I have always refrained from commenting about politics as there are a myriad of sources out there plus I generally deem it to be counter productive to our mission at hand. Which of course is to succeed as traders in the financial markets – period. As such today will be no exception. But watching events in Minneapolis and other U.S. cities unfold over the weekend I could not help but feel a growing sense of surrealism above anything else.
If there was ever a valuable lesson to be learned about the utility of the mainstream media in the context of trading the financial markets, then the global Corona train wreck will undoubtedly be recognized by future generations of traders as a textbook example.
In German we have an expression: ‘Vom Regen in die Traufe’, which loosely translates as ‘from the frying pan into the fire’ – you get the idea. Looking at the insanity we just left behind and exchanged for a prolonged sideways churn across almost every market vertical I’d say either expression applies.
Unbeknownst to most retail rats a fight is taking place in the equities market, and it revolves around an exotic concept only known to a select few in the options trading world. I’m speaking of course about the weekly expected move, and what makes it so important is the fact that much of what drives stock markets these days is driven by the options market. How so? Let me explain.
Imagine my surprise when equities melted higher throughout yesterday’s session, then sold off most of it in the last 30 minutes, only to gain it all back overnight? No you’re right – it wasn’t much of a surprise, especially after the big players showed their hands late last week by seeding the financial MSM with bearish opinion pieces. That’s how the game is being played – and it’s got a name: the good ole’ rope-a-dope.
Everything I touch today seems to either be out of commission, requires maintenance, or repeatedly crashes. One of those U2 Mondays I guess, so after burning through two frustrating hours this going to be a pretty snappy post. That said – the two charts I was able to scrape together should be raising your eyebrows, especially if you’re bearish.
What a difference just three trading sessions can make. Here we were last Friday seemingly on course to exceed the April highs when suddenly the floor gave way on Monday morning and we sold off for three consecutive days. Of course the financial MSM didn’t miss a beat and immediately trotted out the likes of Stan Druckenmiller, David Tepper, and Jerome Powell who did their very best to jawbone this market lower. Are they right? Is this v-shaped recovery doomed to fail?
The market recovery over the past two months has been nothing short of miraculous. I’ve looked at a lot of historical wipe outs in my time and none of them even come close in regards to recovering lost territory and more importantly when it comes to the normalization of implied volatility.
With what’s been happening in the world the past 4 weeks, a lot of people are coming out of the wood work and smelling opportunity. As people who spend a great deal of time trading, Mike and I have an influx of texts, phone calls and e-mails from friends, family and clients about putting some long term capital to work.
The common theme I see among most casual investors is the confusion between trading and investing. The rules for each are much different and many trading rules do not apply to investing. Likewise, many investing rules do not apply to trading. Swapping these rules sets will get you the financial equivalent of prison raped while you have to hold the boom box blasting Air Supply.
Let’s look at the difference between the two and start with a great example of investing, Warren Buffet.
TESLA has been running on steroids over the past few weeks. Is now a good time to buy, to sell, or to just kick yourself for missing out on these massive moves? In this video I will walk you through three different scenarios on TSLA: The bullish case, the bearish case, and the professional trade, plus I’ll offer my prospective on all three of them.