Option Investor
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  Jeff Bailey   12/26/20,  2:35:14 PM
Pivot Matrix for Monday and next week at this Link

  Jeff Bailey   12/26/20,  1:26:45 PM
Closing Internals at this Link

  Keene Little   12/26/20,  1:06:20 PM
Jeff, we're even on the coffee bet. Up day today so I lose my double or nothing bet with you. Overall, both Wednesday and today were nothing days though, so can't take away anything from them to help us next week.

  Linda Piazza   12/26/20,  12:54:38 PM
The OEX does end the day in the consolidation zone from this last week. It's printing a series of small-bodied candles, some with upper shadows. That's indicative of an unwillingness to drive a market higher, and MACD for the first time since early December begins to flatten somewhat. However, that can be a prelude to a period of consolidation before another rise, so we must be aware of that possibility. Still, to me, it looks as if this current rise has been a bit too parabolic, and that the OEX needs to retrace and confirm support. Or not confirm it . . .

  Jeff Bailey   12/26/20,  12:54:34 PM
3-minutes until close ....

  Ray Cummins   12/26/20,  12:53:18 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Market Movers

Looking elsewhere in the portfolio, there is little movement worth noting. However, some buying pressure has emerged in Faro Technology (NASDAQ:FARO), Microchip (NASDAQ:MCHP), and Netflix (NASDAQ:NFLX). Among the bearish positions, there is even less activity with nominal losses observed in Ceradyne (NASDAQ:CRDN), Cognizant (NASDAQ:CTSH), Maxim Integrated Products (NASDAQ:MXIM), and Mercury Interactive (NASDAQ:MERQ). The lackluster trading will likely continue through next week as market participants (myself included) enjoy the holiday season with friends and family.

  Jane Fox   12/26/20,  12:52:47 PM
I see a lot of volume coming into the declining stocks in the NASDAQ composite.

  Jeff Bailey   12/26/20,  12:43:33 PM
Franklin Covey (FC) $2.55 (unch) Link

  Ray Cummins   12/26/20,  12:39:16 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Schnitzer Steel (NASDAQ:SCHN)

Jeff mentioned earlier the rally in steel stocks and shares of Schnitzer Steel are leading the group higher, up almost 5% at $61.59. The catalyst for the rally came from China, which announced yesterday that it has scrapped its steel tariffs, and the move put SCHN at a new all-time high. Our bullish "put-credit" spread is short at $50, so the upside activity is more than welcome.

  Linda Piazza   12/26/20,  12:39:11 PM
The advdec line has been declining since about 10:00 this morning, but it remains positive by 1373 issues as I type.

  Linda Piazza   12/26/20,  12:24:13 PM
The support at the bottom of the OEX bearish right triangle on the five-minute chart finally fell, with the OEX dropping all the way to the minimum downside target implied by that formation. The OEX also is slipping below the 30-minute 21-pma, but since it's still within the congestion zone from this week's trading, it's dangerous to draw too many conclusions about its action on this low-volume day. I wouldn't even hazard a guess on a day like today about the OEX's ultimate ending place, but wouldn't be surprised to see it somewhere within this congestion zone from 541.40-544. I also wouldn't be terribly surprised to see a drop down to the 10-dma at 538.35, however.

  Jeff Bailey   12/26/20,  12:15:43 PM
12:00 Internals at this Link

  Linda Piazza   12/26/20,  11:51:51 AM
On Tuesday, I benchmarked option costs to show the changes in various spreads so we could track them as time progressed. On Wednesday, I also mentioned that it's a misconception to always talk about time premium decay. Early in an opex cycle, changes in volatility can impact the way spreads behave much more than time decay can. A rather moderate change in volatility can mean that a call expands in price even on a slight downtick in price, for example. McMillan quotes the instance of the crash in 1987 when those long OEX calls found themselves profiting from the wild expansion in volatility, suffering mild losses or even gaining even though OEX was plummeting.

Let's look at some specific options prices and see how they might have changed since Tuesday. Here's the option chain from Tuesday: Link Here's the option chain from today: Link Note that the January 550 call moved from a 4.30 x 4.40 bid/ask to a 3.80 x 4.30 bid/ask, meaning that if we'd sold the 550 call as part of a spread with the intention of buying it back as time elasped, we'd be buying it back for about the same price we would have bought it back on Tuesday. The ask hasn't changed much. The January 560 call has changed from a 1.70 x 1.85 bid/ask to a 1.25 x 1.50 bid/ask between Tuesday and today. So, if the January 560 call had been part of a spread, possibly a 550/560 bear call credit spread, we'd be getting a hefty $0.60 less than what we paid for it.

