Tuesday Update: Rules and Guidelines

Rules and Guidelines


AAPL will generate an Intermediate Term Buy Signal on a close today above 172.68. If triggered we will be buying the May $175 calls in the Intermediate Term portfolio.


Since so many of the models are Short, this will be a nice hedge whether you like the trade or not. 


Stop: Exit part or all of the AAPL May $175 calls on a trade below $7.05

The intermediate term trading table below has been updated to show each options' price either via the stopped-out price (column J), current price  (column L) and maximum reached price (column N). However you choose to manage your trades, your own returns will be based upon price(s) somewhere between those three numbers. We decided earlier this year to turn stop management from a "rule" to a "guideline." If you need a rule for your exits, it's there. If you prefer a little wiggle room in your trade management, that's there too. The only caveat then is that wiggle room or not, if the underlying trend changes from Long to Short or Short to Long, that is a RULE, i.e., no wiggle room there. 

The purpose of stops is to control the risk of ruin. That control has a price: The risk of missing out on further gains. One compromise that we have recommended is to respect stops for half (more or less) of the position and let the trade unfold, for better or for worse, on the remainder of the position. 

The trading tables reflect that guideline by indicating "stop-pricing" and "unfolding-pricing." Every attempt that has been made to integrate all of the above into the table has resulted in just too much data, numbers overload and visual complication. Nonetheless, there is a enough in there to make your way through these trades. There are some gems, there are some stinkers, but that is the nature of this game we chose to play. 


VXX and SPY are both every effective vehicles to get back into the market long or short. In fast market conditions, this is where I first look to add to or initiate positions where stops may have left me underexposed to the dominant market trend. 

Charts of Interest

The broad-based New York Stock Exchange Index came right up to its trend-signal line and turned down. Sometimes in technical analysis you just have to believe what you see. This is a bearish chart. 

The 10 YR T-Note reflects a significant rise in interest rates, from about 2.0% to about 3.0% over the course of the past six months. One-percent may not seem like much, but a 50% rise in rates, i.e., from 2 to 3%, is a big deal. Think of 10% to 15% in six months. 

The inverse of rising interest rates is the falling of bond prices. We missed an exceptional TLT short only because we are not trading bonds in either portfolio. That may change...soon. 

Ditto this TBT Long (TBT is an inverse bond ETF).

Tuesday's Trading Tables