Covering High return Balanced Investing Strategies To
Make Money In Up Or Down Markets
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King, Charles Moskowitz
August 20, 2017
Charles Moskowitz Discussion
Week 33 was a small loss of $210 bringing YTD gains to $11,073. We have only 1 position of the remaining SKYW calls using $240. The first half was sold at a 300% gain, so there is no cost for this one.
The week was another reason to believe we are in a correction. To be 100% technical we have now made a new high and had a “reversal week” and a break, a rally that failed at the point of breakdown, another rally and failure at the prior break and another break. This occurred on the DJIA, S&P500, and NASDAQ. In fact, the only place it did not occur was the Transports, which is down over 7.6%, has broken not only the 13 and 50, but even the 200 day moving averages. So if you subscribe to the Dow Theory, and the idea that the Transports lead the rest of the market, we are already into the correction. A look at some of the 20 stocks that make up the DJ Transports and it gets even worse, with very long uptrends being broken for the first time in years. Only the DJIA is above the 50 day.
One of the groups that has had a deep dive lower is Retail. From its monthly high of $51.25 in 4/15 to this weeks close of $48.19 we have seen a 26% drop while the other markets have made new highs. Stocks like Macy’s (M) has made a 7 year low after all-time new highs ($72) in August 2015 we have fallen to $19.49, a drop of 73%. Losses in many of the others, DDS -60%, JWN- 50%,and KSS -56%. While the market has worked higher this group has been affected by growth in consumer credit and a pickup in auto subprime debt (now stretched to as much as 72 and 84 month terms) and the declining mall traffic. On the technical side of the XRT chart we are back to support here from 2/2014 @ 38.40 and 2/2016 @ 37.80. We are only slightly oversold. A break here and we could test the monthly low of 32.44 made on the last major breakout in 2/2013. The big names have been soft too, with GOOGL and AMZN both below their 50 day moving averages and NFLX and NVDA resting on theirs.
With all these factors, you would think lower prices are coming, but my tactic is to take advantage of the closeness of the lows to be a buyer using the breakdowns as my stopping-out point. This will be the method for the week (or weeks) coming. It may cause some small losses, but even 1 or 2 that hold and start higher will make money.
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New Trades Options Account
( 1 ) Buy 10 M September $ 20 Calls @ $ 0.42
( 2 ) Buy 6 CSTM Sept $ 10 Calls @ $ 0.80
( 3 ) Buy 4 NVDA August 25th $165 Calls @ $ 1.10
NEW Trades $ 100 000 account:
( 1 ) Buy 20 M September $ 20 Calls @ $ 0.42
( 2 ) Buy 12 CSTM September $ 10 Calls @ $ 0.80
( 3 ) Buy 8 NVDA August 25th $165 Calls @ $ 1.10
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