What about the put positions? The January 550 put moved from an 11.20 x 12.20 bid/ask on Tuesday to this morning's 10.80 x 11.60 bid/ask. If we'd bought a 550 put as part of a bear put debit spread, it would today have been worth considerably less than we'd paid for it. The spread between the bid and ask is large enough that it might have been possible to get between the bid and the ask. The January 545 put changed from Tuesday's 8.40 x 9.10 bid/ask to this morning's 8.20 x 8.60 bid/ask, and the 540 put changed from Tuesday's 6.50 x 6.80 to this morning's 6.10 x 6.20.

I'm benchmarking these because of inquiries concerning using spreads to swing trade the OEX, perhaps establishing an OTM position and then selling calls or puts against that position, buying them back when a short-term move was over and then starting the process again at the next inflection point. I haven't traded spreads that way, instead preferring to establish them and let them run until option expiration, when only price would impact their settlements. Short-term, changes in implied volatility (vega) and other issues impact spread prices in a complicated way. I want traders to watch what's involved before considering that tactic.

  Jonathan Levinson   12/26/20,  11:31:16 AM
The latest from Al Quaesadilla: Link

  Jane Fox   12/26/20,  11:28:21 AM
Mutual-fund regulators are taking a hard look at soft dollars. The soft-dollar trade works like this: A fund will pay a slightly higher commission to a brokerage house on the understanding that the brokerage house will use the excess commission to provide services that otherwise would be paid for by the fund and required by law to be disclosed to investors. This practice lowers operating expenses and, therefore, profits are higher. The potential cost to fund investors is that their fund might get charged five cents for every share traded, instead of, say, the two cents that might be more in line with industry standards.

  Linda Piazza   12/26/20,  11:25:06 AM
So far, the five-minute OEX chart shows the OEX trading in what may be a bearish right triangle, with the flat bottom and a descending top trendline. That flag bottom lies right along the bullish #2 on the 5MRT system, though, so that should temper the possible bearishness implied by the pattern. With volume so far that's typical of that usually produced in the first few minutes of trading, however, it's difficult to give too much credence to anything we're seeing on the charts.

  Jonathan Levinson   12/26/20,  11:23:37 AM
The Dow futures broke 10300?! Link

  Jane Fox   12/26/20,  11:12:10 AM
Jeff, here is the rest of the story. "The earthquake of magnitude of 6.3 hit Bam, a city of 80,000 people, at 5:28 a.m. Iranian time (0158 GMT), state television reported. Its epicenter was outside Bam, which is about 630 miles (1,000 kilometers) southeast of the capital Tehran.

Iranian television broadcast pictures that showed the temblor had leveled the old quarter of Bam where hardly a building remained upright. In one street, only a wall and the trees were standing. People were shown carrying away the injured, while others sat sobbing next to the corpses of their loved ones.

"The quake hit the city when most of the people were in bed, raising fears that the death toll may go higher," said Mr. Khoshrou, who spoke to the AP from Kerman province. He is one of the province's representatives in Parliament."

  Jonathan Levinson   12/26/20,  11:10:30 AM
LOL Jeff! An OBL rally?

  Jeff Bailey   12/26/20,  11:09:00 AM
Jane ... per your 11:01:57 .... any news on how far away it was felt? Wonder if there are any rats in Afghanistan running out of underground caves?

  Jeff Bailey   12/26/20,  11:06:19 AM
11:00 Internals at this Link

  Jane Fox   12/26/20,  11:01:57 AM
Dateline WSJ "TEHRAN, Iran -- An earthquake may have killed as many as 10,000 people when it devastated a city in southeast Iran early Friday, an Iranian legislator told the Associated Press after speaking to officials on the scene."

  Jane Fox   12/26/20,  10:58:25 AM
I am very surprised the Mad Cow scare has not produced more of an impact on the markets. This is a very scary situation for beef represents the single largest segment of U.S. agriculture, accounting for roughly 20 cents of every agricultural dollar. But so far, American consumers seem to be one group that isn't panicking, even though a few supermarket chains including Albertson's are warning that meat from the stricken cow may have reached meat counters in their stores in the northwestern U.S.

I live within 50 miles of Mabton and will be definitely restricting my beef consumption in the next little while because the discovery of one cow by a fluke could mean a horrific and incurable disease has been introduced to the U.S. People who eat beef products accidentally laced with the nerve tissue of infected cattle, such as processed meats, can catch the human equivalent of the disease, which eats holes in the victim's brain.

