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Jeff Bishop’s Total Alpha Strategy | Jump On The Week

A strong November jobs report surprised the market on Friday and sent stocks surging higher. The surprise report showed payrolls adding 266,000 jobs in November, dropping the unemployment rate to its historic low of 3.5%. The Dow gained 300 points on the number, and Apple hit an all-time high ($270.71).

The stage is now set for the upcoming Federal Reserve meeting which is scheduled for the 12th.  While they are not expected to touch the key interest rate level—their comments are sure to drive the market in one direction or another.

Now, that doesn’t mean I’ve been sitting around and waiting for this Fed event.

No…No…No

In fact, it’s been business as usual for the TA portfolio:

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That said, there is plenty to go over in this issue of The Jump—  I cover the economic calendar, corporate events, IPOs. As well as, my thoughts on the trade deal,  current positions, and trades I’m looking to get into.

The Looming Trade Deadline

While there’s no shortage of rumors surrounding trade talks, we have yet to hear anything concrete. So far it’s one political posture after another. Yet, that all stops dead on December 15th.

Without a deal, the administration is set to raise tariffs on Chinese imports right in the middle of the Christmas season. To add insult to injury, these will directly target many of the consumer gifts purchased. While it will take a while for the pricing to roll through, it smacks of bad taste to come across as Ebenezer Scrooge.

Agricultural purchases appear to be the biggest hangup at the moment. China refuses to be tied to a specific purchase amount, something the Trump administration is dead set on. There could be other underlying problems, but it remains largely unknown.

What we do know is the closer we get to the deadline, the more rumor will be treated as fact. That means every tweet could drive the market haywire in seconds.

Impeachment Showdown

The U.S. House of Representatives plans to draw up and vote on articles of impeachment before the holiday recess. Complaints on process and procedure are largely being ignored. The narrative has become extremely partisan, with neither side backing down.

However, the Senate appears rather serious about the entire matter. Neither side wishes things to devolve into the circus that’s hung over the House. Republicans and Democrats largely agree they want a civil trial, regardless of their personal feelings.

Still, the pressure and presence of the showdown could push the president into rash decisions. That could make a budget deal difficult. But neither the administration nor congress wants a shutdown this time. If anything, they will pass a continuing resolution to fund the government at current levels.

Don’t Forget British Politics

December 12th also marks a special day for the UK to go back to the polls to see if they can break a deadlock in parliament. Polls currently show little change, which makes continuing in action all the more likely.

World’s Largest IPO

And don’t forget about the world’s largest IPO that you can’t invest in. Aramco set its public offering on December 11th. With an estimated value of $1.7 trillion. That also comes on the back of news OPEC and some non-members working to hammer out an agreement to keep oil production in check in a bid to raise prices.

On watch…

Call spreads

NFLX, AMZN, TEAM, FB, CVNA, AMD, PTON

Put spreads

TWTR, WYNN, FANG, EXAS, TPX, BIIB, COST, NKE, TSLA, ULTA, ZS, CMG, SMG, IWM, GOGO, AMZN, HUBS

Want even more trade ideas?

Click here to learn more about Total Alpha

Next Week’s Calendar

Monday, December 9th 

  • Major earnings: MDB (Mongo Database), TOL (Toll Brothers), SFIX (Stich Fix)

Tuesday, December 10th 

  • 4:30 PM EST – API Weekly Inventory Data
  • Major Earnings: AZO (Autozone), HDS (Home Depot Supply), PLAY (Dave & Busters), GME (Gamestop)

Wednesday, December 11th 

  • 7:00 AM EST – MBA Mortgage Applications
  • 8:30 AM EST – Consumer Price Index – Looking at any signs of inflation
  • 10:30 AM EST – Weekly DOE Inventory Data
  • 2:00 PM EST – Fed Decision – It’s not what they do, but what they say
  • Major earnings: AEO (American Eagle), PLCE (Children’s Place), UNFI (United Natural Foods), VRA (Vera Bradley), TLRD (Tailored Brands)

Thursday, December 12th 

  • 8:30 AM EST – Weekly jobless claims and continuing claims
  • 8:30 AM EST – Producer Price Index
  • 10:30 AM EST – Weekly EIA Natural Gas Inventories
  • Major earnings: CIEN (Ciena Corp), ADBE (Adobe), AVGO (Broadcom), COST (Costco), ORCL (Oracle)

Friday, December 13th 

  • 8:30 AM EST – Import & Export prices for November
  • 8:30 AM EST – November Retail Sales – Good look at how we did to start the shopping season
  • 1:00 PM EST – Baker Hughes Weekly Rig Count

Major IPOs This Week

  • Bill.com Holdings (BILL) 8.8M shares expected to price between $16-$18
  • OncConnect Financial (OCFT) 36M shares expected to price between $12-$14
  • Sprout Social (SPT) 8.823M shares expected to price between $16-$18
  • XP Inc. (XP) 72.5M shares expected to price between $22-$25

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Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | Navigating the Tariff Trade

Make no mistake about it, there has been a lot of talk about tariffs this year—learning more about them will only make you a better trader. After all, it never hurts to understand the headlines driving the market.

Why?

Because trading off the wrong headline can cost you money.

For example, stocks came off all-time highs last week but fizzled after it appeared that we wouldn’t be close to reaching a trade deal with China.

So when the sell-off hit Monday, I stepped in to buy the market for a quick trade.

This was the view of my Total Alpha account midweek

But before I get ahead of myself, and explain how you can profit off the tariff news. It’s important that we go over the basics first, understand what tariffs are on what their impact on the global economy is.

