12/1 Almanac

On Thursday, Dec. 1: Weekly jobless claims, the ISM manufacturing index.

There are 16 days before the December options expire, 51 the January, 79 the February and 107 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/30 Covered Calls

This daily posting tracks my covered call plays and other base positions.

Everything flipped from sort of bearish to bullish -- at least for the day -- with the Federal Reserve’s decision to help out the Europe repair the Euro by injecting liquidity into capital markets. Bloomberg’s write-up.

This was great for my covered calls, and awful for my bear plays.

Problem child DDS (see Tuesday’s Covered Calls) stopped falling but also didn’t rise. I’ve opened a countervailing bear position on DDS to insure my covered calls.

Also, I opened some bear positions on Tuesday, and that clearly was an action that stands on the wrong side of history, at least for the near term (see the Other Base Positions section).

The key question, I think, is one of magnitude. No prices broke beyond their weekly-chart price channels. The daily-chart relelative strength index has popped into overbought territory (above 70) on any holding. That goes both for the covered calls and the straight bear positions.

So my tactic at this point is wait and see. We’ve got the employment report coming out on Friday -- that’s an opportunity for the market to again turn negative. And I have several months before my long puts come close to expiration, so there’s time to see what transpires.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
DDS
GDX
LVS
RIMM

11/30 Indicators

The markets this morning...

Sharp opening gaps across the board as the Federal Reserve intervenes to increase liquidity as a way of helping Europe preserve its common currency, the euro.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) is trading within a downtrending channel that began May 2.

QQQ (Nasdaq 100) is within a sideways channel that began Aug. 8.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) is trading within a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began July 18.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading within a downtrending channel that began May 2.

GLD (gold) is trading within a downtrending channel that began Sept. 5.

JJC (copper) is trading within a declining channel beginning Aug. 1.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) is trading within a downtrending channel that began June 7.

EEM (emerging markets) is trading within a downtrending channel from May 2.

11/30 Forex

Notes on this morning’s forex...

Sharp moves this morning across the board on a coordinated rate cut aimed at injecting liquidity into markets strained by efforts to keep the Eurozone intact.

It was a classic black-swan for chartists that no doubt stopped many a position, although fundamentalists may have seen it coming all along.

The moves were insufficient to force any pair beyond its price channel on the weekly charts, although EUR/AUD, EUR/CAD, GBP/AUD and GBP/CAD broke below their 20-day minimums.

NZD/USD, whose complex channel structure I’ve noted below in the Notes section, returned to its uptrending channel after dipping below the channel floor two days prior and remains within its downtrending channel.

On the weekly charts...

Weekly Channels

pair	chan	from
AUD/CAD		Oct. 28
AUD/JPY		April 11
AUD/NZD		March 7
AUD/USD		Aug. 1
EUR/AUD		Dec 15, 2010
EUR/CAD		May 2
EUR/CHF		Aug. 8
EUR/GBP		June 27
EUR/JPY
EUR/USD		May 2
GBP/AUD		March 14
GBP/CAD		July 12, 2010
GBP/JPY		Aug. 3, 2009
GBP/USD		April 25
NZD/USD		Oct. 28
USD/CAD		July 25, 2011
USD/JPY		June 1, 2009

Green means uptrending channel; red means downtrending channel; yellow is a sideways move.

Notes:

NZD/USD is in a complex move: A downtrending channel from Aug. 1 within an uptrending channel that began May 11, 2009 or earlier. For this ongoing study, I’ll track the more recent trend in the table above and note changes in the longer uptrending channel here in the notes.

I’ve excluded high-volume pairs including CHF because of the Swiss government’s active intervention in the markets to keep the currency from rising. I’ll pick the CHF pairs up again if the policy changes.

I’ve retained the JPY pairs as Japan’s interventions appear to be less consistent than those of the Swiss.

11/30 Almanac

On Wednesday, Nov. 30: Pending home sales, employment preview.

There are 17 days before the December options expire, 52 the January, 80 the February and 108 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/29 Covered Calls

This daily posting tracks my covered call plays and other base positions.