  Linda Piazza   12/26/20,  10:58:09 AM
Volume isn't picking up any as the day progresses, and in fact is likely to lessen. As of a few minutes ago, total volume was 124 million on the NYSE and 219 million on the Nasdaq.

  Jeff Bailey   12/26/20,  10:57:59 AM
Franklin Covery (FC) $2.90 +13.7% Link ...

  Jeff Bailey   12/26/20,  10:53:43 AM
Steel stocks from this morning's 09:00 Update have NUE $56.60 +2.25% Link , X $35.53 +3.07% Link , ISG $41.10 +1.48% Link , STLD $22.97 +0.96% Link , AKS $4.57 +6.29% Link

  Linda Piazza   12/26/20,  10:48:57 AM
Keltner channel resistance is beginning to gather near 543.85, but short-term and historical support gathers near 543.30.

  Jeff Bailey   12/26/20,  10:47:20 AM
Buy/sell program levels ... HL Camp & Company has posted their buy/sell program levels. Buying set at $-0.34 and sell program set at $-2.24.

Quick review of my QCharts $PREM.X would show no buy or sell program premium alerts so far today.

  Linda Piazza   12/26/20,  10:45:40 AM
So far, the OEX is turning down ahead of the resistance shown by the 30-minute (20,2) Donchian channel, with that upper boundary at 544.13.

  Linda Piazza   12/26/20,  10:41:19 AM
As of a few minutes ago, total volume was only 100 million shares on the NYSE and 183 million on the Nasdaq. Adv:dec ratios were 19:9 on the NYSE and 16:11 on the Nasdaq. New highs were 298 with 7 new lows. I can't caution enough that it's dangerous to risk your money on a day when volume remains so low.

  Jane Fox   12/26/20,  10:39:58 AM
Parmalat, Italy's dairy titan, has filed for bankruptcy. The company has fallen from one of Italy's largest and most respected companies to one of Europe's largest corporate scandals in just a few weeks. Documents show the company systematically falsified its accounts for at least 15 years and raise questions about the procedures used by the Italian affiliate of the international auditing firm Grant Thornton, Parmalat's long-time auditor until 1999.

  Jeff Bailey   12/26/20,  10:38:36 AM
QQQ $36.03 +0.3% ... session high has been $36.09. Not quite to its DAILY S2 of $36.13 and WEEKLY R1 $36.15.

  Jonathan Levinson   12/26/20,  10:37:49 AM
The put to call ratio is up to .68 here, VXO up to 16.49, a 2.3% gain.

  Jeff Bailey   12/26/20,  10:37:40 AM
S&P 100 Index (OEX.X) 543.80 +0.33% ... session high so far has been 544.08. Not quite its WEEKLY R1 of 544.31, and just fraction shy of DAILY R2 544.09.

  Jonathan Levinson   12/26/20,  10:30:18 AM
COMEX is closed today, but spot gold is bidding at 413.60, with the HUI up 3.78 at 233.61, XAU +1.27 at 105.48.

  Jeff Bailey   12/26/20,  10:27:05 AM
Overstock.com (OSTK) $20.70 day trade stop alert at $20.70.

Stock popped to session high of $22.21, but didn't get to target of $22.94.

  Jeff Bailey   12/26/20,  10:25:04 AM
S&P 500 (SPX.X) 1,097.02 +0.27% .... WEEKLY R1 right here. SPX session high has been 1,098.47 and that high may be good enough to give further bullish bias to 1,100, but bulls would want to see this intra-day high taken out in next 30-minutes or so, as market's close at 01:00 PM EST.

  Linda Piazza   12/26/20,  10:23:05 AM
The USDA will conduct a briefing on the mad-cow situation at 11 EST today.

  Linda Piazza   12/26/20,  10:18:09 AM
I'm wondering how our trading might have been impacted if European markets had been open today. The Parmalat scandal continues to grow, with some now estimating that fraud has been perpetuated for as long as 15 years, and that as much as $12 billion euros might be missing. This amount has ballooned up from the original $3 billion euros and Wednesday's estimated $9 billion euros. European commentators speculate on how many other companies might be out there hiding such fraud, and how Parmalat's scandal might impact the banking sector. If European markets were open, we'd be seeing the import of all this news, with the result either supporting further gains on global markets (if they rebound from the news) or causing markets to stumble a bit.

