The Stock Market

     

 

 

Second Helping

The first round of our IV crush earnings plays was a resounding success and as there’s about a week’s worth of announcements left in this quarter we are pumped and ready for a second helping.

 

vega crushThe next round of Operation Vega Crush begins

Photo via artcarcentral.com

 

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Operation Volatility Crush – Post Mortem

[ed note: this is a follow-up to “Let’s Crush Some Volatility”, penned by the aptly named Ray the Options Executioner for the Evil Speculator]

Our introduction to earnings-based options strategies has started off with a bang. Actually, it’s hard to imagine a much better results for our first option campaigns. Granted, we’ve been doing this stuff behind the scenes for a while, and we expected the options strategies in FB and FSLR to succeed. Still, you gotta love when what happens is pretty much exactly what you predicted.

 

make_it_rainThe rainman

Photo credit: musictory.de

 

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Stampeding Animals

The mass impulse of a cattle stampede can be triggered by something as innocuous as a blowing tumbleweed.  A sudden startle, or a perceived threat, is all it takes to it set off.  Once the herd collectively begins charging in one direction it will eliminate everything in its path.

 

bison-herdBetter get out of the way… stampeding bisons

Photo credit: Surface Niusance

 

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Searching for Victims

If like me you were a Monty Python addict back in the days then you are probably familiar with the phrase ‘And now for something completely different’. As you probably know we’re in the midst of Q2 earnings season right now, and Jay The Executioner in collaboration with yours truly has been on the hunt for potential IV crush victims.

 

crushing_tank-1000x622A tragic victim of Operation Volatility Crush.

Photo via gdefon.ru

 

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Market Breadth Divergences

[ed note: readers not familiar with Frank’s trading system can look at an introductory article here: The Modified Davis Method

Over the years I have developed a lot of respect for the condition of bearish breadth divergence, when an index such as the S&P 500 is rising and the NYSE daily cumulative advance-decline line is not.

 

1-NYSE-a-d-lineNYSE advance decline line vs. NYSE index – currently breadth is strong, as many of the market’s previously weakest sectors (particularly commodity stocks, transportation stocks and industrials) have begun to rally strongly. However, tech stocks and other momentum favorites have begun to lag – click to enlarge.

 

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The Largest Online Marketplace in the World

This company is twice the size of Enron at its peak ($100 billion). Pharmaceutical giant Valeant, which blew up in the last year, was only $90 billion at its peak. Before I get to what the stock is, let me tell you where it is: China.

I recently heard an excellent presentation by Anne Stevenson-Yang at Grant’s Spring Investment conference. Stevenson-Yang is the cofounder of J Capital Research, based in Hong Kong. J Cap provides independent research on China’s stocks and its economy.

 

Jack MaCEO Jack Ma, wagging a finger (bad sign)

Photo credit: Kiyoshi Ota / Bloomberg

 

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Buy Low, Sell High?

It is an old truism and everybody has surely heard it more than once. If you want to make money in the stock market, you’re supposed to buy low and sell high. Simple, right?

 

mad_professor-600x399Successful stock market investing in two simple steps

Photo via slideshare.net

 

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Dismal Earnings, Extreme Valuations

The current earnings season hasn’t been very good so far. Companies continue to “beat expectations” of course, but this is just a silly game. The stock market’s valuation is already between the highest and third highest in history depending on how it is measured.

 

NYSE

Photo credit: Kjetil Ree

 

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Volatility over the Long Term

No matter if you are a hard nosed trader or a casual investor, every once in a while it’s advisable to detach yourself from the daily grind, sit back, grab a hot beverage, and parse through some long term charts. Although the don’t affect our daily entries here at Evil Speculator, they do give us a better view of what type of market we are navigating and thus how we may have to adjust our trading patterns.

 

2016-04-13_trainImage credit: Walt Disney Pictures

 

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Options Expiration Ante Portas –  Just as a Resistance Level is Reached

After we had penned our little missive on the breakout in gold stocks on Monday, it dawned on us that an options expiration takes place this week. Normally, gold stocks decline into the expiration date. Don’t hold us to this, but the last time we remember call writers being forced to delta-hedge their way out of trouble in gold and silver stocks right at the end of an expiration week was sometime in 2006.

Given this backdrop and the recent breakout, we decided to take a look at weekly lateral resistance levels in the HUI – not least because by Monday’s close, it had actually reached one of those. Here is a chart showing all the important medium term support and resistance lines, plus a possible future path for the index if the breakout actually holds up (obviously, this path is pure guesswork).

 

1-HUI, weekly resistanceWeekly resistance and support levels in the HUI. The weekly RSI hasn’t been this overbought since 2006, but this is actually a long-term bullish sign, if somewhat concerning in the short to medium term. The index has now reached the first major post breakout weekly resistance point, which is defined by the early 2015 high as well as two interim lows made in 2013 and 2014 (follow the red circles). To the right, we show what might happen if the breakout actually holds – click to enlarge.

 

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Everything Is Nonsense

 

If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?

– Alice’s Adventures in Wonderland

 

Mad_Hatter_0011A public service message from the Mad Hatter – bad news is bad. Ominous, even. Hat help us all!

Illustration credit: Bob Kane

 

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Surprising Strength

Similar to many others, we have been waiting for some sort of correction in gold and gold stocks, but obviously, not much has happened in this respect so far. We have written quite a lot about gold and gold stocks between August 2015 and February 2016, because we felt a good opportunity was at hand – a short term trading opportunity at the very least, but one with the potential to become more than that.

 

Sotuh Deep gold mineInside the fully mechanized South Deep gold mine in South Africa. Maybe it’s worth to keep digging for more after all?

Photo credit: Themba Hadebe / AP Photo

 

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