Tariff 101

Chances are you haven’t heard the term tariff thrown around this much since you studied American History in high school.

Remember the Boston Tea Party? A little tariff imposed on America was one of the few triggers that started the American Revolution…3 pennies per pound.

Well, brace your yourself. It’s the end of the decade and the future in front of us seems to hold new tariffs as well as a war of the trading variety.

A tariff is a government tax on imported goods. The result is the price of foreign goods gets higher.

The usual reasoning behind tariffs is that countries use them to either limit imported goods or to even out the pricing between foreign and domestic products. Sometimes both.

Why Is Tariffs News Now?

The U.S President made plans to hike tariffs billions of dollars’ worth of China’s imports, steel imports from Japan, Eastern Europe, and several other countries, as well as threatened tariffs on German autos. He delivered these under the authority granted to him under the heading of national security risks. This even extended to American dairy.

Chinese imports undercut two major industries in the U.S. The result is the U.S. margins are getting driven down constantly and the U.S. market is flooded with China’s goods. There’s also been an ongoing issue with intellectual property theft that’s been a headache for decades.

The belief behind the tariffs is two-fold. First, it evens the playing field for subsidized industries in other countries, including Chinese businesses. Second, it provides leverage for the administration to demand controls on intellectual property theft.

Deep In Bed With China

Last year the U.S. imported $540 billion worth of goods from China. A majority of what we imported were cellphones, computers, and what’s on your body and feet. In return, China imported only $120 billion of U.S. goods. Putting a spotlight on how far from a 2-way street we are. And this has been happening for years!

To top it off, China OWNS 28% of the U.S. debt it owes to foreign countries, making it one of the largest foreign investors in U.S. treasuries.

But wait, there’s more! As of this spring, China owned $1.1 trillion of the U.S. debt.

The Tariff Effect

So, what do these tariffs mean for us, billions of dollars on Chinese goods?

Initially, it raised prices on most consumer goods. I expect retail prices to climb, causing sales to drop. Low wage growth makes exacerbates this dilemma.

But American companies can’t keep up with the low prices of Chinese products. Labor costs make China more competitive for resource-intensive goods. They are forced to choose between lower margins or finding cost offsets.

Yet we may not be able to handle the demand. U.S. steel production has declined over the last 50+ years. That reduced overall production capacity. It’s not a simple matter to turn on production that offsets the imports.

Brace Yourself

For years and a couple of presidents, Americans were told more jobs are coming. But with higher tariffs looming, many companies would rather cut costs at home than pass that cost on to the consumer. This means fewer jobs which adds fuel to speculation of a possible recession.

In the meantime, everyone is waiting to see if December tariffs get signed. There is a very real chance they won’t be, at least this year, mainly due to the impending election year on our heels. These tariffs could hurt our president’s reelection odds if things take a turn for the worst.

There is no deadline set for the trade deal, just that it will be completed when the president is good and ready.

China isn’t the only country in the cross-hairs of tariffs of the future. Brazil and Argentina are potential targets. Just this month our president tweeted “Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.

How to Navigate

Steel companies leveraged to U.S. production benefit from protectionist measures. Make sure you understand which ones manufacture in the U.S. versus outside. Those with greater global exposure are more unpredictable.

Chinese American Depository Receipt (ADR) trade directly with the hopes of a deal. Companies like Alibaba and JD.com move higher on lower tariffs. Lower tariffs increase U.S. consumption of Chinese goods. This leads to higher GDP outputs, which in turn drives growth in these Chinese companies.

It remains unclear if the U.S. economy will sustain long-term damage from the tariffs. So far, it’s shown solid growth in the face of global stagnation. For now, I focus only on news that states a deal is or is not done, and nothing in between.

Catch the trades in real-time

Total Alpha members get to watch how I play these minute by minute. They saw me crush a $71,000 trade just the other week.

Click Here to Join Total Alpha (watch this webinar – BEST OFFER HERE!!!)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | Midweek Market Update (12/5/2019)

Congratulations, you’ve almost made it through the trading week…and what a roller coaster ride it’s been! Let’s get you squared away with where things stand after some wild market action with the midweek market update.

The SPY managed to fill the gap today left open from Monday’s massive decline. That comes after a sharp reversal Tuesday that took most of the day to play out.

SPY hourly chart

Earlier this week, I said I expected the market to make its way to the hourly 200-period moving average…which is exactly where it stopped. And I will put my money where my mouth is.

Total Alpha Portfolio midday yesterday.

That’s why I look at the other markets, including Bonds, Gold, and the Dollar, for additional information.

Equity winners – Small caps, energy, utilities, and consumer staples

As I outlined at the beginning of this week, I expected small caps to outperform the broader market. The weekly close above the trading range that bound it all year told me it wants to move higher.

IWM weekly chart

We’re already seeing the IWM outperform the SPY by 0.15% in the last three days. That’s come at the expense of the QQQ, which underperformed by 0.32%.

The real high flyer comes from the least likely of places. Energy stocks (XLE) are down a paltry 0.36% compared to the SPY 1.02%. Much of that comes on the back of rallies in both natural gas and crude oil.

XLE hourly chart

Crude oil itself is up 5.17% this week. However, it finished down 4.75% last week when the SPY gained 0.75%…so it’s really just playing catchup and adding a bit to the top.

Natural gas looks more like an oversold bounce. The commodity fell a whopping 17.09% last week, creating a pop this week of 3.97%. It’s got a very long way to go before it shows any semblance of strength.

Utilities continue to perform well alongside bonds. The cheap yields in treasuries force safety investors to search for return, which often drives them into high dividend stocks.