Covered call position DDS -- the retailer Dillards -- flipped into bear phase, below its 20-day low, after an analyst downgrade, falling more than 8%. The Alabama-based brokerage Sterne Agee criticized the depth of the retailer’s post-Thanksgiving-sales price cutting, casting a dark shadow over its Black Friday.

(Just an aside, but I thought stores were supposed to cut prices deeply for Black Friday. Just saying.)

On the weekly chart, the drop places DDS within the lower third of a rising trend and brings it to where it was trading in Late September. The daily relative strength index (RSI) is seven points above oversold territory, and is deeply oversold on the hourly chart.

The stock measured an even larger one-day drop after earnings were announced Nov. 11.

For my account, I’ll be monitoring the RSI on the sub-hourly DDS charts looking for a good point to buy some puts to mitigate the decline. However, with a rapid fall of this magnitude, I’m always on the lookout for a partial rebound.

Different subject: I’ve added a bear position in K -- the cereal maker Kellogg. Since so few stocks met my criteria for covered calls this time around, I’ve got some cash to place, and at this point I’m generally more bearish than not when I look at the market as a whole.

My key reason for bearishness is the state of the S&P 500 -- using its exchange-traded fund SPY, which is trading midway within a downtrending channel that began May 2. It is in the 6th week of decline from a nearer-term lower high recorded in late October.

Of couse, my specific decisions will be based on analysis of the individual stocks and exchange-traded funds. SPY just tells me in general where I need to be looking.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
DDS
GDX
LVS
RIMM
`````````

11/29 Indicators

The markets this morning...

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) is trading within a downtrending channel that began May 2.

QQQ (Nasdaq 100) is within a sideways channel that began Aug. 8.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) is trading within a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began July 18.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading within a downtrending channel that began May 2.

GLD (gold) is trading within a downtrending channel that began Sept. 5.

JJC (copper) is trading within a declining channel beginning Aug. 1.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) is trading slightly above the ceiling of a downtrending channel that began June 7.

EEM (emerging markets) is trading within a downtrending channel from May 2.

11/29 Forex

Notes on this morning’s forex...

On the weekly charts...

Weekly Channels

pair	chan	from
AUD/CAD		Oct. 28
AUD/JPY		April 11
↓AUD/NZD		March 7
AUD/USD		Aug. 1
EUR/AUD		Dec 15, 2010
EUR/CAD		May 2
EUR/CHF		Aug. 8
EUR/GBP		June 27
EUR/JPY
EUR/USD		May 2
GBP/AUD		March 14
GBP/CAD		July 12, 2010
GBP/JPY		Aug. 3, 2009
GBP/USD		April 25
NZD/USD		Oct. 28
USD/CAD		July 25, 2011
USD/JPY		June 1, 2009

Green means uptrending channel; red means downtrending channel; yellow is a sideways move. Positions I hold are preceeded by an up arrow (↑) for bull plays and a down arrow (↓) for down plays.

Notes:

NZD/USD is in a complex move: A downtrending channel from Aug. 1 within an uptrending channel that began May 11, 2009 or earlier. For this ongoing study, I’ll track the more recent trend in the table above and note changes in the longer uptrending channel here in the notes.

I’ve excluded high-volume pairs including CHF because of the Swiss government’s active intervention in the markets to keep the currency from rising. I’ll pick the CHF pairs up again if the policy changes.

I’ve retained the JPY pairs as Japan’s interventions appear to be less consistent than those of the Swiss.

11/29 Almanac

On Tuesday, Nov. 29: Consumer Confidence.

There are 18 days before the December options expire, 53 the January, 81 the February and 109 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/28 Covered Calls

This daily posting tracks my covered call plays and other base positions.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
DDS
GDX
LVS
RIMM
`````````

11/28 Indicators

The markets this morning...

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) is trading within a downtrending channel that began May 2.

QQQ (Nasdaq 100) is within a sideways channel that began Aug. 8.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) has retreated to within a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began July 18.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading within a downtrending channel that began May 2.

GLD (gold) is trading within a downtrending channel that began Sept. 5.

JJC (copper) is trading within a declining channel beginning Aug. 1.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) has retreated to the ceiling of a downtrending channel that began June 7.

