CSX has been good to us.

We've been bullish $CSX all year. And we had a successful options play this summer that recently came to a profitable conclusion. JC calls CSX "a beast!" I can't argue with that.

And low and behold, even as the overall market has hit a little bump in the road over the past week, $CSX just continues riding the rails, appearing to be in the final stages of completing a nice and tidy two-month base with eyes on a $91 price target and above.

With earnings on deck, the chairs are aligned for an opportunistic play to put elevated options volatility to work for us.

In this episode I am thrilled to have Mark Newton, Founder of Newton Advisors. Mark is one of those Technical Analysts that I have followed for many many years. His intermarket perspective and top/down approach is one of the best on The Street. He does great work on relative strength and ratio charts to really gauge the flow of money from one asset to another. His experience on both the Buy Side and Sell Side gives him a unique perspective and I've always found it helpful to pick his brain whenever I get the chance. In our conversation we discussed U.S. Stock market breadth, keeping an open mind to future outcomes, Interest Rates, Oil and Gold and how he approaches the market day in and day out. I really enjoyed recording this episode and I think you'll quickly see why. This was a good one!

From the desk of Tom Bruni @BruniCharting

For most of the year we've been talking about downside in Bonds and the potential effects that would have on Equities and Commodities. With rates extending their gains to start the fourth quarter, we're going to use this post to look at the structural trends in Commodities and determine which are best positioned to benefit if we start to see money rotate.

Stocks, Commodities, Currencies, this long post will cover all of them as we discuss market conditions heading into year end.

U.S. stocks gave everyone a little reminder last week that stocks don't always go straight up in Bull Markets. Significant gains will be seen in the drivers of every bull run, but not without pauses and pullbacks along the way. Overall, we're still bullish here, but more cautiously so and looking to minimize our risks on long plays as best we can.

If the markets are currently undergoing a pause that refreshes, then we expect the resumption to highs will be lead -- at least in part -- by semiconductors. With that in mind, we want to be buying dips amongst the leaders in this space and we have a great candidate lined up.

Gotta love it when the market hands us a little two-way action to remind everyone that stocks go both up and down. And more importantly, I get real excited when I start to see options premiums rise thanks to irrationally freaking out market participants. Is the top in? I don't know and neither do you (my gut says no), but there are plenty of people starting to buy protection in the options market to protect their positions. We'll happily take the other side of those insurance bets.

There are a lot of interesting developments working through the markets these days. Whether it's the relentless sector rotation underneath the surface or the divergences between small and large-cap stocks, there is no shortage of topics to discuss about the current environment. I have been in the camp that a breakdown in Bonds to new multi-year lows would likely be accompanied by a lower yen and higher stock and commodities prices. Through last week that strategy has worked really well.

Moving forward, however, how does this face-ripper in rates impact U.S. stocks? Is the relative strength in financials this week a positive sign for equities? Or are they just getting a sympathy bid because of rates? Are Semiconductors finally going to break out above their epic 2000 highs, which they've been flirting with all year? What about Gold and Crude Oil? How do they fit in?

This morning I was on the Benzinga Premarket Prep Show discussing what I felt are the most important topics in the markets right now. Here is the interview in full:

From time to time I like to review some of my Best Practices for my own benefit, but also for the benefit of readers of this blog, and for subscribers to All Star Options. So let's get right to it...

This past Friday marked an important monthly date in the regular cycle of options expirations. Friday marked the line in the sand where we crossed under 21 days until October expiration.

Why is 21 days until expiration important?

In short: because of theta and gamma.

For long premium positions, theta decay starts to become a major drag, and increasingly so with each passing day. For short premium positions, gamma has the potential to produce wild swings in your position equity. Neither of these scenarios are very appealing for obvious reasons.

Lets breakdown the risks and actions to take for a variety of common strategies.

There is a lot of noise being made this week about potential divergences in U.S. Stock markets. The one thing that gets lost in the shuffle is that just because asset A is rising and asset B is not keeping up, that asset A needs to correct and come down to meet asset B. Rarely does it get mentioned that asset B can just get some rotation and catch up to the relative strength that asset A is showing. In fact, during bull markets (which we're in, not sure if you heard) the latter is a perfectly normal occurrence.

Today we're going to take a look at a more macro correlation that I think we need to be watching. We're talking specifically about the long-term behavior patterns of the S&P500 in America and the DAX in Germany. Going back many decades, these two indexes really move in sync.

This is the video recording of the October 2018 Conference Call for Members of All Star Options

We were bullish on Microsoft all summer, and with $MSFT printing another new all-time high this week, our stance hasn't diminished in the least. The only thing that's changed is we've raised our price target. That tends to happen in bull markets.

