the outer door and quickly walked into the shop, not seeing the completely clear glass door of the shop itself. I banged into it nose and head first, which almost knocked me out, and as I tumbled to my knees slipping into la la land, my nose started gushing significant amounts of blood. I was trying to capture it in my cupped hands, but it was all over me and flowing like a river.  In my semi-consciousness, while still on my knees, I knocked on the glass door for help. Three customers came out to aid me, along with a member of the staff with some napkins for the pool of blood in my hands and face.

About 20 mins. later, I stopped the bleeding in their bathroom by applying pressure to my very aching nose. When it got to the point that it wasn’t still dripping much, I saw that I had a gash across the bridge of my nose, too. So, I asked for a bandage for that, as it was still dripping blood. Eventually, I got myself in a state of being to be able to leave the establishment.

Why do I tell you this? Well, on Wednesday I had to take the day off with a massive headache and doctor appointment to make sure that I didn’t have a broken nose or need stitches. And because this event still had my body in some state of shock and pain, I realized on Thursday — while waiting for the 2pm FOMC announcement – that it had come out the prior day – the same day to which I had been AWOL from the markets.

The good news for me is that the nose isn’t broken, nor did I need stitches. But I do have one heck of a shiner under one eye, and the headache and nose ache are still very much there. Therefore, I plan on a very quiet Friday and weekend ahead. See you Monday for the weekly outlook webinar.  – Rick

P.S. Getting out of the UNG trade yesterday was in no means my saying I’m now bearish natural gas. To the contrary, I continue to hold and scale down bid for more stock in my own portfolio for the long-term.

Closing Trade

• MRNA – 37.15% Loss: Buy to Close 3 Contracts (or 100% of your Contracts) Feb 24th $170/$160 Put Vertical Spreads @ $6.83 Debit. DailyPlay Portfolio: By Closing all 3 Contracts, we will be paying $2,049

Partial Closing Trades

• COIN – 29.68% Loss: Buy to Close 1 Contract (or 50% of your Contracts) Mar 10th $70/$54 Put Vertical Spread @ $9.70 Debit. DailyPlay Portfolio: By Closing 1 of 2 Contracts, we will be paying $970
• BYND – 26.09% Gain: Sell to Close 5 Contracts (or 50% of your remaining Contracts) Mar 17th $17.50/$22.50 Call Vertical Spreads @ $1.16 Credit. DailyPlay Portfolio: By Closing 5 of 10 Contracts, we will receive $580.
• SPOT – 20.00% Gain: Buy to Close 3 Contracts (or 40% of your Contracts) Mar 17th $125/$130 Call Vertical Spreads @ $1.52 Debit. DailyPlay Portfolio: By Closing 3 of 7 Contracts, we will be paying $456.
• GE – 12.50% Loss: Sell to Close 6 Contracts (or 50% of your Contracts) Mar 24th $83/$77 Put Vertical Spreads @ $1.40 Credit. DailyPlay Portfolio: By Closing 6 of the 12 Contracts, we will receive $840.

Investment Rationale

A minor mixed day for equities on Tuesday as things were pretty quiet as investors await today’s FOMC minutes. At this point, the SPX is off 4.5% from its closing 2023 high of 4180, and just ½% away from my initial call for a 5% pullback, that I could potentially even see get to an almost 8% decline from that Feb. 2nd peak price. (This has been another good example of the value of fading price trends at the right place and time. Bulls have watched an almost a 200-pt. selloff with their hands tied and like deer caught in headlights.)With the FOMC announcement this afternoon, I am not going to put out a new DP idea for today. But looking at our open positions, let’s lighten up the following names to reduce either giving back profits or potentially losing more:

• MRNA: Let’s cover 3 of 3 short Feb. 24^th $170/$160 put spreads we’re down 35% on.
• COIN: Let’s cover 1 of 2 short March 2^nd $70/$54 put spreads that we’re down 21% on.
• BYND: Let’s liquidate 5 of 10 long March 17^th $17.5/$22.5 call spreads that we’re up 26% on.
• SPOT: Let’s cover 3 of 7 short March 17^th $125/$130 call spreads that we are up 20% on.
• GE: Let’s cover 6 of 12 long $82/$77 put spreads that we are down 13% on.

It’s your choice if you want to trade these before the Fed announcement at 2pm ET, or wait till after to see the effects of the news. I tend to be conservative in my trading, so I generally lighten positions before the news, but, as always, it’s up to you and your tolerance for risk.