EEM (emerging markets) is trading within a downtrending channel from May 2.

11/28 Forex

Notes on this morning’s forex...

On the weekly charts...

Weekly Channels

pair	chan	from
AUD/CAD		Oct. 28
AUD/JPY		April 11
↓AUD/NZD		March 7
AUD/USD		Aug. 1
EUR/AUD		Dec 15, 2010
EUR/CAD		May 2
EUR/CHF		Aug. 8
EUR/GBP		June 27
EUR/JPY
EUR/USD		May 2
GBP/AUD		March 14
GBP/CAD		July 12, 2010
GBP/JPY		Aug. 3, 2009
GBP/USD		April 25
NZD/USD		Oct. 28
USD/CAD		July 25, 2011
USD/JPY		June 1, 2009

Green means uptrending channel; red means downtrending channel; yellow is a sideways move. Positions I hold are preceeded by an up arrow (↑) for bull plays and a down arrow (↓) for down plays.

Notes:

NZD/USD is in a complex move: A downtrending channel from Aug. 1 within an uptrending channel that began May 11, 2009 or earlier. For this ongoing study, I’ll track the more recent trend in the table above and note changes in the longer uptrending channel here in the notes.

I’ve excluded high-volume pairs including CHF because of the Swiss government’s active intervention in the markets to keep the currency from rising. I’ll pick the CHF pairs up again if the policy changes.

I’ve retained the JPY pairs as Japan’s interventions appear to be less consistent than those of the Swiss.

11/27 Forex

This is an example of how I’ll be following forex using my new strategy.

On the weekly charts...

Weekly Channels

pair	chan	from
AUD/CAD		Oct. 28
AUD/JPY		April 11
AUD/NZD		March 7
AUD/USD		Aug. 1
EUR/AUD		Dec 15, 2010
EUR/CAD		May 2
EUR/GBP		June 27
EUR/JPY
EUR/USD		May 2
GBP/AUD		March 14
GBP/CAD		July 12, 2010
GBP/JPY		Aug. 3, 2009
GBP/USD		April 25
NZD/USD		Oct. 28
USD/CAD		July 25, 2011
USD/JPY		June 1, 2009

Green means uptrending channel; red means downtrending channel; yellow is a sideways move.

Notes:

NZD/USD is in a complex move: A downtrending channel from Aug. 1 within an uptrending channel that began May 11, 2009 or earlier. For this ongoing study, I’ll track the more recent trend in the table above and note changes in the longer uptrending channel here in the notes.

I’ve excluded high-volume pairs including CHF because of the Swiss government’s active intervention in the markets to keep the currency from rising. I’ll pick the CHF pairs up again if the policy changes.

I’ve retained the JPY pairs as Japan’s interventions appear to be less consistent than those of the Swiss.

Forex Trading Strategy

I’m changing my approach to tracking and trading forex in order to allow greater concentration pairs I am likely to trade. I think the alternations will help me make better trading decisions.

Truth is, the "everything but the kitchen sink" approach I've used the past few months has been quite paralyzing, a sort of information overload that makes decisions difficult and trades impossible to enter with any confidence.

So, to the changes...

First, I’m shrinking my coverage to, at most, 25 currency pairs, and fewer if possible. These will be the top-volume pairs, for the most part, although I shall from time to time add other pairs of that are of interest.

And the corollary is that I shall subtract pairs, no matter how liquid, if I feel they are no longer interesting.

Secondly, I’m moving to a longer term strategy. I’ll be drawing price trend channels on weekly charts. Afterward, I'll switch to the daily charts, using both the Wilder Relative Strength Index (RSI) and the position of the price within the channel, to determine entry and exit points.

(Read more about the RSI in Wikipedia and Stockcharts.)

Most minor-league private forex speculators -- that's my league -- play the short-term trades, with charts having granularity of an hour or less and certainly no more than a day.

This has two drawbacks: 1) Short-term moves tend to be less consistent than those in the longer term, and 2) hourly trading encourages the trader to stay glued to the charts day and night, especially when London is trading.

What the two points have in common is that they lead to bad trading decisions, be it due to fatigue or false signals. I'm looking for a more measured approach.

