Looks interesting, Doc. Not sure that I would go all the way to having them be my broker, but I guess I would want to see first how easy they make trading. I just don’t think I’m interested enough to really look too closely to make this determination, but they do seem to know a bit about what they are doing. I do like that their emphasis appears to be on options trading, which is pretty much all that I do in my short term trading. LTBH is totally different from trading and for me is mostly about dividend income.
This isn’t an argument, but especially for technical analysts, terminology/semantics matter when you discuss the market. Plus, time frame perspective influences things tremendously. I write this more as a general thought or question rather than any critiquing statement.
Okay, what defines a bear market? I’ll defer to Investopedia. “A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.”
Are we in a bear market?
Roughly 5.75% doesn’t meet criteria. Are we in a downtrend? Hell yes. Lower highs and lower lows. Could it continue to a true defined bear? Sure.
Let’s look at another component, sentiment. Harder to define but simplest look is with the VIX.
Okay, VIX is trying to turn, tried to print a bullish harami (but the wick to some would discount it) but then printed a bearish engulfing candle next. Remember, bearish means sentiment is less panic. I’d still like to see below 15 but it’s encouraging.
Another perspective is the CPCE. The ratio of Put options to Calls. Higher suggests a negative sentiment.
It also seems to be reversing. I added the 5 period MA, which some believe above 1.0 signals a reversal. We shall see.
My foot spends a fair amount of time in my mouth. I always screw up and misspeak, but to discuss technical analysis, I try to maintain a defined terminology. We have come out of a cyclical Bear market, appear to be resuming a secular Bull market, but have experienced a Downtrend in the market that is showing some possible signs of a reversal. Saying we are in a downtrend is not as gut impacting as saying we are in a bear market. The result shouldn’t matter, we should read the charts as they role, but this is a process with emotions deeply tied. Perspective should be maintained. Words matter. Even if they don’t to all of us, there are folks who read “Bear” and need to run to the bathroom. Deep breath and look at it all.
Your chosen timeframe also matters/influences perspective. Day traders tend to react more to downtrends than buy-and-holders.
Okay, enough. Not trying to start an argument nor preach. Just trying to lay it out from my perspective to see how it jives with all. And please, correct me if I am missing something. Sure wouldn’t be the first time.
Lakedog
PS May not be able to respond for a few days. Got the granddaughter for a week before school stuff starts. Spent time on our salt water, now to the lake to drench her in some fresh water behind the boat. Happy hunting to all.
6 Likes
PPS: Think or swim is amazing for Options. Tastytrade is excellent also. Actually, I believe Tom Sosnoff of Tastytrade was on the initial coding of TOS. For me, Tastytrade was more percentage oriented and going back and forth confused me. I still have a TT account, but focus on TOS as it’s my main platform. Fingers crossed Schwab doesn’t screw it up.
Lakedog
1 Like
Lakedog,
I do not fault your explanation, however, my calling of a bear (or specifically what I feel to be a bear) is a prediction on my part that may affect the way I lean in my trades. Sure, the definition may be a 20% decline, but if that happens then it will be a 20-20 hindsight observation. I need to be able to make assessments today and cannot really wait for a textbook definition to come to pass. I have already said that sure, the decline that we have seen may prove to be nothing but a momentary flag before resumption of the long standing uptrend. But I am not so optimistic. It just doesn’t feel that way to me. So I am going to continue to trade as though it is more likely to stay in a decline. That is, until the market shows me that it is actually going up and then I’ll change. Even in an extended bear market I will continue to go long with calls because some of the most powerful up moves occur during bear markets.
I have long term investments but that is a completely different account and has nothing to do with my trading activity. All of my short term trades are measured in days, often only 1 or 2 days. I really have no interest in seasonal changes such as a 20% bear market decline in either my trading or LTBH accounts.
