The key take-away here is that for the first time since March, 2024, the Fear & Greed index is knocking on the door of Extreme Greed. The last time resulted in a mild 10% correction into the May market lows, so that would be the minimum to be expected once the market turns down from current levels. Fear & Greed Index Since the "Crash Window" has been extended to accommodate domestic electoral politics, let's be especially diligent and respectful of trailing stops, whether it be on PLTR, GLD or any other options being held in our trading accounts. Protect gains first, make money second. On the latter, if the market shows signs of giving up the ghost, expect another round of index puts to be considered, as early as is feasible based on traditional timing tools. Otherwise, we will continue to roll with a couple of huge winners for us over the past few months, looking to add others along the way. No FOMC until after the election, so no monkey wrenches to distract our trading and finally, at the end of this update are a couple of big picture charts, DJIA and SPY, along with a reminder, October has some of the biggest tops in history and there is reason to be on the lookout for breakdowns in the two biggest stock indices. Continuation on A Theme Last weekend exponential returns were examined as a viable trade management tool. The response has been enthusiastic so let's take another look at those trades with another week of trading under our belts. Gold (GLD) Gold (GLD, GDX) and Silver (SLV) continue to shine and look to be in robust bull markets where retracements will be sharp, but subsequent rises to new highs even sharper. Usually commodity bull markets are measured in years, and run longer and higher than anticipated. If this one falls into that category, there will be multiple opportunities to replicate what we have already done in 2024 in the months and years ahead. An example of exponential growth of $1,000 to just under $20,000 in about seven months, when we get the trend right and continue to roll-over expiring options with that trend. The arrows represent the initial Buy-in (Mar 1), followed by two rollovers in out-of-the-money GLD calls. There are variations on this theme, for better or worse returns, but you should get the idea, go with the trend, assume some risk (50%) and sometimes you get lucky. PLTR This is an example taken from the PRO Service, which was trading PLTR calls about two months before the Premium Service joined in. As with GLD above, exponential returns, where $1,000 could have been turned into over $20,000 by pyramiding gains with new strikes and expirations as PLTR share price doubled from $21 to $42. ----- Premium Subscribers joined in the fun July 15th, with one early rollover on Oct 2nd because the calls we bought just-out-of-the-money very quickly became deep-in-the-money. ----- Bitcoin (BTC) Monitoring BTC for a confirmation of the above bullish wave count; if so confirmed a series of BITO calls, rolling over as BTC runs to triple digits. Crash Window - Revisited Whereas October is the typical month for market crashes, this year it is being extended by what is shaping up to be an election and aftermath of epic proportions. Market crashes do not typically occur off of top tick in the stock indices, but usually just a ways below top tick. On the chance that this market has seen its best levels as of yesterday, October 11, 2024, as it did on October 11, 1929 and October 11, 2007, the latter two preceding historical market crashes, let's be wary of any big picture breakdowns (as set out below) in the weeks ahead. DJI - Daily Sell Signal: Close < 42,400 Sell Again: Close < 41,200 SPY - Weekly A fresh red down arrow, i.e., SPY Trend Model Weekly Sell Signal, would be the first trigger to add puts, contemporaneous to or followed by breakdowns: Sell - Weekly Close < 567 Sell Again - Weekly Close < 560 Crash Window Trading Notes The signals above are triggers based upon basic pattern recognition principles, where an established trend (five clear waves up) gets broken in an overextended market. No doubt there will be other reasons to take the suggested trades and we will go more extensively into them when and if the breakdowns occur. For now, any of the breakdowns set out above would be enough to establish a short position in 45-90 day out-of-the-money puts. I will have more to say, along with more specific option picks, should those breakdowns become imminent.
