• This Week's Trade Ideas:
Bullish: Exxon Mobil Corp. > XOM > $83.57 Last.  Warning: A significant dividend is set to be paid shortly and that could adversely impact the stock price.  Buy the Dec. 1st 82.5 Calls for $1.65 or less with a close or anticipated close above $84.00 in an up market with expectations for continued strength in the XLE and the major indices.  This is an idea that needs a little movement to trigger but has that dividend "monkey wrench" that can't be avoided.

Bullish Mentions: None at this time.

Bearish: None at this time but we are fighting very hard to resist selling too early!

Bearish Mentions: The financial sector.  Many stocks within it have shown very early signs of a short-term cyclical turn.  We'll see soon enough if those signs are onto something.  JPM, GS and BAC would be examples of stocks we're keeping an eye on.

• Market Overview:
Our first look this week is the SPYs, which remain overbought but free of any real selling on any given day much like the rest of the market. Even if the major indices finally begin a very long overdue pullback, there should be plenty of support at various levels all the way down. Our take is that it would take a major “news bomb” for sustained selling to persist. So, for now, we’re forced to remain technically constructive on the market until its complexion changes in a meaningful way.

• Below the Radar:
The long-awaited and much discussed tapering on the way to "normalization" (as if anyone remembers what that means or looks like) proceedings have begun at the G3 Central Banks but US Stocks, as with anything else potentially negative, care not in the least. Historically, the bond market has always been viewed as the "smarter market" relative to the stock market. We'll see who wins this round in the near future.

• Options Academy:
Recently, at our live training events, ONE question more than others has surged in popularity: "Can you show us the right way to sell "naked puts"?, I've heard it's a good strategy" Take that as you will but it is more than a little concerning to us that new-to-options investors and traders are hellbent on selling puts with market indices lurking near all-time highs nearly 9 years into the Great Inflation Bull Market. Now that that's out of the way, let's take a look at things...

The Great Melt Up should be tiring but will it?

The Trade(s):

We strongly suggest attending tomorrow morning's Advantage Point Morning Call for full details with respect to these idea(s), last week’s and options education.

It may not be over yet but there’s much more risk than reward at this juncture if history is a guide.

Bullish Ideas: Exxon Mobil Corp. > XOM > $83.57 Last.  Warning: A significant dividend is set to be paid shortly and that could adversely impact the stock price.  Buy the Dec. 1^st 82.5 Calls for $1.65 or less with a close or anticipated close above $84.00 in an up market with expectations for continued strength in the XLE and the major indices.  This is an idea that needs a little movement to trigger but has that dividend "monkey wrench" that can't be avoided.

Bullish Mentions: None at this time.

Bearish Ideas: None at this time but we are fighting very hard to resist selling too early!

Bearish Mentions: The financial sector.  Many stocks within it have shown very early signs of a short-term cyclical turn.  We'll see soon enough if those signs are onto something.  JPM, GS and BAC would be examples of stocks we're keeping an eye on.

Outlook:

The NOT-EVEN-A-HINT of volatility environment is making it near impossible to find good bullish ideas with stocks jacked to all-time highs and well overdue for a pullback.  We can't get "beared" up yet and fortunately we've been patiently avoiding that trap.  It's been another rough week for easy ideas and a week that should see a pullback in the major indices but then again, we very well may not.

Technicals:

Will be discussed in-depth in the Advantage Point Morning Call webinar.

Fundamentals:

These trade idea(s) and mentions are technically-driven.

(Editor's note: This trade idea may be updated periodically, in keeping with market conditions. It is intended solely for educational purposes.)

Recap of Last Week:

CMCSA, our bearish idea from last week, fell somewhat and did make a new low even as the markets were making a new high.  However, we didn’t get the next leg of follow through we hoped to see and the indices and competitor stocks especially remained resilient or move up strongly on news.  It was for these reasons that we sent out an update on Tuesday morning outlining that patience may not be a virtue in the case of this idea.

Bullish Mention MOS, hasn’t done much at all to speak of and Bearish Mention QCOM wasn’t a possibility until post-earnings to begin with and then became a non-starter on earnings and other corporate action news that hit the tape very recently.  We’re most definitely moving on from these stocks for now.

Our first look this week is the SPYs (Above), which remain overbought but free of any real selling on any given day much like the rest of the market.  Even if the major indices finally begin a very long overdue pullback, there should be plenty of support at various levels all the way down.  Our take is that it would take a major “news bomb” for sustained selling to persist.  So, for now, we’re forced to remain technically constructive on the market until its complexion changes in a meaningful way.

Both the DOW and Qs are, more or less, in the same “boat” as they SPYs:

There should be MANY support levels on the way down if we even see a little selling.  Without a change in the news dynamic, there remains no reason to begin fighting in a big way with the technicals in place as they currently are, at least as we see them.  Expected news isn't likely to deliver much as this may be the lightest news week of the year given what’s slated for dissemination but the way that potential acquisitions are flowing, there could be much more news that hits the tape that’s unexpected.  All we can do with news now is wait and see.

This week we'll start the proceedings by playing "Spot the Odd One Out":

The long-awaited and much discussed tapering on the way to "normalization" (as if anyone remembers what that means or looks like) proceedings have begun at the G3 Central Banks but US Stocks, as with anything else potentially negative, care not in the least.  Historically, the bond market has always been viewed as the "smarter market" relative to the stock market.  We'll see who wins this round in the near future.

