The Madison Letter Weekly Summary

Since inception, our overall timing return is 81.29% versus 48.41% on the S&P 500 for excess return of 32.88%. 

madison market1

Madison scores on the major indexes are in a range of -8 to +6. Stocks and indexes have moved higher, albeit a small move, since our last update.

The range between the buy and sell points is now average. As an example, the S&P 500 range was 54 points at the low and is now at 104 points which is rising but lower from a week ago at 110. As volatility rises, this expands. Witness at the October low the range was 169 points. Currently, volatility has begun to expand again.

Also, in tracking the range between the 2 year and 10 year moves from 157 basis points to 152. Short term rates are on the rise while long term have fallen in the last week. This needs to be watched. There are implications.

We began to offer a buy and sell strategy via our Madison Market Timing Indicator at the beginning of April of 2007. There are now 24 open and closed winning trades to 8 closed losing trades with our market timing results.

JC Penney (JCP)

JC Penney has fallen over $1 since July began. Is this enough to get us interested in the name in front of back to school?

jcp

Options Activity

We highlight unusual options activity where volume is heavy as well. The third column from the left will highlight such outliers. Airgas (ARG) saw excess call action for a third day in a row. I smell a deal and might have to look into a trade. JC Penney (JCP) saw excess put action as it struggles in front of back to school season.  

                                                      [Image 1]

                     The rows in the options matrix are as follows:

  • Curr Vlm = Current Option Volume for today
  • OpVol20 = 20 day Option Volume average
  • % Delta (sorted descending) = Curr Vlm/ OpVol20 * 100
  • Sym = Symbol
  • 20 HV 100HV 252HV = 20 day, 100 Day and 252 Day Historical Volatility
  • Slope = The slope of the historic vol
  • Delta = Change in slope
  • cOptInt = Call Open Interest
  • pOptInt =Put Open Interest
  • cVolum = Call Volume
  • pVolum = Put Volume

A Cruel Joke For Investors In TLT?

We are going to continue making Thursday our chart section in only Superstock Investor. That said, we are changing the format. Each Thursday in Wall Street Rebel we have moved to doing a Chart of The Week.

If you want to follow the S&P 500, then you will need to sign up for www.superstockinvestor.com at the website when subscriptions become available. Each week in Superstock we track the S&P 500, NASDAQ Composite, Russell 2000, Emerging Markets (EEM), 20 Year Treasury (TLT), U.S. Dollar (UUP), High Yield Bonds (HYG) and Corporate Bonds (LQD). 

 Last week we looked at the Las Vegas Sands (LVS) which is in our Morning Matters Portfolio and reported earnings last week. Finally, the chart has begun to improve. Time to start making up for lost time. 

1

This week we look at iShares Barclays 20 Year Treasury (TLT) which is could be playing a cruel joke on investors. Finally, the chart has begun to improve but what if it turns down from here? A distinct possibility. Pay attention carefully here. 

2

 Charts are courtesy of www.erlangerchartroom.com.

 

Western Digital (WDC)

Western Digital (WDC) has fallen some 30% since December. So the $64,000 question is should it be bought here? The stock is higher on earnings by 5.6%.

wdc

Options Activity

We highlight unusual options activity where volume is heavy as well. The third column from the left will highlight such outliers. Airgas (ARG) saw excess call action for a second day in a row. Chicago Bridge & Iron (CBI) saw excess put action for a second day as it jumped 3%.  

                                                      [Image 1]

                     The rows in the options matrix are as follows:

  • Curr Vlm = Current Option Volume for today
  • OpVol20 = 20 day Option Volume average
  • % Delta (sorted descending) = Curr Vlm/ OpVol20 * 100
  • Sym = Symbol
  • 20 HV 100HV 252HV = 20 day, 100 Day and 252 Day Historical Volatility
  • Slope = The slope of the historic vol
  • Delta = Change in slope
  • cOptInt = Call Open Interest
  • pOptInt =Put Open Interest
  • cVolum = Call Volume
  • pVolum = Put Volume

Portfolio Update

The S&P 500 is lower than a week ago thanks to the weakness since last Tuesday and we are now under 2100. The Nasdaq Composite has moved back under 5100 and the Dow unfortunately has fallen back below 18000 and is now lower again for the year. The portfolio moved to 58% invested long, 0% short and 42% in cash, net long 58%. We are now at a value of 1035.25% from 1024.39% through Tuesday’s close. We finished the year at a value of 951.10 up 29.86% for the year. Our current value is 1035.25% which puts us up 8.13% for the year without dividends.

Below are the year by year results on a cumulative and absolute basis: 

ssi ytd

It appears for now that 2050 on the S&P 500 has become support from 2100 and now 2100 is resistance. We are now at 2093.25 which is lower than a week ago. A big test for the week is to see if the S&P 500 can stay above 2050.

Our batting average of closed winners and losers is 72%. The portfolio is up to a value of 1035.25% and from inception when it began at 0% in April of 2008. We have never added in dividends so our weekly results are understated since 2008.

The Russell 2000 is now lagging the S&P 500 on a daily basis. As such, we remain with a large cap bias.

United Parcel Service (UPS)

United Parcel Service (UPS) popped today on positive guidance. There is still some nice upside on this name and is worth a look.

ups

Retracements Revisited

This morning we are updating the retracement levels. We last updated these on June 30th. Since then we ran to a closing low of 2046.68 on July 8th and to a closing high of 2128.28 last Monday. We are now at 2067.64.

The S&P 500 peaked at 2130.82 on May 21st. So we have dropped 63.18 points or -2.97% from the peak. This is typical of the type of pullback we have seen in 2015. This is the average duration since the end of 2012. The average drop of the S&P 500 since then -4.34% with a median of -3.94%. If this is an “average drop” then we are getting there.

When markets pullback we look at the retracement tool. This morning we draw the S&P 500 and Russell 2000 retracements. The first is on the S&P 500 and the second is on the Russell 2000. 

spx retracement 072715

Currently, the S&P 500 has pulled back below its 38.2% retracement at 2075.96. The next level, 50%, is at 2057.59 and we closed just above that level on Monday night. If we fail at the 50% retracement, then the 61.80% retracement comes into play at 2039.49.

The Russell 2000 retracement can be found at www.superstockinvestor.com

 

Exxon (XOM)

Exxon (XOM) is due to report earnings on Friday morning. The stock has been pounded. At $79.26 the stock is cheap here and worth a look. We would advise to buy the stock and buy 1 put for every hundred shares. That will product on the downside.

xom