When institutions trade currencies long-term, they most often look at the reports of the governments and central banks of the issuing countries, and on those bases make a fundamental assessment of direction.

I lack the time and resources, and perhaps the knowledge, to follow such a course. So I'll stay with the charts, which have always been the basis of my trading.

In practical application, here's what I plan to do:

1) I'll draw a price channel on the weekly chart, tracking the current price trend. At that level of granularity the trend will generally be something that began three to six months prior, although in my current analysis I have one pair, USD/JPY, that has been trending since 2009.

2) For bearish entry, I'm looking for a situation on the daily chart where the current price has rebounded from the top of the sideways or descending channel and the RSI has moved to 65% or below. The price must be high in the channel.

3) For bullish entry, the current price must have rebounded from the bottom of the sideways or ascending channel and the RSI must have moved to 35% or above. The price must be low in the channel.

Clearly, this is not an auto-trading strategy. I mean, what does "high" and "low" mean? What constitutes a proper "bounce"? And since channels are pretty wide on a weekly chart, why the insistence that the trend channel be aligned with the direction of the trade?

The Holy Grail of trading is a scientific system that makes the profits roll in. That's a quest I no longer believe in.

Trading in truth is an application of the psychological art. It is an art because I am making decisions based on appearance, on the look-and-feel of the chart, and it is psychological because the goal is ensure that I'm confident about opening the trade.

The alternative is automatic trading decisions that cause me to stumble out a few days later because I've been spooked by a whipsaw.

As an art, the strategy I've described can, and should, accommodate the trader's level of caution or courage by ignoring the direction of the channel (as in swing trading), bringing the RSI level nearer the 30% or 70% baseline, and defining "high" and "low" in the channel as being nearer the middle.

As always, it's up to us, as traders, to make the decisions, and to happily see our trades live or die by the choices we make. We define the game by our actions, not by our rules.

I've put together a new version of my daily Forex report, which generally moves shortly after trading opens in New York, that shows how I'll be tracking the pairs I'm following day by day.

11/28 Almanac

On Monday, Nov. 28: New home sales.

There are 19 days before the December options expire, 54 the January, 82 the February and 110 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/25 Covered Calls