XLU hourly chart

Those with a little more risk tolerance tend to stick with consumer staples. They may have smaller dividends, but offer more exposure to growth.

XLP hourly chart.

Safety Trade Outperformance

Bond ETFs also performed exceptionally well off the back of equity declines, up 1.2% for the week.

TLT hourly chart

This is a crucial hint. For the majority of the year, bonds and stocks traded together. We only saw them decouple and trade opposite one another this week (historically normal behavior).

Following a close second are the gold ETFs. GLD climbed 1.17% this week so far.

GLD hourly chart

Poor performers – The Dow, transports, and the dollar

The biggest loser this week so far has been the Dow Industrials (DIA). Though a small index, it’s down 1.58% on the week.

DIA hourly chart

The real loser this week has been transports. They’ve been just obliterated. The IYT ETF is down 2.88%, nearly double the Dow’s performance.

IYT hourly chart

This could be a harbinger of doom for any Dow theorists.

The real head-scratcher is the dollar. No matter when you looked, the dollar had been the strongest performing area week after week, month after month. So it’s a bit shocking to see it down 0.68% on the week.

UUP hourly chart

That may not seem like much to you. But it’s almost a third of the monthly range.

Go no-where – Healthcare 

Here’s an oddball for you. Healthcare stocks are flat on the week. It’s impressive given all the political drag this sector has.

XLV hourly chart.

Most volatile – The VIX

Last week, the VIX printed prices under $12. That’s extraordinarily cheap…and it indicated complacency among investors. It’s not a surprise that the VIX shot up nearly 41.77% at its peak this week, while still settling up 16.63%.

VIX hourly chart

My analysis – we’re heading lower before we head higher

Let’s look at the facts:

  • Equities haven’t seen a selloff since…well it’s been a while
  • Investors didn’t buy enough protection
  • Stocks rose on little volume
  • Now, the VIX shoots through the roof, and all the safety trades outperform
  • But the dollar is noticeably weaker

It’s pretty clear that we’re seeing money move into the safety trades after a monster run. However, even though the volume on the downside was much higher than the upside, it’s still pretty light.

Outside of a news event, we’ll likely float sideways to higher through the end of the week. From there, I expect we’ll see one last push lower before we get our Santa Clause Rally.

How I plan to profit these next two weeks

That’s for me to know and Total Alpha members to find out. There’s plenty of egg nog…so pull up a chair.

Click Here to Join Total Alpha (watch this webinar – BEST OFFER HERE!!!)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | The Best Ways to Short Volatility

I wasn’t surprised to see volatility return after the signals the market was throwing last Friday – the VIX spiked over 7%, the markets had a mini-selloff, and a few stocks ran into liquidity issues on Wednesday.

Traders must have realized their mistakes, as they pushed the VIX up nearly 20% at one point yesterday.

A quick look at stock futures this morning, and it looks like we’re in for a potential bloodbath.

Yesterday’s VIX hourly chart

While the financial media might try to strike fear in you if the selling pressure continues. I want you to know one thing—this is the time experienced traders clean up.

I want to show you how I structure and enter my trades to short volatility at the highs.

My weapons of choice?

Volatility ETNs like VVIX, and UVXY.

And you know what else?

Today’s environment sets the table for a potential trade.

I use VVIX to time my entries into the market and play option trades on leveraged ETFs like the UVXY.

Most people don’t realize the VVIX’s forecasting power. I’ve used it over and over to time market lows and ride the strong bounces.

Combine this with options trading, and you’ve got a winning strategy.

Let’s get to it, shall we?

Why this trade works

I want to quickly explain the reasoning behind this strategy. It will help you understand how to put things together.

The VIX measures the annualized volatility expectations for the S&P 500. Its dollar value represents the expected percentage change. So, a $15 value equals a 15% change in the market. The CBOE derives the value from all of the put in call options on the S&P 500.

This doesn’t mean it expects a 15% move within 30 days. Rather, it says if you annualized the expected move over the next 30 days, it would equal 15%.

There is always an underlying assumption of volatility in the market. That’s why it always reverts back to its mean around $15.

You can see it on a quarterly chart below.

VIX quarterly chart

Timing the trade

The key to timing this trade is using the VVIX. This index measures the volatility of the VIX. Simply put, it measures option demand on the VIX.

Just like the VIX, the VVIX is mean reverting. You can see how this works on the monthly chart below.

VVIX monthly chart

Note: The VVIX isn’t as old as the VIX. Hence why there’s less data.

I look for the VVIX to enter a zone above $115.00. That is the signal that volatility is overbought, and I want to go short. This trade doesn’t set up all that often, maybe a few times a year if you are lucky. But it has an extremely high probability of success when you play it right.

Structuring the trade

I like to use leveraged ETF’s for my trade. They have a natural decay working against them on top of mean reversion. The UVXY works great for this strategy. It tracks 1.5x the movement of short-term volatility.

My trade of choice is to sell call spreads. This puts me in the driver’s seat for the entire trade. I control my risk, as well as put myself at a statistical advantage from the outset.

A call spread is easy to execute. You start by selling a call option at or above the current stock price. Then, you buy the same number of option contracts at a call strike that is higher than the first call strike. Both of these must have the same expiration date.

Here’s a quick example:

  • The UVXY trades at $35.
  • I want to sell 10 contracts of the UVXY for an expiration 30 days from now at the $36 strike price.
  • Then I buy 10 contracts of the UVXY for an expiration 30 days from now at the $37 strike price.

When you execute this trade, you receive a credit (payment) to open the trade. The goal is to have the UVXY trading below the lower strike price at expiration. You can also close the trade early for a portion of the total profit.