I think you should rely on macro factors to funnel down your tradable stock list. For myself, I know for certain that troubles are brewing in China and the fund managers have already started to push more to cash last month. I trade technicals and just need to lower my threshold - tighter take profits, etc.
so far so good… I am up even this month.
1 Like
I’m thinkiing NVDA might be an interesting stock to look at for a strangle. If Nvidia does better than expected as it has been doing, then it should move up strongly again. If it does anything less, it could really trend down. I haven’t looked at the pricing, but what do you think derek…doc
As you should have already seen in the options area, I am currently in a strangle on NVDA. It started as just puts because I have a hard time believing that they can please everyone given how far it has run up. It’s to the point now that they can give a positive surprise on earnings and still get clobbered which is what just happened to AAPL. But I got nervous recently and added some calls which turns my puts into a straddle of sorts. I still have more puts than calls and my calls are a much shorter duration, but I can still profit in either direction. I just profit more if it goes down. As with any strangle, I lose money if it does nothing and just moves sideways but I just don’t see that happening. If it just moves sideways that in itself will be viewed as a negative and it will at least trend downwards and I have time for this because my puts do not expire until December.
At least that’s the idea… 
1 Like
Man, this morning was crazy on NVDA. Gapped up to all time highs then gave it all back. The recent volatility is a bad sign in my book, but then none of these traders causing this volatility really know what will be announced tomorrow. I would say that the high volatility and high interest in this particular earnings report makes the options really expensive right now. At this point it’s probably better to wait until after earnings to try to play the trend.
1 Like
Derek, what do you think?
I was thinking that if Nvidia misses, it could be the catalyst that pulls this market significantly down on Thursday and if it does well then the inverse…doc
1 Like
I agree, Doc.
As I said before, I think that the market as a whole (not just techs) will be affected by NVDA no matter which way it goes. The market in general appears to be placing a lot of weight on it. Something similar happened with AAPL which some could say started this market-wide August downtrend.
1 Like
I found this on NVDA:
How Aggressive Do You Want To Be Here With NVDA?
A number of key warning signals, all short-term, flashed in mid-July and they’ve taken their toll on our major indices over the past 5 weeks. Currently, I have signals suggesting that we’re ready to bounce quickly back to the upside. Among those are an extreme, pessimistic reading on the 5-day moving average of the equity only put call ratio ($CPCE). History says that these extreme readings (above .80) produce at least short-term rallies. Also, we’re holding key price and moving average support (20-week EMA, in particular) thus far. These signals would encourage me to grow more aggressive in my trading on the long side. But then there’s the seasonality that certainly favors the bears right now. So as we look at NVIDIA Corp (NVDA), what should we expect when they report their quarterly results after the bell today?
If you look just prior to NVDA’s last quarterly report that was released in late May, you’ll see that volume trends looked strong as most of the heavy volume days in April and May resulted in advances. Over the past couple months, NVDA has seen much bigger selling days leading up to its earnings report and that makes me pause a bit. Also, as price has moved up to challenge the July high, potentially printing a double top, check out the AD line recently printing a 3-month low - completely different than the strong AD line back in late May. I’m not showing a semiconductors chart ($DJUSSC), but if you look at a daily chart, you’ll see that Tuesday’s gap up and reversal MAY have printed a right shoulder in a topping head & shoulders pattern. The neckline would be at 9250 and a break of that neckline would measure to 8500, testing the low that was touched AFTER NVDA’s last earnings report. Bottom line, what to do with NVDA is a VERY difficult call. I love the company long-term, but what happens to it between now and the end of September is anyone’s guess.
Looks like an opportunity for a strangle to me…doc
1 Like
The BRICS meetings seem to be sending the gold stocks higher at a rapid pace this morning. I wonder what impact the meetings will have on the overall market. It’s my understanding that they are discussing having their own gold-backed currency, and that Saudi Arabia might be joining them.
The IV on NVDA options today will be very high making all options expensive. They will be a lot less expensive tomorrow morning. So it may be a little late to enter a strangle today unless you think the move will be huge.