This daily posting tracks my covered call plays and other base positions.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
DDS
GDX
LVS
RIMM
`````````

11/25 Indicators

The markets this morning...

The U.S. dollar (UUP) breaks above it’s downtrending channel.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) is trading within a downtrending channel that began May 2.

QQQ (Nasdaq 100) is within a sideways channel that began Aug. 8.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) is trading at the ceiling of a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began July 18.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading within a downtrending channel that began May 2.

GLD (gold) is trading within a downtrending channel that began Sept. 5.

JJC (copper) is trading within a declining channel beginning Aug. 1.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) has broken above a trading within a downtrending channel that began June 7.

EEM (emerging markets) is trading within a downtrending channel from May 2.

11/25 Forex

Notes on this morning’s forex...

On the daily charts...

DKK/CZK, EUR/CZK, GBP/CZK show major breaks above their uptrending price channels.

Channels of Interest

pair	chan	from
AUD/CAD		Oct. 28
AUD/HKD		Oct. 28
AUD/THB		Oct. 28
AUD/ZAR		Aug. 8
CAD/PLN		July 8
DKK/CZK		Aug. 31
DKK/HUF		July 7
EUR/AUD		Oct. 31
EUR/CZK		Aug.17
EUR/HUF		Sept. 1
EUR/USD		Oct. 4
GBP/AUD		Oct. 28
GBP/CZK		Aug. 29
GBP/SGD		Sept. 7
GBP/THB		Sept. 23
HKD/JPY		Nov. 1
NZD/JPY		Oct. 31
NZD/THB		Oct. 28
NZD/USD		Oct. 28
PLN/CZK		Sept. 22
TRY/JPY		Nov. 14
USD/HKD		Oct. 28
USD/SGD		Oct. 31

Green means uptrending channel; red means downtrending channel.

11/24 Forex

Notes on this morning’s forex...

The U.S. equities markets are closed today. I won't be posting anymore today on Private Trader because of the U.S. Thanksgiving holiday.

On the daily charts...

HKD/JPY has broken free of its downtrending channel with a sideways movement, slightly skewed to the upside, that threatens to break of the downtrend.

Channels of Interest

pair	chan	from
AUD/CAD		Oct. 28
AUD/HKD		Oct. 28
AUD/THB		Oct. 28
AUD/ZAR		Aug. 8
CAD/PLN		July 8
DKK/CZK		Aug. 31
DKK/HUF		July 7
EUR/AUD		Oct. 31
EUR/CZK		Aug.17
EUR/HUF		Sept. 1
EUR/USD		Oct. 4
GBP/AUD		Oct. 28
GBP/CZK		Aug. 29
GBP/SGD		Sept. 7
GBP/THB		Sept. 23
HKD/JPY		Nov. 1
NZD/JPY		Oct. 31
NZD/THB		Oct. 28
NZD/USD		Oct. 28
PLN/CZK		Sept. 22
TRY/JPY		Nov. 14
USD/HKD		Oct. 28
USD/SGD		Oct. 31

Green means uptrending channel; red means downtrending channel.

11/25 Almanac

Thursday, Nov. 24, is a market holiday in the United States. Other major money centers will be open for trading.

On Friday, Nov. 25: U.S. stock markets will close three hours early, at 1 p.m. Eastern.

Private Trader will post only a Forex report on Thursday, and a full schedule of reports on Friday. The Almanac will be posted Friday shortly after the markets' early close at 1 p.m.

As of Friday, there are 22 days before the December options expire, 57 the January, 85 the February and 113 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/23 Covered Calls

This daily posting tracks my covered call plays and other base positions.

I’ve sold monthly covered calls on two new stocks -- DDS and GDX -- and two stocks held over from previous cycles -- LVS and RIMM. In addition, I’ve sold weekly calls against a third holdover -- BIDU.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
DDS
GDX
LVS
RIMM

11/23 Indicators

The markets this morning...

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) is trading within a downtrending channel that began May 2.

QQQ (Nasdaq 100) is within a sideways channel that began Aug. 8.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) is trading at the ceiling of a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began July 18.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading within a downtrending channel that began May 2.

GLD (gold) is trading within a downtrending channel that began Sept. 5.

JJC (copper) is trading within a declining channel beginning Aug. 1.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) is trading within a downtrending channel that began June 7.

EEM (emerging markets) is trading within a downtrending channel from May 2.

11/23 Forex

Notes on this morning’s forex...

On the daily charts...

TRY/JPY has fallen below the floor of its uptrending price channel and is falling within a downrending channel.

Channels of Interest

pair	chan	from
AUD/CAD		Oct. 28
AUD/HKD		Oct. 28
AUD/THB		Oct. 28
AUD/ZAR		Aug. 8
CAD/PLN		July 8
DKK/CZK		Aug. 31