Let’s use the previous example to break down payments.

  • I sell 10 contracts of the UVXY for an expiration going out 30 days at the $36 strike price.
    I receive $2.00 for the sale.
  • Then I buy 10 contracts of the UVXY for an expiration 30 days from now at the $37 strike price.
    I pay $1.50 for the purchase.
  • My maximum possible profit is the difference between what I sold and what I paid.
    Max profit = $2.00 – $1.75 = $0.25 per contract
    This comes out to $0.25 x 10 contracts x 100 shares per contract = $250
  • My maximum possible loss is the difference between the strike prices less the amount I received.
    Max loss = $137 – $136 – $0.25 = $0.75
    This comes out to $0.75 x 10 contracts x 100 shares per contract = $750

So my maximum profit potential is $250 and my maximum possible loss is $750.

In this trade I like to have a risk to reward of 1 to 1. That means I want to set up the trade so that my maximum profit and maximum loss are equal.

I go for expirations that go out at least a month or more. That gives me time to take off the trade early at a portion of the maximum profit. Remember, you don’t have to wait for the maximum profit to close the trade. Getting 50% of your possible profit is great!

Want to see it in action?

Then check out Total Alpha. You get to watch my streamed trades live. This lets you follow along and learn in real-time.

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Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | How to Make $71,000 in One Trade

I love it when other traders leave early on Friday. The less competition, the better…that leaves more for me! They don’t know what they’re missing.

My highest profit trades often come when no one is looking—and last Friday was no exception.

Despite the anemic trading volume and the slow grind we were experiencing—my money pattern pointed me to an interesting opportunity in Biogen Inc (BIIB).

A setup that doesn’t come across too often… but one I pounce on whenever I see it.

Total Alpha members got to trade alongside me in real-time!

These trades happen all the time…most people just don’t know how to take advantage.

And while it takes discipline, patience, and practice to make them work. They become a lot easier to pull off—once you know what to look for.

But I’m here to tell you that anyone can flip trades like these. Let me walk you through how I analyzed and executed this trade and how you can harvest profits.

Watch for unusual price action

Friday’s trade came off atypical volume for Biogen (BIIB). While the rest of the market went to sleep for the remainder of the day, Biogen saw colossal interest in trading midday.

Shares rallied over 2% in a matter of minutes. That’s pretty unusual given the light volume and size of this stock.

BIIB 5-minute chart

Check out how shares jumped up on a tremendous amount of volume. There are some notable pieces here.

  • Shares spiked and retraced back from $300. Large numbers will often act as support and resistance. It’s no more complicated than people find it easy to place orders there.
  • Before the move, the stock had a strong uptrend. This is important as I wanted to trade with the stock and the broader market, not against them.
  • On the 5-minute time frame, price retraced back into the 13-period simple moving average. This was very close to the 30-period moving average, which should act as support.

I expected price to come off its high and retrace part of the move – then float higher into the end of the day. Ideally, that sucks out a lot of potential orders, leaving those that would mainly shove it higher.

So now that you’ve got the basic outline of the trade, let’s talk about how I set it up.

Scaling made this possible

I’ve said it before, and they’ll write it on my gravestone – risk management is the key to success!

Scaling into this trade is the only reason it worked. While my profits hit $71,000, my drawdown took me down $25,000 at one point.

If the numbers dazzle you think of it this way – I had a total risk to reward of 1 to 2.84. That’s a pretty standard trade. You don’t have to put big money into a trade like this. However, with multiple factors working in my favor, I felt that it had an extremely high probability of success.

Note, I didn’t plan to lose much more than the $25K drawdown in this case.

First, it’s important to note that I never want to do worse than a 1 to 1 risk to reward. Anything worse doesn’t mesh with my trading style and strategies. Scaling the trade lets me improve those odds.

For argument’s sake, let’s say the swing high was $302, and the breakout area was $294. That means I don’t want to enter the trade before the midpoint at $297. From there, I want to scale in all the way down to $294.

However, you don’t always want to stop out at the low point. Oftentimes (as happened here), the stock will pierce through the low before resuming its trend. So, I prefer to use one or two closes below the low on whatever time frame I’m trading.

In this case, you can see how I scaled both into and out of the trade:

My initial entry started at 80 contracts at $2.20. I added 100 contracts at $1.45. My final purchase of almost 100 contracts was about half the capital of the previous two trade sizes.

From there, I did the exact opposite scaling out at $3.20, $4.00, and $4.50. That allowed me to capture more of the move than if I simply sold at $3.20.

Scaling works because none of us know precisely where the stock will stop on the upside or downside. Instead, we assume we’ll get it wrong and adjust our trading accordingly.

Stuff your pockets with cash

It doesn’t matter whether you’re a new trader or have years of experience. Total Alpha will help you become a better trader and find big scores like these.

Click Here to Join Total Alpha (watch this webinar – BEST OFFER HERE!!!)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | Your Jump on the Week

Believe it or not, some of the best trading happens during slow periods when everyone expects trading volumes and market volatility to be on the low end.

SPY daily chart

And while I’ll be thinking about family, Thanksgiving, and football this week – don’t think for a second, I won’t jump in and throw some trades down if I see my Money Pattern floating around.

$16,000 in trading profits is pocket change for me. Not a member of Total Alpha, then click here to subscribe

Preparation is key, and I’ve got you covered, as I rundown, the top market-moving catalysts (economic and corporate), as well as, my watchlist (plays that I might enter).

Political nonsense

Several decades ago, the big news came on the Sunday morning talk shows. Major government officials would announce policy and other market-moving events.