  Jonathan Levinson   12/26/20,  10:09:49 AM
The opening put to call ratio is .56, with the VXO up .25 to 16.37. Again, with volume this thin, it's not worth reading much into today's readings.

  Linda Piazza   12/26/20,  10:06:18 AM
The OEX now tests the 12/23 high at 544.13. Because Donchian channels are built on the highest high and lowest low over a specified number of periods, and since that 544.13 level was hit within the last twenty 30-minute periods, the upper boundary of the (20,2) Donchian channel resides at 544.13. Although the OEX often pierces the upper boundary, it doesn't often see a thirty-minute close outside the boundary. Such closes constitute breakouts. We should consider this a strong resistance level on a closing basis, then, with bears and bulls both on guard here.

One caveat, however: The daily ADX hints that the OEX has begun trending. Breakout signals occur more often and work better in a trending market. I guess we're about to get one of our first tests of whether the OEX can continue trending strongly to the upside.

  Jeff Bailey   12/26/20,  10:06:05 AM
10:00 Internals at this Link

Wednesday's internals at this Link

  Linda Piazza   12/26/20,  9:58:25 AM
The BIX heads toward the descending trendline that formed off its 12/23 high, with that trendline at about 338.40. Here's a question I've never answered for myself satisfactorily: since there was no trade yesterday and hence a gap in prices, should that trendline be translated to the right, as if we'd folded a paper to eliminate the portion with the gap? If we'd done that, the trendline would be crossing higher.

  Linda Piazza   12/26/20,  9:55:12 AM
The SOX is testing the round-number resistance at 500, with gap resistance looming just above near 502. Thirty-minute oscillators aren't giving many clues as to direction, with most of them flat or otherwise inconclusive. As I typed, the SOX surmounted the 500 level and is now above 501, headed toward 502.

  Jeff Bailey   12/26/20,  9:52:30 AM
Overstock.com (OSTK) $21.95 +4.92% .... trying to make a move above BLUE #1. BLUE #2 at $22.49, and BLUE #3 at $22.95.

AMZN building a tight little triangle on its 5-minute bar chart, just under BLUE #2 of $54.89.

  Linda Piazza   12/26/20,  9:51:51 AM
The advdec line continues to climb. As Jane noted earlier with respect to the TRIN and BETA, there's no sign of a reversal here yet.

  Jeff Bailey   12/26/20,  9:47:58 AM
Ciena (CIEN) $6.14 +0.83% ... challenges Tuesday's high of $6.15. Would like to see stock move above this $6.15 level today to help along the "inside day" trade technique.

  Linda Piazza   12/26/20,  9:46:54 AM
The OEX has made it back above the trendline off the December 10 low. Donchian channels and Keltner channels show resistance from 544-544.25, an area that also shows up as historical resistance. That should be strong resistance, but anything is possible in a low-volume environment.

  Jeff Bailey   12/26/20,  9:44:08 AM
5-MRT observations.... on Wednesday, I looke to play AMZN bullish based on OSTK rise, today the opposite, playing OSTK on AMZN rise.

This morning... AMZN trades BLUE#2 (54.89) quick, OSTK now at BLUE #1 ($21.76).

  Linda Piazza   12/26/20,  9:37:11 AM
We have a positive advdec line today, positive by almost 1000 issues. So far, that's supporting a bullish case for today, but we're not yet into the first reversal of the day.

  Jeff Bailey   12/26/20,  9:36:51 AM
Day trade long alert ... Overstock.com (OSTK) $21.38 +2.19% ... market, stop $20.70, target $22.94.

  Linda Piazza   12/26/20,  9:33:23 AM
The OEX traded a range from 542.07 to 542.75 during the first five minutes of trading. The midpoint lies at 542.41, with the OEX currently at that level. The OEX faces 544-547 resistance today, however.

  Linda Piazza   12/26/20,  9:29:27 AM
The OEX is heading up to test that violated rising trendline built off the 12/10 low, with that trendline now crossing at just over 543. The OEX dropped below that trendline late Friday afternoon, so the violation may or may not have been significant.

  Jeff Bailey   12/26/20,  9:11:30 AM
QQQ $35.90 .... Swing trade stop alert ... raising bullish swing trade stop up to break-even of $35.70. Still targeting $36.25.