DKK/HUF		July 7
EUR/AUD		Oct. 31
EUR/CZK		Aug.17
EUR/HUF		Sept. 1
EUR/USD		Oct. 4
GBP/AUD		Oct. 28
GBP/CZK		Aug. 29
GBP/SGD		Sept. 7
GBP/THB		Sept. 23
HKD/JPY		Nov. 1
NZD/JPY		Oct. 31
NZD/THB		Oct. 28
NZD/USD		Oct. 28
PLN/CZK		Sept. 22
TRY/JPY		Nov. 14
USD/HKD		Oct. 28
USD/SGD		Oct. 31

Green means uptrending channel; red means downtrending channel.

11/23 Almanac

On Wednesday, Nov. 23: Durables, income/outlays, jobless claims.

There are 24 days before the December options expire, 59 the January, 87 the February and 115 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/22 Covered Calls

This daily posting tracks my base positions, including analysis as I try to select and enter covered call plays for December.

Covered Calls

Having selected a universe of possible plays based on a system that aggregates analyst opinion, I’m now ready to turn to the charts.

As a preliminary screening device, I’m using the relative strength index (RSI) on charts showing the standard deviation. I’m looking specifically for one or more of the following.

• Newly risen: The RSI newly risen above the 30 line.
• Low-ball: The RSI below the 30 line and the price below the lower one standard deviation line.
• Deviation: An RSI bull deviation, with the RSI trending up from below the 30 line while the price trends down.

I screen hierarchically. If a stock meets the RSI criteria on a daily or weekly chart, then I’ll also look at the hourly chart. However, an hourly signal alone doesn’t make the grade.

Within the cells of the table below, I use w for the weekly chart, d for the daily chart and h for the hourly chart.

RSI Status

sym	new	low	dev
BIDU	h	d
DDS	d
EPI	d	w
EWT	d h
RIMM		w
SLV	d h
UNG	d
VWO	h	d

Channels are analyzed on the weekly chart. The dates are the end of the week during which the event occurred.

BIDU is trading within a downtrend that began July 25.

DDS is trading within an uptrend that began Aug. 19 lying within a sideways trend that began March 28.

EPI is trading within a downtrend that began Nov. 1.

EWT is trading within a downtrend that began May 9.

RIMM is trading within a downtrend that began Feb. 21.

SLV is trading within a downtrend that began March 25.

UNG is trading within a downtrend that began with a precipitous price collapse that began in July 2008.

VWO is trading within a downtrend that began May 2.

Other Channels

But what about the stocks that didn’t meet the RSI criteria?

Three are in uptrends: QCOR from March 2010, RL from July 2010, and SCSS from way back in July 2009.

Three are in sideways trends: GDX from December 2010, LVS from March 2011, and SNDK from Aug. 2010.

All but one stock is trading either at the top of the channel or has broken through the channel ceiling and is retreating.

If I’m bullish a stock, I want to buy it at the bottom of the channel, so it has room to rise. Only GDX meets that criteria, trading near the floor of the channel. DDS, from the RSI list, is at mid-channel and so is also an acceptable choice, since covered calls can make money when the price moves sideways.

LVS is a holdover stock -- its November covered call expired and I still own the shares. There are two other holdovers in my stable: BIDU, trading in a downtrending channel from July, and RIMM, downtrending since February.

BIDU is trading mid-channel, and RIMM is at the roof.

None of the stocks signalled by the RSI is in an uptrend, and of all stocks on my potentials list, only GDX is in an uptrend near the channel floor, with DDS at mid-channel.

The bottom line: This is not a bullish time in the markets. I own BIDU, LVS and RIMM shares, so I need to sell covered calls to lower the basis. Among the others, I’ll look into DDS and GDX -- the gold miners exchange-traded fund as potential covered calls. However, with gold itself (GLD) in a downtrend, GDX seems like a risky choice.

Other Base Positions

• Long shares: CBM, PCCC, PKOH, TAST.

11/22 Indicators

The markets this morning...

I’ve changed the channel tracking -- the descriptions positioning each indicator that appear under each table -- to a weekly chart. This gives a longer-term picture that, I think, will elminate much of the ambiguity that has been showing on the daily chart. The dates given are the end of the week in which events occurred.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) is trading within a downtrending channel that began May 2.

QQQ (Nasdaq 100) is within a sideways channel that began Aug. 8.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) is trading above a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began July 18.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading within a downtrending channel that began May 2.

