By Chris Ebert

The following trade has profited week after week, every week except four of the past 192 weeks. That’s nearly four years of virtually continuous weekly gains; and of those four losses – none were big enough to be a concern or a danger to anyone using the strategy properly.

Sell a Covered Call option on $SPY (NYSEARCA:SPY) using an at-the-money strike price and an expiration date as near as practical to being exactly sixteen weeks away, then hold it until expiration day. That’s it! That’s all there is to the trade.

campfireObviously, such a strategy can’t work all the time. But, it works wonderfully well in Bull-markets and even in choppy sideways range-bound markets. The only time it fails is in a Bear market. In fact, most weeks it returns the maximum potential profit that is possible for such a trade.

Recently, however, even though profits have continued each week, those profits have been less than the maximum on several occasions. It’s an important development because failure to attain the maximum profit can sometimes be an indication that widespread distribution is taking place in the stock market.

The Implications of Declining Covered Call Profits

Distribution is a term used in the stock market to describe the process of selling large blocks of stock without overwhelming the market. Ordinarily, if large numbers of shares are offered for sale all at once, there are not enough bids (at the current stock price) offering to buy those shares.

To sell a large block of shares all at once requires accepting all of the bids at the current share price plus some bids that are below that price. When the sale is complete, the final trade is often at a price well below the price at which the stock was trading earlier. Selling a large quantity of stock too fast can lower the share price considerably. Distribution seeks to avoid the drop in price by parceling out the sale of large blocks into smaller blocks that are more easily absorbed.

Done successfully, the process of distribution allows the sale of large quantities of stock to occur over an extended period – days, weeks, or even months – without requiring the acceptance of an excessive number of low bids. Thus the stock price may not decline at all, even though a large investor or large institution is getting rid of all its shares. In some cases the price may actually continue to rise.

“The process of distribution is much like pouring water on a campfire. Pour too slowly and the fire may burn itself out before the water is gone. Pour too quickly and the water may extinguish the fire. But pour at an optimal rate and it may be possible to use all the water while the fire continues to burn.”

It is important for a trader to recognize distribution because of the motives behind it. Large investors and institutions are often privy to information not available to the public. Therefore, such stockholders tend to sell their shares when they know something the public does not – that the stock price is likely going to decline in the near future.

Knowing that stock prices are on the way down does not necessarily require illegally obtained insider information. Some institutions are so large that they have the ability to move stock prices just by their actions in the market. Just as distribution seeks to prevent unwanted declines in stock prices, a single large-enough entity can often intentionally drive stock prices down simply by dumping a sufficient number of shares for sale on the market all at once.

It makes sense that if large institutions were planning to drive stock prices down sometime in the near future, that they would employ a period of distribution, prior to the anticipated decline, in order to collect the best prices on the largest blocks of stock they intend to sell. Once they have sold most of their stock in an orderly fashion – through distribution – they can then dump the remaining blocks of stock for sale on the market all at once and drive stock prices much, much lower.

Recognizing Distribution in the Stock Market

So, how does the individual retail trader recognize distribution in the (more…)

By Poly

This is an excerpt from this weekend’s premium update from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly. Now offering monthly & quarterly subscriptions with 30 day refund. Promo code ZEN saves 10%.

Cycle Count Observation Probable Outlook Cycle Clarity Trend
Daily Day 19 Range 36-42 Days – 1st or 6th Daily Cycle (depends on IC) Bullish Green Up
Investor Week 4 or 42 Range 20-24 Weeks   AMBER Up
4Yr Month 74 Range 50-56 Months- 8th Investor Cycle. Bearish Green Up

I think it’s safe to say that the current 4 month trading range presages a big move – but the trick is to determine the direction. It is either a complex final topping pattern or a significant consolidation before another massive up-leg in the great bull market. There is ample support for both scenarios, and I’m continually weighing charts, data, and facts from many sources in an effort to glean insight. Whether sentiment, breadth, or technical data, there are numerous data points that support each outlook. The challenge is to view them without filters, to keep my personal bias at bay.

I’m a Cycle analyst first, and my brand of technical work favors the scenario that suggests that the market is currently consolidating before its next move higher. This is not my personal bias, however. It’s a technical observation of an outcome that has a higher probability of occurring than the alternative. It’s based on recent market history, and is built on an understanding that technical indicators offer an edge but not a certainty. Cycles are backward-looking to an extent, and I extrapolate future performance from the character and performance of the Cycles that came before.

