August 2020 – Red Pill Quants

0 Welcome To Thunderdome!

Along with April and May the months of September and October are actually my most favorite of the entire year. The heat finally breaks, the nights are getting cooler, and most importantly the tourist zombie armies have finally returned to their respective icy enclaves in the North. Prices across the board are dropping as well, so it’s a perfect time to plan a late summer or early fall vacation. Life is good – until November when I get to complain about too much rain and cold feet again.

0 Going Vertical

This is going to be a brief post as we are running low on technical context that would provide any meaningful edge to our respective trading activities. The market has been going up – it continues to go up – and it’ll go up until that famous last sucker finally has been found. Based on historical statistics (see my Monday post) and the ongoing trend we knew this week would most likely end in the plus but few of us expected the ferocity of buying pressure we’ve witnessed all week.

0 Market Halitosis

As equities remain on cruise control and there’s really not much new to report on the daily front I decided to take a peek at some of my longer term momentum charts. The ones that stood out all relate to market breadth, which refers to the ratio between advancing stocks vs. declining stocks. But why would we care about that?

0 August Peak

British tourists have been departing Spain in droves during the past weekend in an attempt to avoid newly introduced legislation that imposes a 14-day quarantine on any travelers returning from the Spanish Peninsula. Suffice it to say that this effectively puts the death knell on an already dismal 2020 holiday season, and given ongoing political shenanigans the prospects for the fall and winter seasons are extremely dim. I foresee at least 50% of all tourism related businesses to go bust before the end of this year.

0 Binding Implied Volatility

In my Wednesday post I introduced the Z-Score and also explained how we use it for scoring implied volatility, making it the IVZ-Score. What I didn’t focus on much is why one would do such a thing in the first place, and the underlying purpose may not be immediately apparent to some. Now I already can sense your eyes glazing over plus it’s Friday, so I’ll promise to make this brief and actionable for non-nonsense traders mainly interesting in turning a buck.

0 Scoring Implied Volatility

The implied volatility Z-score is a way of framing implied volatility in context. For example, today SPY closed up 0.35%, which is decent but nothing compared with some of the candles over the past few months. But how normal or abnormal is it? We don’t know unless we’re able to put it in context.

0 A Vampire At The Beach

I was born with a fairly pale complexion which has always forced me to stay out of the sun lest I end up looking like a roasted chicken after only minutes of being exposed to a UV index anywhere above 5. It’s not that I hate the sun – rather the sun seems to hate me, or at least it hates my skin as it insists on burning it. As a financial blogger who also trades for a living it’s easy to understand that summer is my least favorite season of the year.

0 Brave New World

We are only eight months into the year but for all intents and purposes 2020 will be remembered by future historians as a year of explosive change and implacable economic Darwinism. At no other moment in time was there ever the possibility of shutting down a nation’s entire economy – let alone a global one – due to war, disease, or any other reason. It didn’t happen during WW1, neither did it happen during WW2, the Spanish Flu in 1918, the American polio epidemic in 1916, or the Asian flu in 1957.

0 Big Tech Crunch

Big tech was stomped again over the past few sessions but the current retracement still lies within the parameters of a regular late summer shake down. What is a bit more disconcerting to me is the marked increase in realized (historical) volatility, which usually is indicative of a late stage bull market top. Since big tech has been leading this rally this would have major implications to equities across the board.

0 The Dollar’s Line In The Sand

The greenback seems to be in the process of forming a floor pattern despite ongoing negative narrative by the financial MSM. Although I happen to have a dog in this fight my general perspective remains to be one of skeptical optimism as the Fed continues to exert massive headwind against a stronger Dollar.

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Monthly Archives: August 2020