GLD (gold) is trading within a downtrending channel that began Sept. 5.

JJC (copper) is trading within a declining channel beginning Aug. 1.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) is trading within an uptrending channel that began June 7.

EEM (emerging markets) is trading within a downtrending channel from May 2.

11/22 Forex

Notes on this morning’s forex...

On the daily charts...

I’ve broadened my time-range for AUD/ZAR, CAD/PLN, EUR/USD, GBP/CZK and GBP/THB.

Channels of Interest

pair	chan	from
AUD/CAD		Oct. 28
AUD/HKD		Oct. 28
AUD/THB		Oct. 28
AUD/ZAR		Aug. 8
CAD/PLN		July 8
DKK/CZK		Aug. 31
DKK/HUF		July 7
EUR/AUD		Oct. 31
EUR/CZK		Aug.17
EUR/HUF		Sept. 1
EUR/USD		Oct. 4
GBP/AUD		Oct. 28
GBP/CZK		Aug. 29
GBP/SGD		Sept. 7
GBP/THB		Sept. 23
HKD/JPY		Nov. 1
NZD/JPY		Oct. 31
NZD/THB		Oct. 28
NZD/USD		Oct. 28
PLN/CZK		Sept. 22
TRY/JPY		Oct. 4
USD/HKD		Oct. 28
USD/SGD		Oct. 31

Green means uptrending channel; red means downtrending channel.

11/22 Almanac

On Tuesday, Nov. 22: Gross domestic product.

There are 25 trading days before the December options expire, 60 the January, 88 the February and 116 the March.

On the jump, market stats, econ reports, and the trading calendar . . .

11/21 Covered Calls

At present I have no open covered call positions.

Over the weekend I posted the pool of stocks that I'll use in selecting my covered calls for December.

But with the congressional super-committee on the budget about to plunge off the cliff of failure, I won't be opening positions today.

Only UNG among my prospects shows a price rise from Friday's close, at nearly 2%. The rest are all in loss territory, led -- oddly -- by foreign equities: RSX, which tracks the Russian market, and BIDU, China's gigantic counterpart to Google, each down around 5%.

And UNG isn't a position I would open, based on the chart. It is ensnared in a declining channel that began last June, within a long decline that began in 2008. A growth position only for traders who can stand on their head.

All but three of my November covered calls were exercised or assigned. The expirations allowed me to hold over shares of BIDU, LVS and RIMM, none of which are meeting my criteria any longer.

I've been considering using weekly options for at least some of the holdovers, so I can ditch them early while getting some income, and I must make that trade on Tuesday if ever. Because of Thanksgiving, after today's close the PM-settled weeklys will have only three trading days remaining.

As for the rest, I'm looking for the slide to halt and give some sign of a reversal before opening any December covered calls. If that doesn't happen, then fine. I'll take a covered call vacation, the trader's equivalent of a week in sunny Florida.

Covered calls aside...

Other Base Positions

• Long shares: CBM, PCCC, PKOH, TAST.

11/21 Indicators

The markets this morning...

The S&P 500 and Nasdaq 100 have both dropped below their 20-day lows into bear phase.

All in all, at the outset it appears to be a downish sort of day.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

SPY (S&P 500) has broken decisively below a sideways channel in force since early August to Oct. 3. The trend at this point is in confusion

QQQ (Nasdaq 100) has broken decisively trading below an uptrending channel that began Aug. 9, throwing the trend into confusion.

VIX (fear index) is trading within a sideways channel that began Aug. 9.

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

TLT (Treasury long-term debt) is trading above a downtrending channel that began Oct. 4.

JNK (corporate high-yield debt) is trading within a downtrending channel that began Oct. 27.

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD
JJC

USO (crude oil) is trading below an uptrending channel that began Oct. 4.

GLD (gold), displaying some ambuiguity, is trading below a rising channel that began. Oct. 4 and appears close to transitioning out the uptrend.

JJC (copper) is trading within a declining channel beginning Oct. 31.

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

UUP (U.S. dollar) is trading within an uptrending channel that began Oct. 27.

EEM (emerging markets) is trading within a downtrending channel from Oct. 27.

11/21 Forex

Notes on this morning’s forex...

On the daily charts...

GBP/CZK has broken decisively below it’s uptrending channel.

Channels of Interest

pair	chan	from
AUD/CAD		Oct. 28
AUD/HKD		Oct. 28
AUD/THB		Oct. 28
AUD/ZAR		Nov. 1
CAD/PLN		Oct. 4
DKK/CZK		Aug. 31