With the 24-hour news network and an inflated sense of self-worth, we’re constantly bombarded by every political machination.

At some point traders gave up and began ignoring commentary. Now they focus on actual events.

Trump’s threats of tariffs seem to make no difference to the market. Money refuses to take the bait, instead waiting until actions happen. No one knows the outcome. But, history tends to favor politicians not hurting their standing before elections.

That doesn’t mean we won’t see a lot of posturing before then. It just means no one is investing until they get actual resolution.

In the same vein that’s why impeachment hasn’t jolted the markets. Even if it passes the house, no one believes Trump will be convicted by the Senate. That leaves all of 2020 as a giant question mark.

Across the pond you see the exact same thing. It became painfully obvious when a crowd gathered for a debate with Boris Johnson and Jeremy Corbyn laughed them both off stage.

The best bet here is to ignore the headlines entirely. They can derail stocks intraday. But until markets change their trend, they’re nothing more than a bump in the road.

This could just be a midpoint

While bulls would have you believe the economy is turning, not everything looks rosy. The Fed recently published forecasts for 2020 that suggested the U.S. economy would only grow at 1.8%.

Everyone also says we’re out of the woods since the yield curve steepened. But exactly how does this chart make you feel any better?

The real problem happens once rates starts to normalize. Debt levels in the U.S. and around the world are unsustainable. Current public debt exceeds 100% of GDP and continues to remain elevated.

What scares me most is the amount of corporate debt taken on. If and when rates go up, or really bonds take a dive driving up borrowing costs, plenty of this debt resets to higher rates. Zombie companies (ones that remain unprofitable but are propped up by cheap money) could cause a wave of defaults.

My take

We’re nowhere out of the woods. Unless we’ve rewritten hundreds of years in economic theory (which technology has in some areas), then our path remains unsustainable.

However, the day of reckoning remains far away until another economic behemoth stands out in the world with better prospects than the U.S.

Until then, there’s plenty of trading…you just need to know how to capitalize.

So why not get yourself an early Thanksgiving treat with Total Alpha?

Click here to learn more.

On watch…

Call spreads

NFLX, IWM, AMZN, TEAM, FB, CVNA, AAPL, AMD

Put spreads

TWTR, DIS, WYNN, SHAK, ROKU, MTCH, FANG, EXAS, TPX, BIIB, COST, NKE, GLOB, TSLA, FL, PBR, ULTA

Next Week’s Calendar

Monday, November 25th

  • 10:30 AM EST – Dallas Fed Manufacturing Activity for November – An early look for manufacturing rebounds
  • Major earnings: A (Allegiant Technologies), AMBA (Ambrella), HPE (Hewlett Packard), PANW (Palo Alto Networks), PVH (PVH Corp)

Tuesday, November 26th

  • 7:45 AM EST – ICSC Weekly Retail Sales – Last look at retail before the holiday rush
  • 10:00 AM EST – New Home Sales MoM for October – Look for housing to remain strong
  • 10:00 AM EST – Consumer Confidence for November – What’s the state of consumer’s views on the economy?
  • 4:30 PM EST – API Weekly Inventory Data – Will crude continue its metoric rise?
  • Major Earnings: ADI (Analog Devices), ANF (Abercrombie & Fitch), BBY (Best Buy), BURL (Burlington Coat Factory) DKS (Dicks Sporting Goods), DLTR (Dollar Tree), ADSK (Autodesk), BOX (Box), DELL (Dell), GES (Guess), HPQ (HP Inc), VEEV (Veeva Systems), VMW (VMware)

Wednesday, November 27th  

  • 7:00 AM EST – MBA Mortgage Applications – Are consumers refinancing their homes?
  • 8:30 AM EST – Gross Domestic Product (GDP) QoQ for Q3-S – Lots of juicy data on the U.S. economy
  • 8:30 AM EST – Personal Consumption for Q3-S
  • 8:30 AM EST – GDP Price Index for Q3-S
  • 8:30 AM EST – Core PCE QoQ for Q3-S
  • 8:30 AM EST – Durable Goods Orders for Oct-P
  • 8:30 AM EST  – Durable Goods Ex-Transportation, Oct-P
  • 10:00 AM EST – Personal Income for October – Great data on how the consumer continues to support the economy
  • 10:00 AM EST – Personal Spending for October
  • 10:00 AM EST – Pending Home Sales MoM for Oct – Will inventory constraints lower sales?
  • 10:30 AM EST – Weekly DOE Inventory Data – I want to see if inventory comes in lower than expectations again
  • Major Earnings: DE (Deere)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Market Internals

Over the last six weeks, the S&P 500 has gained nearly 10%.

Back then it was a news-driven market—a time when itchy twitter fingers and fake news mattered.

And while the media circus will only intensify as we approach the 2020 election, the market has currently muted the news…

Markets continue their relentless push higher on anemic trading volume—last week marked the sixth consecutive that the SPY and QQQ closed in the green.

And while one could make a strong argument that the SPY doesn’t deserve to be up here, and that the fundamentals don’t support these levels—the market remains judge, jury, and – if you’re on the wrong side of the trade – executioner.

So how am I tippy toeing around this mess?

By being stock specific, sticking to my money pattern, and using options to exploit the opportunity.

You can still find trades if you know where to look. Even with a slow market, my Bullseye Trade in Nike (NKE) pulled out a 72% winner on the week.

Not to mention a massive winner in Total Alpha with my option spread.

This week could mark a turn in equities. And I’ve got you covered in the Jump. I break down the economic and corporate schedule, as well as discuss what upcoming micro and macro factors could influence stocks and the global markets.