Above is more evidence of the "calm" in US stocks.  Virtually nothing is happening aside from wafting higher and higher each day on light volume with very little volatility.  Weakening market breadth has been masked very well by the heavy weights jamming higher and then higher still.  Intraday trading ranges are very small.  Intraday selloffs are very mild and erased routinely by 4 PM Eastern Time.  Even swing trades are becoming near impossible without guessing on earnings or economic releases as "normal" cyclical movement from swing lows to swing highs has been greatly dampened.

In BTR we've tried to consistently focus on metrics and graphics that help remind us of critical things that many have lost sight of in this euphoric phase we're experiencing.  In that vein, we present yet another to place the lack of volatility and selling of any meaningful kind into better perspective:

This is one reason why you've used the word "overdue" so many times over the past several weeks.  We had good reason to believe the Wall St. Gang would use the earnings season to jack and re-jack stock prices higher, which they did, but now that they have, we have even less to pick from!  We need some kind of "yang" to occur so we can smartly enter in expectation for the next "ying" to the upside.  That's just hasn't been possible as "back offs" haven't been present.  Hence, where we now sit:

Aside from the obvious elevated state of things, and a few early concerns cropping up in increasingly debt-dependent/liquidity-dependent/USA-mimicking China:

There's scant evidence of anything in the US that would cause a selloff of significance.  Typically, the final two months of the year tend to be bullish.  However, we were able to dig up something but it is not a lot to hang our hats on:

As we recently saw a reading of over 60 in the ISM, this may not portend well for the next 3 to 6 months quite simply because the reading doesn't often get much better than that.  It could be different this time given the administration's focus on this area but we'll have to wait and see on that before declaring anything either way.

The only other area of note this week (which hasn't mattered much either!) is further evidence of "one side of the boatedness" spreading like a virus:

More on more folks are being drawn into selling volatility short.  It's becoming a "pandemic":

We can't help but feel, based on 25 years of close-up observation and participation in the financial markets, as though something should happen much sooner than later.  Yet, we also haven't seen the final "take your breath away" manic surge to the upside that's typically signaled the end of a bull market or larger wave within one.  Instead, we've seen an epic slo-mo volatility-less grinding out of existence of the bears.  There are no rules that insist that something should happen in ways we expect even if they're historically well-founded.  Perhaps it's too much to ask the most hyper-engineered bull market to show us something that only far more natural markets have exhibited.

Recently, at our live training events, ONE question more than others has surged in popularity:

"Can you show us the right way to sell "naked puts"?, I've heard it's a good strategy"  Take that as you will but it is more than a little concerning to us that new-to-options investors and traders are hellbent on selling puts with market indices lurking near all-time highs nearly 9 years into the Great Inflation Bull Market.  Now that that's out of the way, let's take a look at things...

We're actually big proponents of put selling (not naked selling however) although there may not be one "right way" to sell them.  We like many things about put selling, for investors that is, and we certainly agree that it can be lucrative.  Let's take a closer look.

This example in Apple is one that we used at our most recent event:

AAPL Stock Price $174.60

AAPL Dec. 8^th Expiration with a Strike Price of $172.50 at which the Put can be sold for $3.10.

Now, let's do the math.  Since this is an OTM put, if it remains so, we keep $3.10 per share or $310.00 X 100 shares associated with the option contract.  If we do it 10X that's $3100.00.  That's pretty nice for about one month's worth of "premium collection" on an obviously great and extremely successful company.  And, that's why the question's frequency has surged recently.  The never-ending series of relentlessly higher stock prices have made it possible to collect quite a bit on many stocks with just 10 contracts.  That's intriguing to many people seeking income and we'll need not argue as to why.

If AAPL moves up or "sits still" for about a month then the $3100.00 is theirs to keep.  That's a very nice return in that much time on a stock of AAPL's price.  It sure beats letting the FED beat you senseless as a saver by staying with offerings from banks!  What if the premium collection attempt goes awry?  Well, the put sellers would be forced to take delivery of shares of AAPL for an effective price of $169.40 ($172.50(strike price) - $3.10(premium for the put per share basis).  This assumes AAPL falls below the short strike of $172.50 (so there's even a little buffer if the stock does fall by the way). So... the way these new folks look at it (after we lay it all out for them), which is true, is that even if they were forced to buy AAPL, they'd be picking it up at nearly a 3% discount to where they could buy it right now. (($174.60 - $169.40) = $5.20) / $174.60 = Roughly 3% lower than the current price.  Again, what's not to love?  We AGREE!  But here's the rub...

We inform them that "naked selling" can be dangerous because stock prices can fall very fast at times.  You'd have to check with someone born in the 19^th century to hear an account of what that's like but it has happened!  It's just that very few are alive to have witnessed it!  The response we always hear back is that "I'm not worried because I'd only do this on stocks that I would buy any way'.  We're sure that most mean this when they say it but we KNOW from working with people that once naked put selling works and works, most will become greedy and sell and sell and sell on stocks that they really DON'T want to buy.  Which brings us to our final points for this for the week.

What happens when all stocks fall hard at the same time?  Are you really prepared to buy them all?  Do you have enough freed up capital you can commit to that?  Do you have a plan in place on how to handle them when you own them?  ARE YOU SURE you really will want to buy them?  More than likely, we'll pick up on this discussion next week.

Have a great week!

The Advantage Point Team