This Market Shape Is More Telling than a “Death Cross”

The major U.S. indices open today right about where they started the month of August.

The Dow has lost -0.85%.

The S&P 500 is down just -0.09%.

The Nasdaq gave back -0.84%.

If you are a straight “buy and hold” equity investor, you probably haven’t made too much money this month. But if you’re an options trader, you could be taking profits all along the way, like we have!

So what’s the rest of the month have in store for us?

If you love technical analysis as much as I do, it probably has not escaped you that the Dow Jones Industrial Average shows what is known as a “death cross.” (Click here for a closer look at that.)

That’s a trading term for when the 50-day Simple Moving Average (SMA) crosses below the 200-day SMA, as it did last week, on August 10.

A death cross gives an indication of some weakness in the average.

However, its meaning isn’t as clear cut as you might think. Will it mean lower prices? Or will it simply be a short-term cross that will rectify itself as prices go higher, eventually bringing the 50-day SMA back above the 200-day SMA? Only time will tell.

I’m looking at this shape instead…

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The One Options “Timing” Lesson You Need Now

If you’re just getting started with trading options, you may run into a financial adviser or broker telling you stay away from them.

You’ll hear that options are “too risky!” (which we’ve already proven is untrue) or “too complicated!” (also untrue)…

Or this …

“Options are fixed-time investments that expire on a specific date!”

That is true. But that “fixed time” feature doesn’t have to work against you. Quite the opposite. It gives you the flexibility to focus your trade the way you want to – a flexibility you don’t have with a straight long or short equity position. But you need to know how to use it.

If there’s one thing you need to know about options, it’s how to handle this “fixed time” aspect of trading them. Picking the right expiration date can make the difference between a small 15% gain and a huge 300% winner.

So today I want to spend some time to help you get this all down pat, so all your broker rep’s will need to do is provide you the most efficient means to execute your orders. (Heck, if you are using an online platform, you may never have to talk to them at all.)

And then look out for my email next week, when I’ll show you how to focus your trade by picking the right expiration, as well as my personal favorite timeframe for trades.

Let’s jump right in.

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