By: Tom Gentile
on May 17th, 2023
Originally published via our newsletter previously. Subscribe for early access!
Dow Suffers its Fourth Down Day in a Row. Is There More to Come?
It is possible the Dow continues to slide. The NADAQ however is positive on the week and the S&P500 is basically flat.
The drag on today is being largely credited to shares of Disney trading significantly lower on their earnings and guidance.
Another troublesome sticking point for the markets is yet another regional bank stock is stating their troubles.
PacWest Bancorp let it be known the amount of their bank deposits fell 9.5% during the week of May 5. In one sense you have Jamie Dimon from JP Morgan Chase saying the worst is over and the regional banking crises may be behind us and another story like this pops up, re igniting the concern of the regional banks.
Take in to account the battle in congress on whether or not to raise the debt ceiling and these two items are not doing well for confidence.
One slight bit of a reprieve may be that the PPI report showed an increase of 0.2% on a monthly basis in April. This a day after the CPI from Wednesday showed inflation rose 4.9% from a year ago, below expectations.
Initial jobless claims grew by 22,000 for the week ending May 6 to 264,000, the highest reading since Oct. 30, 2021.
This rise in jobless claims could be evidence that the labor market is easing.
— Tom Gentile
C1P: Chief 1-Percenter
Corners of the Market
SPY – SPDR S&P 500
The last two trade days, post the economic data that came out prior to the market open, saw the SPY trade much lower on its day.
Where the SPY looked like the bears were in control and going to drive this thing dramatically lower, the bull stepped in to bring it off its lows each day.
The chart above shows a pinching of price or what is shaping up to be a symmetrical triangle pattern.
The overhead resistance is still intact, but if SPY gets pushed higher out of the triangle pattern. There is a chance that resistance gets breached.
The key thing to watch SHOULD that happen is if it can hold that price and be a false breakout.
TLT – iShares 20+ Year Treasury Bond ETF
The longer-term symmetrical triangle pattern has been in place for months.
TLT bounced off the ascending support of that triangle a few trading days ago.
Will it trade up to the resistance of the triangle and eventually break out? Too early to tell, but from the perspective a security can trade consistently between a support and a resistance area, it is possible a test of the resistance is possible.
Thing is, should TLT make that move it may come at the expense of U.S. equities.
If SPY trade to the upside, the move in TLT higher may NOT happen and a retest of the ascending price support comes more in to play.
A Darknet B or Buy signal happened at 104 but that does not mean it can’t or won’t trade a bit lower forming R Re Bullish or A Aggressive/Abandon signals.
UUP – Invesco DB US Dollar Index Bullish Fund
There isn’t much difference in opinion this week from last week regarding UUP helping gauge a directional bias for U.S. equities based on trend going on with UUP.
That’s because the only trend going on right now with UUP is sideways.
And though that is a direction it isn’t the type we are looking for.
We do not trade option on UUP as the security itself is not that robust in its price moves to be deemed capable to provide us a large enough move to make the options on it that lucrative.
However, we generally see an inverse trading relationship between equities and the US dollar and if UUP was trending higher or lower we could assess an opposite directional bias for equities: it’s not happening right now.
USO – United States Oil Fund, LP
An island cluster is when one or more trading days activity shows up on a chart that has a gap in price to its left and its right.
It shows up and could lead to a reversal, where the security that has a cluster in price at a low point of its trend or a support area may trade higher.
It may not happen right away and there is the chance the security fills the gap lower before it takes off.
63 can be looked at as a minor support, minor in that it hasn’t trade at that price level for a lengthier time frame past a handful of days.
It is a small support in terms of time traded at that price level, but should it hold, that could lead to a price move higher for USO.
GLD – SPDR Gold Shares
It’s been awhile since a Case Study was shown in the Weekly Newsletter, so take a look at this.
Remember a case study is NOT a trade recommendation. We do not do that.
It is a trade found with the tools and the purpose in showing this is to educate you all on how we go about using the tools to find a trade idea.
But that is ALL it is, an idea. It is not a trade we are providing for all to go trade, but to rather see how the process is executed so one can decide if they want to continue to use the tools in a fashion that helps them find their own trading ideas to discuss with their broker(s).
For those subscribing at least to the Contrarian Trader level, you all have access to the Darknet Scans.
There are multiple videos in the Free Videos section to train you all on Darknet.
One of the great things about Darknet and the scan in our tools is it not only find the Darknet pattern and provide the signal on a chart for you (B, R and A signals indicating possible price points where the security bounces or trade higher from.
Click on the icon in the orange square in the prior image and you get to the Darknet page.
Once there go to this rectangle of info and click the dropdown window and select Call Option Trades.
Here is today’s results list:
Click on the green, underlined hyper link for the trade shown as that is the one for that underlying security that has the lowest percent to double.
That means how much of a percentage the stock theoretically needs to go up to see its option double in value.
What those prior two images show is the (top image) cost $3.35 per contract or $335 cost per contract.
The bottom image, Statistics and Probabilities shows if 0 days left or at expiration, RTX needs to be at $99.70 for the stock option premium to double in value.
— Tom Gentile
C1P: Chief 1-Percenter
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