Don’t you hate it when someone you know is proven to be right about something and then keeps on rubbing it in by saying ‘I told ya so’? Well, I hate to be that guy today (actually I don’t) but heck… I TOLD YA SO! What am I droning on about again? Implied volatility of course – what did you think?
Have you ever noticed that the mainstream media, a.k.a. schmucks for hire who write about stuff they have no single clue about, will always start hyping powerful market rallies once they’ve already run their course? And you don’t have to look very far for recent examples. I give you gold, Bitcoin, the Euro, and of course equities. Usually the move is at least half done by the time you start reading about it. The age old conundrum for retail rats of course is whether or not it’s time to fade the crowd or to jump on the bullish bandwagon.
Strike it up to my Austrian upbringing but I absolutely love the month of December. Putting aside COVID epidemics and the current social upheaval across the West for a moment, it still ranks high on my favorites months of the year list, right after April and – of course – lovely May. And not just for the usual reasons like the Advent Season, the anticipation of Christmas Day, New Year’s Eve, batches of Glühwein (mulled wine), snuggly movie nights with the Mrs. in front of a crackling fire. It’s also my favorite month when it comes to my biggest passion, which of course is trading the markets.
Biden’s confirmation of Janet Yellen as the Fed chairwoman 2.0 pretty much sealed the fate of the U.S. Dollar and I expect it to be renamed the ‘U.S. Weimar’ just before its replacement by monopoly money which it appears to be more resilient against haphazard inflation. But to be honest a crashing Dollar is par for the course for a nation that is incapable of holding a presidential election without certified results over one month later.
Everything but the U.S. Dollar seems to be ramping higher these days. Bitcoin is back over $19k with HODLERs projecting it to be at $30k sometime next year. The smugness in the crypto waterholes I monitor is literally oozing out of everyone’s pores. Continue reading
I take it that most of you folks are either already getting juiced up on mulled wine or busy preparing for whatever Thanksgiving gathering will be permitted in your locality this year. Here in Spain Thanksgiving ain’t really a thing but that didn’t keep Mrs. Evil and I from cooking up a big pot of ‘Glühwein’ (mulled wine) and hunting down the juiciest looking turkey our local ‘Mercado Central’ had to offer.
What is the first thing you look at on Monday morning before the trading session opens? Most traders attempt to get a ‘feel’ for the market by tracking one or more futures contracts related to equity indices. So most likely we’re talking about the ES, the NQ, or the RTY which is the new CME contract for the Russell 2000. I personally mainly focus on the former two but always keep an eye on the RTY as it sometimes provides early clues of divergence. But before doing any of that my first go-to charts are my weekly statistics. Why is that?
I often wonder whether or not Albert Einstein would have been a good trader, given his IQ of 160 and his ability to correlate seemingly mundane observations and twist them into a mind bending theory related to the inner workings of the universe. Odds have it that he most likely would have laughed at the question and balked at wasting his intellect at a silly endeavor such as predicting future price action.
With the S&P 500 mostly treating water this week the big question in my mind was what the heck is driving the Russell to advance higher as if being juiced by a double dose of Martin Armstrong’s Tour de France special. Time to lift up the market’s skirt and dive in for a closer inspection.
The option market continues to do a horrible job in handicapping risk which is evidenced by the fact that expected move ranges all across the board are repeatedly being taken to the woodshed. We’ve got a situation now in which IV is steadily trickling lower whilst blatantly ignoring the wild moves we keep seeing all across equities. In conjunction with what I’m seeing in the VX futures and other pertinent measures this presents us with a juicy EOY trading opportunity I call ‘the taking candy from a baby’ trade.