In our October conference call for subscribers, we teased a bullish trade idea in $MSFT. And upon further reflection, I think I've come up with an even better probability play with an opportunity for better risk adjusted returns.

Small and mid-caps have been hit hard since late August, so rather than look for short opportunities after a large move, we're looking for potential counter-trend trades on the long side. Today's candidate is PTC India.

I have to give credit to our Intermarket Analysis work for a lot of our success over the years. This "Cross-Asset" perspective is incredibly valuable, particularly when it comes to identifying and staying with important trends. As a supplement to our Technical work in U.S. Stocks and Indexes, we incorporate a variety of Intermarket relationships to help us formulate a thesis. These include Bonds, Commodities and Currencies.

When it comes to safety, I don't care what people believe is a safe haven, I only care how the market reacts when it needs to go safe. When markets stressed and volatility rises, stocks fall in price and US Treasury Bonds and Japanese Yen reap the benefits.  When did Yen and Bonds get strong? Summer of 2015 just as the S&P500 was topping out. When did Yen and Bonds peak? When stocks got going several months before the 2016 elections. Both of these are near their 52-week lows, which makes perfect sense with Stocks at all-time highs.

So, the way I see it, we're most likely going to see Yen and Bond strength if stocks really sell off this quarter. The other side of that argument is that stocks are likely to do well in an environment...

The one thing we do know is that stocks are not in a downtrend. New all-time highs are consistent with a stock market environment where prices are rising. We saw new all-time monthly closing highs in most of the major U.S. Stock Indexes last week. The question is more about whether or not we're starting to see this trend change or deteriorate in any way. The short answer is no. We do not see enough evidence to support a bearish approach towards equities, quite the opposite in fact.

Here's what I'm seeing:

Mid and small-caps have been hit hard over the last month, so I wanted to do a quick update post on how we should be approaching these indexes over the short-term.

We've got 46 days until November expiration and it's always good to have some income trades on for every monthly expiration. It just makes good sense for somewhat diversifying our portfolio. We don't want to have only directional and/or long premium plays on. If the market goes sideways or falls somewhat from here, we need to have some cushion built in somewhere.

After reviewing all the most liquid ETFs we track, I've identified our best candidate based on relatively high implied volatility and range-bound trading action.

From the desk of Tom Bruni @BruniCharting

Earlier this month we did two Energy updates from the top-down, ultimately drilling into the best individual stock opportunities in both Canada and the US. I feel like there's been a lot of noise around Crude Oil and Energy in general because of OPEC, Trade Wars, and whatever else the media can come up with, so I just want to do a quick update on what we're seeing in Energy Commodities.

September has been a month where the market's experienced some sharp moves to the downside, so I want to use this post to review what we spoke about last month and provides some context around any changes that have occurred since then.

Kim Sokoloff is a trader's trader. Whenever I see her she is always telling me about her trading day, what she was buying and what she was selling. I have a huge appreciation for the passion she brings to the markets on a daily basis. We all have different time horizons, some longer-term and some shorter-term. Kim is concerned with what stocks are doing over a a few days. For her, "long-term" is only a couple of weeks. In this episode, Kim walks us through her morning routine and thought process throughout the trading day. We've had analysts, money managers and traders on the podcast, but in this conversation we really dive deep into what it's like trading every day from an apartment in lower Manhattan. I really enjoyed this discussion with a very active swing trader and practicing technician.

As the Technology sector goes, so often goes the market. And the Tech Select Sector ETF $XLK has been going nowhere -- increasingly so -- over the past several weeks.

Does anybody here think broader market indices go sideways from now until the end of the year?

Yeah, I didn't think so.

If, or rather when, indices start busting a move, we're pretty confident that the technology sector will have a major say in the direction and pace. And we've got a plan to participate, whichever way it goes.

In life we have the saying "Make hay while the sun shines", suggesting that we take advantage of something while conditions are favorable because we don't know when those conditions will end or when they will be favorable again. In markets it's similar in that we want to be our most aggressive when the majority of the evidence is pointing in one direction or another.

Sticking with a theme we’ve been discussing with All Star Options subscribers for the past month or so, we expect to continue keeping things simple around here until the market tells us it’s time to change.

One way we’ve been keeping things simple is to be buyers of straight long call options. It’s still a bull market in spite of what gets shouted to you on TV, and volatilities continue to be low — pricing options relatively cheaply. So as long as the volatility in any individual name is still cheap, we’re always going to be looking at long slightly out-of-the-money call options to participate in bullish plays while affordably limiting our risk.

One variant of this play that also holds a lot of interest for me — especially in higher priced names where I might wish to limit my risk a little bit more — is the long call calendar spread which consists of a short call in a near month combined with a long call at the same strike in a further out month for a net debit. It gives us three ways to win!