In this case, no one can deny the Cycle performance (and gains) of the past 3 years, and this three year period is the foundation of my forward Cycle expectations. At some point, and likely soon, the pattern will change and a new series of down-trending Cycles will develop. It can be credibly argued that that the current trading range is the start of such a change in trend, but it is dangerous to bet against the dominant trend.   The dominant trend is always paramount, regardless of other observations, and in this case it is up. The typical Cycle duration for a bull market advance has passed, so we need to be mindful that a top is due. But the tail-end of a bull market is often its most powerful part, and with a dominant uptrend in place, has to be seen as the most likely outcome.

The S&P recovered nicely from its recent 7 day plunge, and is again in a position to attempt to break to a new all-time high. The Cycle count is very favorable and sentiment is subdued; an upside move from here would take many by surprise and could develop into a substantial rally. If the bullish case is to hold, 2,063 should not be lost on the downside. (more…)

By Chloe Weiss

It can be difficult enough marketing a business that has all-year-round appeal, so it can be a true challenge to promote a business whose appeal waxes and wanes with the seasons. Thankfully, there are a few ways you can promote your business in, as well as out of season.

Seasonal marketing

There are many types of business that can be considered seasonal, with the tourist industry representing the biggest sector. Tourism has its peak during the summer months, but your holiday- related business can feel like a ghost town once the season is over. It may not be just hoteliers and restaurateurs that suffer in this way. People in seasonal occupations can find themselves wondering what to do once the vacation season is over. Staying sociable is one way of promoting your business during the slow months. A ski instructor and photographer, Jim Decker’s twitter page provides an example of how you keep engaged with your customers even when they are not using your services, keeping you in the forefront of their minds so that it is you they turn to when the season comes around again.

You should use your website to grow your database of customers during the peak season. This is because your website should be buzzing at this time with customers and potential customers interested in what you are offering. Ensure that your website has a strong “call to action” on every page, which includes an invitation to subscribe to your mailing list or newsletter, coupled with a special offer for signing up. You should also be continually obtaining feedback from satisfied customers, that you can then add to the website as testimonials.

Whatever the time of year, you should still be making your website worth a visit by updating it with off- season content. For example, if you are a food producer of seasonal vegetables, you could fill your website out-of-season with recipes that include your food or complementary produce. Content of this kind helps to build a loyal audience that will refer to your website when the season is back in.

To generate revenue during the slow months, you could use your website to advertise special price offers to existing customers and perhaps those local to your business, helping to keep your company ticking over.

When you are thinking about marketing your business, you need to plan for the long-term and use your off-peak months to devise marketing strategies that will reopen the summer season with a bang.

By Poly

This is an excerpt from this weekend’s premium update from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly. Now offering monthly & quarterly subscriptions with 30 day refund. Promo code ZEN saves 10%.

Cycle Counts

Cycle Count Observation Probable Outlook Cycle Clarity Trend
Daily Day 28 Range 18-22 Days – 2nd Daily Cycle     Neutral
Green Up
Investor Week 11 Range 18-22 Weeks  Bullish Green Up
3Yr Month 13 Range 36-42 – 6th Investor Cycle. Bullish Green Up

We knew the dollar was pushing lower towards the next DCL because the dollar had already turned and broken below the 10 day moving average, all while deep enough in the DC timing band. My goal for this Cycle (as in most cases) was to see the rising trend-line broken and then a reversal develop, before a new Cycle can be declared. From the looks of the chart below, we might have already seen the 2nd DCL, although a decline of just 5 sessions is not typically enough time to reset the Cycle. In any case, the Cycle Low is imminent (if not already in) and from there the dollar will be ready to rally once more to form in the least a slightly higher high. It’s at that point where we wait to see what the longer time-frame Investor Cycle has in stall.

The dollar is in an interesting long term position here and it obviously has specific connotation for the commodity complex in general. If I had to speculate, then I would not classify this action as topping, but rather as consolidation of a possible new primary trend. The dollar put in a stellar 2014 performance and from what I can see, this is an Investor Cycle that is working off those gains via time. I try to steer clear of these grand predictions because as you can see, it could easily cloud once views on assets that are historically correlated.

7-29 Dollar Daily