DKK/HUF		July 7
EUR/AUD		Oct. 31
EUR/CZK		Aug.17
EUR/HUF		Sept. 1
EUR/USD		Oct. 27
GBP/AUD		Oct. 28
GBP/SGD		Sept. 7
GBP/THB		Oct. 31
HKD/JPY		Nov. 1
NZD/JPY		Oct. 31
NZD/THB		Oct. 28
NZD/USD		Oct. 28
PLN/CZK		Sept. 22
TRY/JPY		Oct. 4
USD/HKD		Oct. 28
USD/SGD		Oct. 31

Green means uptrending channel; red means downtrending channel.

December Covered Calls

Three of my November covered calls expired worthless on Saturday. They are BIDU, LVS and RIMM. So I still hold the shares and will need to figure out how to place them for the December cycle.

Here is my planning for December covered calls in my own account, with the usual caveat: This is my planning, and everyone else should go do their own planning, and therefore make their own mistakes. Another caveat, the strike price and returns must be re-calculated before opening a position. I failed to do that for one November play, causing a small loss as tuition for that particular learning experience.

For December, I have selected at-the-money strike prices. I also did a calculation for in-the-money strikes by the amount of the average true range, with little difference in returns.

The at-the-money calculation provides a mini-max return whether the covered call is exercised or not. The in-the-money is skewed toward greater returns on the option premium, with no reference to the stock.

Here is a run-down of the universe from which I'll be selecting my December covered calls, with if-exercised returns rounded to the nearest percentage point.

My criteria for inclusion is that the stock be ranked strong buy on the Zacks website, that it be free of earnings announcements through December options expiration, that the combination of the premium and the if-exercised return be 5% or greater, and that the if-exercised and premium-only returns each be 2% or greater.

I give preference to stocks that are new to the Zacks top rank, to those having dividends during the December option period, and to those having lower price/sales ratios.

In the following tables, sym is the stock symbol, strike is the covered call strike price, prem is the return from the premium received from selling the call, and if-ex is the return if the covered call is exercised or assigned.

Monthly Positions

sym	strike	prem	if-ex
BC	17	3%	3%
DDS	49	3%	3%
QCOR	43	3%	3%
HAR	40	2%	3%
SCSS	20	3%	3%
SNDK	49	3%	3%
CTL	37	3%	3%
NTES	46	3%	3%
RL	145	3%	2%

Two stocks -- LULU and SIG -- were eliminated because of earnings announcements.

NTES and SCSS were added to the Zacks' top rank prior to October, which makes them a bit old.

QCOR has a price/sales ratio of 15 (!) and NTES has one of 6, which makes both very expensive on the market. The others round to a price/sales ratio of 2 or less.

Exchange-traded funds aren't ranked by Zacks, so selection is all about the percentages.

Exchange-traded Funds

sym	strike	prem	if-ex
UNG	7	5%	10%
XLF	12	3%	5%
SLV	31	3%	4%
XLY	37	3%	4%
XLV	32	2%	4%
RSX	29	3%	3%
FXI	35	3%	3%
VWO	39	3%	3%
EWT	12	2%	3%
EFA	49	3%	3%
EPI	17	2%	3%
XRT	51	2%	3%
EWZ	59	3%	3%
XLB	33	2%	2%
XOP	53	3%	2%
GDX	57	3%	3%
IWM	72	3%	2%
XLE	68	2%	2%

All three of my holdover stocks have weekly options as well as the standard monthlys.

In the monthly calculations, the returns on LVS alone fail to make the grade according to my criteria for new stocks. And all three holdovers are ranked too low by Zacks to be attractive. But, I own them, and so I've got to play them.

Holdovers - December calls

sym	strike	prem	if-ex
BIDU	125	4%	3%
LVS	45	2%	1%
RIMM	18	7%	4%

In addition, BIDU and RIMM have earnings during the December option period. One way to avoid that risk is to use weekly options, and skip covered calls for the earnings announcement week.

The returns on the weekly calls have been placed on a monthly basis in order to be directly comparable with the December options.

Holdovers - Nov. 25 weeklys

sym	strike	prem	if-ex
BIDU	125	9%	5%
LVS	45	7%	4%
RIMM	18	6%	5%

All three holdovers, assuming all the weeklys are played, meet my criteria for returns. However, with weeklys there is an increased chance that the options will be exercised or assigned, reducing the monthly profit.

All of the returns in this report are reduced by the amount of the trading commission and fees, and also by a tax rate.

I've assumed the following: $10 for each stock commission, $10.75 for each option contract commission, $20 for exercise and assignment fees, and a 34% income-tax rate, federal and state combined.

The actual impact will vary considerably from these assumptions, depending upon the brokerage and actual federal and state tax rates.