But I also think that given the high weight the market seems to be giving to NVDA’s report today, I do not think that we are looking at a one-day event. Whatever happens, up or down, is likely to affect the whole mood of the market for some time…at least a week. I think there may be enough volatility (down or up) to make a strangle profitable if you enter tomorrow morning.
As I’ve said, the worst case scenario for strangle holders is that nobody is surprised and it just moves sideways for the next week. I believe that this is so unlikely to almost be impossible. If NVDA exactly meets all expectations on earnings, revenue, and guidance to the penny they will get clobbered. If they beat just enough to make everyone confused as to which way to go, then I think that this is also negative and they will at least trend downward. In order to spike upward they need to blow away all expectations.
I’ve been in strangle for a while but the recent volatility (20+ point swings) makes me have to keep reassessing the profit picture because we are always starting from a different place. As of last night, it appears that I break even on 15% up (profit if more than 15%), and I more than double my money on 15% down. My strangle is weighted more to the puts because I am more pessimistic about this report.
I was listening to a podcast and they were saying that the implied current volatility for NVDA is 51 points, so over 500 dollars or down to 400. I checked the calls and puts for NVDA this morning and the prices were crazy just as you are saying so I passed.
I did a strangle on google two days ago and the calls went from (purchased) 43 cents up to a dollar (this morning) so I sold them. I actually was anticipating google to go down so the call profit was a surprise. The puts were 84 cents if I remember correctly…doc
I’m pulling for you to get at least the 15% up. Looks like that’s the direction it’s taking. I’m happy because I have a couple of AI positions that need to ride this wave!
Yes, we’ll see tomorrow how it goes on the upside. Unfortunately, it does not appear that I’m going to get my 15%. I also don’t like what I was seeing in aftermarket. NVDA went all the way to 520 (~+10%), but then sellers took it down to around 500. I’m wondering if morning will bring more profit takers. I doubt that it will lose enough to go negative. My strangle appears to be a loss, mostly because I oriented it too hard towards the puts. Had I played it safe and oriented it right down the middle, then a 10% move would have given me decent profit either way. The only thing I can do now is try to get as much as I can from all the options while it is still bouncing around. I’m looking at a loss, but I can try to make it a smaller loss by playing the bounces.
I just noticed that yesterday NVDA gapped up to a new all time high and profit takers immediately jumped in and took it down like 26 points. If the same thing happens tomorrow then NVDA could lose all of their gap. I doubt that’s what will happen. I think that there may have been a lot of traders looking to get out on any new high and the action yesterday thinned that crowd down. What sellers that still remained got out in after hours this evening when they were pulled down 18 points. It will be interesting how the sentiment changes tomorrow. The action in the last couple of days, including today’s after-hours when the volume was as high or higher than the regular trading day, seem to tell me that the market has not yet completely decided where the stock price will settle down.
Doc may have an opportunity here to try a strangle. I’ll be too busy trying to plan the exits on my existing losing strangle, but I may try some individual trades.
One last thing I’ll say, bringing it back to the original topic.
If for some reason, NVDA does tomorrow, exactly what they did yesterday, namely, gap up to an all time high, then trade down all day and end the day negative, then this will be a very bad sign. Wiping out all the positive from the earnings and displaying massive volatility, not just one day, but recent days. It would be a very bearish sign for the stock. And given all the attention this stock has been getting recently, this will inevitably translate into a bad time for the whole market.
Not that I think this is what is likely to happen, mind you, but if it does, you heard it here first! lol
1 Like
The service that I listen to has been saying the same thing about the volatility in the market that you are. I hope this market jumps today from the NVDA news but there are a lot of warning signs. We will see…doc
Rosenblatt raising guidance on NVDA to $1100!!!. Another broker raising to $600 so its looking like guidance for this leader in AI is going to be positive and maybe crazy high. I had already seen $800 before the earnings release…doc
1 Like