  Jeff Bailey   12/26/20,  9:09:44 AM
Ciena (CIEN) $6.09 Link ... Swing trade stop alert .... raising bullish swing trade stop up to $6.02. Still targeting $6.45

  Jeff Bailey   12/26/20,  9:07:24 AM
09:00 Update posted at this Link

  Linda Piazza   12/26/20,  8:50:05 AM
We're in for another holiday-shortened light-volume trading session today. Wednesday's decline erased Tuesday's gains in the OEX, but since both candles were small-bodied candles, we don't have a typical reversal signal--not quite a tweezer-top or a classic evening-star formation, either. The 5(3)3 stochastics have produced a bearish kiss, but haven't been tugged out of territory indicating overbought conditions and the 30+ ADX level warns that we can't trust that potential bearish signal anyway. That high ADX says that we should be watching OEX behavior with respect to its moving averages instead. A study of the chart shows that it's far outstripped its moving averages. It may need to pause while those averages catch up or it may need to dip down to re-establish support. The 10-dma is at 538.27, the 21-dma at 531.43, the 30-dma at 526.75, and the 50-dma at 523.64. Of even more importance to the OEX over the last few months has been the 72-ema, now at 520.89. I expect choppy trading into the end of the year, but if the OEX should decline as far as 526-529, I would expect a bounce attempt at that point, because MA support will be joined by historical support that the OEX spent several months establishing. On shorter-term charts, the 30-minute oscillators show a bearish mode, but most slant down at the shallow angle that sometimes hints that they'll turn right back up again with the slightest uptick in price. Sixty-minute oscillators are somewhat mixed, but did show bearish divergence on Tuesday's new relative high.

  Linda Piazza   12/26/20,  7:03:49 AM
Good morning. Some Asian markets opened December 25, but most closed near the flat line. The Nikkei closed down 5.92 points or 0.06%, at 10,365.35. The Taiwan Weighted lost 0.07% and China's Shanghai Composite lost 0.08%. Bourses in South Korea, Singapore, and Hong Kong were closed. The U.S. mad-cow scare still impacted beef-related stocks, with restaurants and meat processors hit hardest, but as was true on Wednesday, the strong performance of financials balanced those declines. As was also true Wednesday, technology stocks turned in a mixed performance. One media report mentioned that Fujitsu and Sumitomo Electric might combine their compound chip operations next spring, with Sumitomo Electric benefiting from the speculation while Fujitsu and rivals Canon and Sony all dropped.

In Friday's trading, the Nikkei hugged the flat line most of the day, too, but saw a burst of buying in the last few minutes of trading, driving the index to its close at the high of the day, up 52.06 points or 0.50%, to 10,417.41. The banking sector was hit by news that the Tokyo Stock Exchange was delisting Ashikaga Financial, but that sector recovered and began making gains early in the session. Tech stock Canon gained after announcing that it would raise its dividend by 67%. Although technology and bank stocks gained in early trading, disappointing economic numbers had hobbled the markets in early going. November's industrial output grew by 0.8% over October's, with that number less than expected; consumer prices declined by 0.1%; and unemployment remained at 5.2%. However, news that China had lifted its tariffs on steel drove steel stocks higher into the close, with those gains adding to those made by the techs and banks. Beef-related shares also bounced after the steep declines in recent days. With the dollar falling during the session, automakers suffered, however. As a reminder, the Nikkei will be open Monday and a half day Tuesday, but then will close until January 5.

Other Asian bourses were mostly higher or flat. The Taiwan Weighted gained 0.06%, but South Korea's Kospi was one of the decliners, falling 0.47%. South Korea's market was again hit by weakness in troubled credit card company LG Card. Singapore's Straits Times gained 0.25% and China's Shanghai Composite gained 0.14%. Hong Kong's Hang Seng remains closed for its holiday session.

Most European bourses remain closed today. Media reports focus on Italian dairy company Parmalat, with a report this morning speculating that the company had been falsifying records for as long as 15 years. Wednesday, the company filed for bankruptcy protection. The FTSE 100, CAC 40, and DAX all remain closed today.

  Jeff Bailey   12/24/20,  9:43:48 PM
Franklin Covey (NYSE:FC) $2.55 +63.4% Link

Nice little move and triple-top buy signal at $2.25 today. No news that I could find, but might be trying to make a run for early 2005. This company makes daytimers and stuff.

I've placed a fitted retracement on the stock from $7.70 to $0.65.

Setting pullback alert at $2.10 to look for a long entry. Would treat this like an option, but look for a triple to $6.00 by end of first quarter.

  Jeff Bailey   12/24/20,  7:34:03 PM
Wednesday's Market Monitor has been archived at this Link


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