Tom’s Weekly Newsletter March 1 2023

Originally published via our newsletter previously. Subscribe for early access!

A Strong January for the Markets Followed by a Weaker February 

It seems what investors feel about the continued fight the Fed is going through to stave off inflation and how that affects the ongoing rate hikes will determine if February is a consolidation period before price go higher or not.

Corners of the Market

SPY – SPDR S&P 500 

TLT – iShares 20+ Year Treasury Bond ETF

The peak charts have populated two support lines near where TLT is trading right now.

This past month equities and bonds (SPY and TLT) have traded in a more correlated manner, which is atypical to what they more often than not tend to do and that is trade inverse to each other.

The markets are currently in a 4-day slide and TLT is now bouncing slightly higher.

I pointed out in the image above’s annotation that it is in a a small bounce, but know bounces in TLT have been sold off before.

I can’t predict what will happen but should the slide in equites continue that could lead to higher price action in TLT. The most recent pivot low is support and if it breaks that lower the next picot low is really close.

UUP – Invesco DB US Dollar Index Bullish Fund

A bit of education on the Darknet ‘S’, Stop or Stall signal.

In the early days of showing Darknet it was said the S signal is a Sell signal, but over time we realized people may take that as the signal to either sell short or sell to close their position.

We say the ‘S’ signal is now a Stop or Stall signal, meaning the security could stop its current run up or it may stall a bit before continuing higher.

Please don’t take this to mean sell short or stop out of a trade.  If you see that S signal do your own assessment at that time if you feel you want to exit a trade or initiate a bearish trade – talk it over with your broker.

The S signal has seen the security stall, consolidate and then continue higher so please know that.

USO – United States Oil Fund, LP

The Darknet B signal from last week was tested yesterday. It gapped up today from that support level and is thus far in a holding pattern for today.

The peak chart lines are brought in for this weeks Weekly Newsletter to help visually emphasize more clearly support and resistance price levels.

A close at the low if yesterday’s price range was bearish, but the gap up today shows the support level ‘may’ hold.

We are in the start of the seasonally bullish 5-month pattern for oil so that may help this price level hold.

Should a breach of that support level lower happens it’s possible the next support level down at the price of 63 holds.

GLD – SPDR Gold Shares

Tools and Observations

Darknet plus Fibonacci

Since I have been highlighting the Fibonacci retracement zones in the chart images of some of the charts in the Corners of the Markets section of this Newsletter.

One thing that can be done with the charts of securities that come up in the Darknet scans is plot a Fibonacci retracement view on it.

The Darknet scan already accounts for securities testing multiple (different time interval) channel support levels.

If you want to see one extra layer or visual example of a potential support for that security you can look at the chart of the security that pops up on the Darknet scan results list and then plot the Fib tool on it.

If the security is also testing a fib support level maybe that gives you an extra bit of confidence in considering the option trade on it.

Here is the first 10 listing of a current Darknet Scan search:

The security meets the Darknet scan criteria and it is testing a fib retrace level. 

If this appeals to and you look further into consideration of the option the Darknet Scan and tools finds that has the lowest percent to double calculation.

“Percent to double is a reading showing how much of a percentage move higher (in this case) and the corresponding price that percentage equates to.

It’s that percentage / price that the security has to be at come options expiration for the premium of that option to be at a valuation of a double.

Click on the green hyperlink of the option in the Darknet scan results table for the option it shows.

I highlighted the risk and Entry Debit as they are both the same at $0.60, and $60 per contract.

Position-size up to your max risk threshold to determine the number of contracts.  If one doesn’t want to spend/risk $300 on the trade the max number of contracts would be 5, (5 x $60 = $300).

A piece of analysis one can accomplish with my tools is calculate where the stock needs to be at certain time intervals between the time one enters a trade until expiration day in order for the value of the option premium to double.

If one bought to open this option shown at $0.60 then a double would be if it was at $1.20.

We look at worst case scenario in that what if you had to wait until options expiration for it to get to the price needed to double at that time.

That data is found at the bottom of the Risk Graph page title Statistics and Probability.

What the above chat shows is at expiration (O days left) the security would have to be up 5.3% or at the price of $36.20 in order to see the potential double in valuation of the option.

Again, discuss this with you broker if you are considering it before actin on it as we are NOT registered investment advisors, and this is NOT a recommendation.