Market Internals

A lot of traders think that the light volume makes a market bullish. That’s factually untrue. Take Thanksgiving week for example.

We all know volume lightens up as we approach the holiday. Here’s a couple of stats for you in the last 9 years if you bought the SPY on the days prior and sold at the close of the Wednesday before Thanksgiving.

  • Friday – Win 66.67% of the time, but lose 0.29%
  • Monday- Win 55.56% of the time, but lose 0.32%
  • Tuesday – Win 77.8% of the time, and make 0.04%
  • Same day Wednesday – Win 55.56% of the time, but lose 0.02%

Light volume just creates more volatility. But, it does mean big money is less likely to make important decisions.

Budgets and China

Impeachment remains the focus of nearly every news station. Yet, there’s important work happening behind the scenes.

Nancy Pelosi and Steve Mnuchin get closer to a budget deal to fund the government. The border wall and the Department of Homeland Security (DHS) remain the sticking points. Trump still wants $5 billion that Democrats won’t offer.

In all likelihood, we’ll see a shortened version of last year without a shutdown. The bills won’t fund the wall, and Trump will pull money from other areas he has discretion over. Still, he’s always a wild card. The deadline for passage is Nov 21st.

And speaking of deadlines…negotiators hit a snag once again between China and the U.S. Trump set December 15th as the deadline for another 15% increase on a range of products. That would put it square in the Christmas shopping season.

Chinese negotiators want additional tariffs removed and continue to balk at being tied to a specific amount of agricultural purchases. The U.S. continues to hammer them over intellectual property transfers among other issues.

Markets took all developments in stride this past week. No one trusts the reports anymore to make trading decisions. Until actual statements of what is or isn’t happening come out, they look at everything else as rhetoric.

Little Data Coming Out

Data starts to come in slower as we reach the holiday season.

Housing starts and permits on Tuesday provide data on a key sector that remains strong. We also get existing home sales on Thursday morning.

One of the standouts for the economy remains home construction. They create more jobs through direct and indirect means than most other sectors.

A decade past the financial crisis, we still see strong demand in the home market. Low rates continue to make purchasing affordable. But, if bonds continue their selloff, that could drive rates higher and crimp home demand.

Friday will give us the manufacturing PMI. I don’t expect we’ll get a hot number, but you never know. Core CPI came in above 2% for the consumer already. If inflation starts to rear its head, that would put the Fed in a real tough spot.

But keep an eye out for energy

Tuesday afternoon, we get the American Petroleum Institute’s weekly data along with Wednesday’s Department of Energy report. With the weekly natural gas inventory on Thursday, we’ll see if energy stockpiles show any signs of a drawdown.

Crude remains reasonably bullish, which would certainly help out some poorly performing companies. Energy companies got destroyed on the earnings front.

If crude and natural gas start to turn bullish, that would be a huge windfall for the energy sector (XLE) and exploration companies (XOP).

Market signals to watch

I’m keeping a close eye on the VIX. It finished last week near $12, which is insanely cheap.

VIX weekly chart

Pure statistics say we should see a bounce in the VIX, which should lead to a market pull back. I like to play the VIX through options on the UVXY, which was actually my Bullseye Trade of the week.

I’ve been trading these positions with long calls on certain stocks in my Total Alpha portfolio. No one knows the exact timing for the turn. So I create low-cost strategies that offer huge potential payouts.

In fact, it wasn’t that long ago that I showed traders how I work these markets live. You can catch a replay of the workshop through the link below.

Click here to watch replay

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | The Jump on the Week

I can’t recall another time where I’ve witnessed a stock market rally to all-time highs—with such unease, disgust, and hatred.

And you know what else?

There is an incredible disconnect with the market’s performance and what the raw data is saying…

And let’s not forget about all the uncertainty:domestic political tensions as the 2020 election heats up, Brexit uncertainty, cracks in overnight lending, and a contraction in the Chinese economy.

However, here we are, at all-time highs—and a record number of net shorts in the VIX futures.

I see a massive screw factor here driven by Wall-Street money. How else do you explain such passive behavior in volatility against a weekly SPYchart as this:

SPY weekly chart

Traders use Bollinger Bands to gauge volatility, when a stock or ETF experiences extreme volatility, it will trade above or below the Bollinger Band.

You’ll have to go back to the beginning of 2018, to find the last time a stock indice closed over the weekly Bollinger Bands, and not since 2016 has the SPY moved from near the lower band to the upper band (a two standard deviation move) in a quarter.

It feels like…

Big money wants to hide their true intentions with some good ol’ fashion market manipulation.

Heck, they play in their own dark pool exchanges to cover their tracks…moves that Taylor Conway exploits in Shadow Trader.

Before I get sidetracked and go full-on Alex Jones on you, let me regroup, and get back to what really matters—and that’s providing you with the tools, education, and tips to becoming an elite trader.

In this issue of the Jump, I breakdown charts in XLE and XOP, go over market-moving events (economic and corporate), as well as, give you my thoughts on volatility.


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A tweet, a meet, and a Thanksgiving treat

The global public cannot escape the never-ending barrage of political coverage that dominates headlines like never before. It takes a Ph.D. in forensics to sift through rotting stories to find a kernel of valuable information.

Trump and Xi continue their dalliance like some sort of teenage courtship. Will they meet, or won’t they? Does December bring more tariffs? Who kisses who on the cheek first?

It’s a sleight of hand that obscures any real certainty. At one point markets needed absolute clarity to pick a direction. Now, they simply need assurance of freely flowing Fed policy.

