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Last two weeks I was quite busy over the weekends and had no time to write my overview and expectations. Today, I am going to catch up on this deficit. My goal is to have these reviews on regular basis, if possible.

Let’s review the market

Two weeks ago, I posted my expectation of a measured move of the market and where we may go ①. Fast forward two weeks, and we are right there already.
When we broke from a base, my expectations were that we may reach 3225 level. This Friday, the market reached 3221 level (note, the numbers are not an exact science and it can be a number in its vicinity). I think, we reached the level as expected.


But, looking at the chart ① I must admit, I no longer like it. I think, we are over-extended and due for a serious pullback. Now the question is, how deep a pullback and when will it happen?

Before I get to my expectation, let’s take a look at SPY chart ②. The trend would be OK if it wasn’t accompanied by a HUGE VOLUME. We may be experiencing a bull trend capitulation and if so, we are due for a serious pullback here.


Where can we go?

There are a few possible levels – an obvious one is a 50 day MA at 3100 level. Or we can go and retest the breakout level at 3030 level.

Personally, I think, we will see the large pullback early next year (possibly March 2020) and minor pullback either next week or in the first two weeks in January. I do not have a crystal ball so we have to sit and wait to see when it really happens and how deep. Nevertheless, it will be a great opportunity for sure. So, when trading these few weeks, trade cautiously and do not over-extend your trades.

There is one thing which may come into play and cancel all this pullback thinking. If you look at the longer time frame of the chart ③ you will see that for the last two years (since 2018 which started with a large selloff) the market went nowhere. It was pretty much flat.


We had a breakout in July but that breakout failed and we went sideways for another 3 months before we finally broke up in October and rallied since then to the level where we are today.

When we look at the previous decline, we can see, that the market went from 2942 and dropped to 2399 level, a 543 points drop. If we use a measured move again, then from the breakout level at 3030 our next move expectation would be at 3573 level, see chart ④. This is my expectation for the move until possibly in March 2020 (or maybe sooner, maybe later). This is also why we decided to place our SPY trade (details here: https://tinyurl.com/wco3pyl) to take advantage of this move. After that we expect a pullback or a bear market to hit us. Thus, I expect only a minor pullback in the coming two to three weeks, possibly to 3100 level only.


Open trades:

#46 – IWM long strangle – https://tinyurl.com/vq8gtcs
#48 – OXY bull put spread – https://tinyurl.com/v4nq6n5
#49 – DHI bull put spread – https://tinyurl.com/uuxl9bh
#50 – SPY calendar call spread – https://tinyurl.com/up4vxo4
#52 – SPY long call butterfly – https://tinyurl.com/wco3pyl

During last two weeks we opened a few new trades. You can review them one by one above. Also make sure to follow the comments under each trade as we post our adjustments, comments, and reviews for each trade. You can also review those trades in our spreadsheet ( https://tinyurl.com/y2lzx5vs ) which contains a link back to the Facebook page listings.

Last Friday (December 20th) was expiration Friday and we had two of our trades expiring that day – PBCT ( https://tinyurl.com/sajds2z ), and PPL ( https://tinyurl.com/r6u4xjw ). Both trades expired worthless for a full profit. Both companies report earnings in January, therefore we will not be re-entering those trades at this time and wait for after earnings reports.

We also closed our IWM long call trade ( https://tinyurl.com/yx6ae54e ) for a profit. Although the stock seems to be in a good trend move to the expected level of 170 and possibly to the previous 175 high, see chart ⑤, I think we are extended to re-enter the trade now. We will wait for a pullback to re-enter a bullish trade.


Stock holdings:

3 HP (+1)
3 PPL (+2)
4 OXY (+3)


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