Closing Trade

• UNG – 115.46% Loss: Sell to Close 18 Contracts (or 100% of your Contracts) March 10th $10/$12.50 Call Vertical Spreads @ $0.09 Credit. DailyPlay Portfolio: By Closing all 18 Contracts, we will receive $162.

Investment Rationale

The S&P 500 fell over 80 points to below $4,000 yesterday on the back of concerns of higher interest rates. Treasuries yields rose sharply with the 10-year rising 14bps to 3.96%, as the bond market shifts to a more hawkish Fed. Our expectation is that equities will continue to remain under pressure as markets reassess how sticky inflation will likely be and what the Fed’s actions will be to bring it back to their 2% target. SPX has now within spitting distance of its trendline support. A break below trendline support and $3950 would target $3850 to the downside.

S&P 500 – Daily

As natural gas continues its decline and the inability to hold the key $8.50 level over the past few trading sessions, we would take this opportunity to cut losses on our open debit spread. As a rule of thumb with long options positions that are approaching the last 3 weeks of expiration, if the trade is not moving in the expected direction quickly, it’s better to cut losses and reassess the trading thesis and timing. We are at this point going to close out the full balance of the position of UNG and look to reestablish at lower levels and time

UNG – Weekly

USO Bullish Opening Trade Signal

View USO Trade

Strategy Details

Strategy: Long Iron Condor

Direction: Bullish

Details: Buy to Open 5 Contracts Jul 21st $71/$77 $63/$57 Iron Condors @ $3.85 Debt per contract.

Total Risk: This trade has a max risk of $1,925 (5 Contracts x $385).

Counter Trend Signal: This is an ETF that is currently bearish and is expected to bounce higher.

1M/6M Trends:  Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 97

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

With markets closed yesterday, we only have how the futures traded to get a sense of what today may look like, and as I write this Monday night, I’m seeing the S&P futures down about 18 points from last Friday’s close. I continue to believe that the way to play the market is for a continued pullback, using a Friday close above SPX 4148 as the stop out of that gameplan.

For a new idea, let’s take advantage of a flat oil market in 2023, but one that has added significant open interest since Jan. 1. (to the tune of over 330,000 contracts – a huge surge considering the market hasn’t moved since then). My experience of having traded futures markets for over 40 years would suggest to me that a large directional move is coming, as one of those two sides of recently added new longs or shorts will be on the wrong side of the move – ultimately exacerbating the move even further as the losing side will be forced to unwind their positions.

As such, I want you to consider putting on a long iron condor in the USO July 21st expiration, buying the $71/$77 call spread (it closed Friday at $1.95 mid) and buying the $63/$57 put spread (it closed Friday at $1.90 mid) for a combined cost of $3.85. I’m willing to give up the first 6% or so move in crude oil before this idea starts capturing any juice to it, but when oil really starts to move directionally, I am planning on it being far greater than a single digit percentage move.

Crude Oil – Daily

USO – Daily

Partial Closing Trade

• BYND – 25.00% Gain: Sell to Close 10 Contracts (or 50% of your Contracts) Mar 17th $17.50/$22.50 Call Vertical Spreads @ $1.15 Credit. DailyPlay Portfolio: By Closing 10 of the 20 Contracts, we will receive $1,150. 

Investment Rationale

The well-higher than expected PPI number yesterday never allowed the SPX to go green on the day, and then a late sell-off sent it spilling to over a 50-point loss (-1.38%) to pull the index down to 4090, its worst close since Feb. 9th. But more importantly, the chances of today closing above 4148 are greatly reduced, and thus, it makes sense to me to lighten all tactical long positions put on since the Oct. low has been made.

Within 100 pts. of yesterday’s SPX close, I see the 4050 put strike with the most open interest (~7,700 contracts) that expire today. On the call side, the largest open interest is in the 4100 strike (some 8,300 contracts) which can also go out worthless depending upon how today trades. These large open interest strikes often act as trading magnets on expiration days.

Looking at where we have some long exposure that I want to actively manage, yesterday Moderna (MRNA) got some bad news on drug trial results, sending the stock down $5. We are short the Feb. 24th $170/$160 put spread from $4.98. It went out yesterday at $3.46 mid. I’d place a buy stop back at breakeven entry to protect this from potentially turning into a loser.

We are also long 20 March 17th BYND $17.5/$22.5 call spreads from $0.92. Yesterday it closed at $1.15 on almost a 2% pullback in the stock. Let’s kick out of 10 of the 20 today to lock in what yesterday closed with a 25% gain since putting the trade on.

For now, I will stick with the several bearish trades that we have open in the portfolio.