Short of any new tweet or revelation, the markets face little in their march towards turkey day. Instead, the focus shifts on how far retailers are willing to encroach into the meal and NFL football. Make no mistake, Black Friday through Cyber Monday will drive the conversation through year’s end.

In fact, November tends to be one of the best months for the SPY. Over the last 20 years it turns a profitable month nearly ¾ of the time!

But back up to the Alibaba contrived ‘Singles’ day. Marked by four 1s on the calendar, the Chinese  Valentine’s Day should signal the arrival of a horseman of the apocalypse. Instead, it proffers a critical measure of spending.

We don’t know the extent of the economic slowdown in China. Single’s day not only tells us about the Chinese economy but any fallout from turmoil in Hong Kong.

Will the energy rally fizzle?

The standout the last few weeks happens to come from the economic laggards. Energy stocks once left for dead, rose from the grave bidden by a cold winter.

XLE weekly chart

The recent run in Oil and Natural Gas gentrified the once dilapidated sector. Exploration companies hadn’t seen bids in so long I expect they looked like apparitions.

XOP weekly chart

A cold winter itself wouldn’t create sustained investment. But, a theme that’s seeded itself in the underbelly of the trading community might yet blossom.

The shale boom in the U.S. brought a flood of production and investment, not seen the Beverly Hillbillies struck oil. Easy money from banks greased the spokes of the derricks that fracked their way through the lands.

Yet, today’s lenders harken back to an age of stodgy bankers requiring actual performance. Being burdened with investments in losers like WeWork, Uber, and other failed startups does little to bolster lending confidence.

Ironically, it’s beginning to claim the least capitalized of the drillers. Larger companies face fewer competitors. Their large coffers allow them to invest in operations without relying on the banks.

Put simply – the few and the profitable remain.

The EIA report due out Thursday gives a look like last week’s one on Oil. Last week saw crude inventories rise. Yet, the longer maintenance cycles of refineries helped extend the backlog. I want to see how the weekly inventories do on Wednesday and in the coming weeks.

A downgrade few agree with

Indian politics stepped into the spotlight this past week on a Moody’s downgrade. The rating agency (cause they never get things wrong) downgraded Indian debt to negative from stable. Bank of America Merill Lynch sees a “shallow recovery” in early 2020.

The fast-growing economy decelerated to a six-year low of 5% in June. Despite the reasonably pro-business government, the country faces a growing population without jobs.

The bottom line

The market’s way overextended. But, that doesn’t mean they can’t make one last move just to slap you in the face. That doesn’t mean we crash out from here.

But, I like being long volatility when others bet against it…

Next Week’s Calendar

 

Monday, Nov 11th

  • Singles day! Time to cry alone in public.

Tuesday, Nov 12th

  • 4:30 PM EST –  API Weekly Inventory Data – Our first look at crude inventories
  • Major earnings: Advanced Auto Parts (AAP), CBS (CBS), Noble Energy (NOG), Tyson Foods (TSN), Skyworks (SWKS)

Wednesday Nov 13th

  • 8:30 AM EST – October Consumer Price Index – A good inflation indicator
  • 10:30 AM EST –Weekly DOE Inventory Data – A slick look at oil
  • 11:00 AM EST – Fed’s Powell addresses Joint Economic Committee of Congress – The Fed equivalent of a parent-teacher conference
  • Major earnings: Stratasys System (SSYS)…and pretty much not a lot else

Thursday, Nov 14th

  • 8:30 AM EST – Jobless claims – One of the economic bright spots
  • 8:30 AM EST – Produce Price Index – Find out if tariffs burden input costs
  • 10:30 AM EST – Weekly EIA Natural Gas Inventories – Will the rally continue?
  • Major Earnings – Applied Materials (AMAT), Wal-Mart (WMT), Nvidia (NVDA)

Friday, Nov 15th

  • 1:00 PM EST – Baker Huges Rig Count – Will Derrick show up to the party?
  • Major Earnings: Hewlett Packard (HP), JC Penny (JCP)…how are they still around?

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Three Winning Volatility Trades

There are three ways I think you can play the next volatility spike in the market. If played correctly, it could generate substantial returns for myself—and life changing for others.

3 Winning Volatility Trades

First, the VIX isn’t a stock. You can’t trade it on the open exchange.

There are three main ways to trade the VIX: ETF products, futures, and options.

ETF products come in two varieties – leveraged and unleveraged.

VXX tracks short-term volatility through futures and other products. The ETF trades on the open exchange like a normal product.

However, because the VIX is mean-reverting, and futures strategies cost money to execute, the VXX loses value over time.

VXX weekly chart

The UVXY works similarly but as a leveraged product. This means it tracks the daily movements of volatility by twice the normal amount.

With the same costs as the VXX plus degradation from being a leveraged product, the UVXY erodes in price much faster over time.

UVXY daily chart

My favorite trades work with either options and/or stocks on the ETFs, or options directly on the VIX.

So let’s get to it, shall we?

  1. Covered calls

Good ‘ol covered calls never stray far from my heart.

They’re one of the first option trades we learn how to do.

Now, I’ll show you how to work them properly.

Timing this trade is the key. Jump in too early, and you bleed out slowly.

I like to use the VVIX as a gauge for potential volatility. When I see it starting to move higher, I take that as a signal for a possible spike in the actual VIX.

As a quick refresher, the VVIX is the VIX of the VIX. It measures traders’ activity on the VIX options.

Once I see the VVIX moving from the ’80s to the ’90s, I plan my move.

I like to do what’s known as a ‘buy-write.’ This is where I buy the stock and sell call options against it immediately.

It’s another form of a covered call.

My sweet spot is right at-the-money. That pays me the most extrinsic value possible on the trade.

I don’t like these trades to last more than a few weeks. If volatility hasn’t spiked by then, my timing was off.

The goal here is to have the ETF spike on a jump in volatility. That puts the options deep-in-the-money and converts the extrinsic value to intrinsic value.

Then, you simply close the trade and take profits.

Easy trade to execute. Timing is the biggest challenge.

  1. Long VIX options

VIX options aren’t my favorite option (pun intended). They can be very tricky to play, and may not pay out a lot.

But, done right, they have extremely high win rates.

This play relies on searching for extreme lows in the VIX coupled with lows in the VVIX. We actually saw this scenario recently.

VIX daily chart

You can see how the VIX got down near $12, which came very close to the lows of the year.

At the same time, the VVIX got relatively near its lows before turning around.

VVIX daily chart

This meant you could buy long calls in the VIX at extremely low prices for very cheap.

Since then, we’ve seen the VIX pop up nicely over $13, which could yield a solid profit.

  1. UVXY Call Spreads

This is another trade with a high win rate that pays handsomely.

The construction is pretty straightforward.

You want to sell a call spread at or slightly in-the-money when the VVIX gets up between $115-$120, the VIX is over $20, and the UVXY has spiked at least 40%.

It may seem like a lot at once. But, those criteria help you pick off the tops in volatility during market downturns.

You can see it in action in mid-august. The VVIX spiked up near $118, the VIX jumped over $20, and the UVXY nearly doubled.

UVXY daily chart

In this example, you would sell a call spread around $36-$38. You want to give yourself about 1-2 months on expiration.

That lets volatility get sucked out of the market at least once, putting you in a profitable position.

You don’t need to get full profit. If you manage to 25%-50% profit, you’re doing just fine.

This is, by far, my favorite trade to play. It may only come a couple of times a year, but it’s so easy and consistent.

These aren’t the only tricks I have in my bag.

If you’re ready to open up the toy chest then come join me at Total Alpha.

I’ll show you how you can become a multi-millionaire option trader.

Click here to join Total Alpha

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Is the energy rally real?

Could Crude Oil and Natural Gas Break Out?

First, let’s start with the obvious.

Energy prices were way oversold. Both Crude Oil and Natural Gas sat near record lows.

Although Crude didn’t go nearly as low as it did in the winter of 2018, price remained extremely depressed.

Crude Oil daily chart

Crude found a lot of support around $50 a barrel since early summer.

News hit the wire in the later months of an attack on Saudi Oil fields that demolished production.

Yet, at the time, while price jumped almost 15% overnight, the Oil VIX spiked as well.

Oil VIX daily chart

So crude spiked and traders were pricing in a big move.

That tends to mean they expected price to drop pretty fast.

Why is that?


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Well, if crude spikes on a production loss, the disruption lasts only a certain amount of time.

In fact, Saudi Arabia expected to have most of the production back on by that weekend.

Put these together, and you have a recipe for falling oil prices.

Today we have a different story.

Oil prices have not only climbed, but they’ve also brought along some long-forgotten sectors.

The S&P Energy ETF (XLE) climbed a whopping 10% off the October lows. That’s better than the SPY 8% increase.

XLE daily chart

Energy hasn’t just lagged the markets, it’s in a different continent altogether.

It’s actually been a bit of a surprise that more shale drillers haven’t gone bankrupt, given the depression in prices.

Another interesting point comes from the Oil & Gas Exploration companies. The S&P ETF XOP tracks a basked of these companies including Marathon Petroleum (MPC), Murphy Oil (MUR), Apache (APA), and others.

While the XLE remains well above the lows of the last several years, the XOP appears to be rising off the bottom.

XOP weekly chart

Nothing has fundamentally changed yet in the production landscape. However, these stocks were up nearly double their current value at the end of 2018.

Even a measurable increase in oil and natural gas prices could send these stocks soaring.

And natural gas doesn’t look too shabby at the moment.

Known as the ‘widow maker,’ natural gas follows some well known seasonal patterns.

Yet, the recent surge in price comes on the heels of an extremely odd winter.

Parts of the southeastern U.S. remain at record highs, while extreme cold grips other parts of the nation.

This created an unusually high burn of energy and fuel consumption.

Natural Gas weekly chart

Natural gas experiences wild swings in prices regularly. Last winter price shot up from $3 to $5 in a matter of days.

Current prices remain below prior years and are coming off of already depressed levels.

My take

This appears to be nothing more than a sucker’s rally in the short-term. We could easily see natural gas prices explode higher on short-covering or other technical factors.

Yet, time and again as prices rise, production increases to match. The same thing occurs with crude oil.

That dynamic hasn’t changed for years and shows no signs of deviating.

That said, the XOP ETF looks enticing here. The $20 level offers a great stop to work with.

Fundamentals don’t need to change for the ETF to double from here. It could do that entirely on the back of a renewed economic outlook.

Given that I’m not seeing heating oil prices rise, I don’t know that we aren’t being fed an excuse to match the price action.

I won’t sit here and say that crude prices could run up towards $64.

But, I think there are plenty of better opportunities out there to trade.

I’d rather put my capital to work on setups I know work out.

That’s why I grabbed an opportunity in SDC the other week.

The stock signaled it bottomed, giving me a chance to put on some call options.

$22,962 later, I’m a happy man.

If you want to learn how to spot trades like these, come join me at Total Alpha.

It’s one of the best places to learn an array of trades to fit your needs and style.

Click here to join Total Alpha

Source: TotalAlphaTrading.com | Original Link