Newsletter - 12/10/2023
Many important events should be resolved in the final weeks of this year.
As I start winding down for the Christmas holiday, I remain intently focused on protecting gains so as not to risk what are truly fantastic returns. As good as I wanted them to be? No, they never are. Better than almost anyone else? Absolutely.
However, as I usually do at this time of year, I have been reflecting on what I did right and what needs improvement. It is the only way in pursuit of my simple goal: "Do Better." I encourage you to take time to do the same.
Current Important Datapoints
As we get closer to Christmas, volumes will continue to become less and less. This of course allows for moves in either direction to be initiated with less commitment and less capital. It also has the potential to exaggerate moves which therefore, allows for easier manipulation. However, and truly this has become repetitive, monotonous and annoying to say once again: we are very near the turning point.
When markets top, its a process. And that process typically includes increased choppiness, decreased concern for risk, decreased attention given to macro fundamentals and increased FOMO. All of those things are happening right now.
This past week repeated the same pattern that has been playing out for months: any weakness is allowed for a time and then reversed. Of course I find this amusing as I have seen this play out so many times before and each time, market participants act as if this type of market is completely new. The current environment is simple: bad news is good news; good news is great news; no news is good news. The market is like a drunk at the end of a bender: refusal to believe its coming to an end until every last drop of elation is finished.
A summary of particular areas of interest (charts from Bloomberg and Zerohedge):
MARKETS: Tech and small caps were strong this past week with the Magnificent 7 again leading the way. As I have said before, when small caps rally it is a classic sign of money chasing one of the last areas of risk assets after all others have moved. Not good. Interesting, the DOW underperformed and was sold off every time it went green. This is not the sign of a broad market movement.
The S&P and the Nasdaq both closed at their highest levels since March 2022 and January 2022 respectively.
Money has also been chasing the most short stocks but as an example of the chop, it's easy to see that chasing this basket was also a fool's errand.
Of particular and humorous note was the fact that regional bank stocks, $KRE, rocketed higher despite the fact that at the same time, they were tapping the BTFP bailout facility pushing it to a new record high (red line down represents the amount drawn).
I will leave you with this chart. It represents the S&P with Global Central Bank's balance sheets. At some point, this huge divergence will revert back to correlating. Either the markets will fall, Central Banks' balance sheets will grow, or both. It's important to note that the balance sheets would grow not because of a strong global economy but because of a weakening one. The net effect of both, by the way, is markets go down.
Trading Results
After having the chance to update the YTD trade results, while pleased overall, I was not incredibly thrilled. Of course the +100% return of the Model 5k Portfolio is excellent and I am thankful for the results. However, I am one of those people that is constantly looking for areas that can be improve. And I found numerous items of note.
STOPS: I have been engaging in a policy of allowing losing trades to go to expiration "just in case" there is a return to the intrade trend. Not once has this proven to be successful. I have been looking at positions holistically meaning that if I had positions that were up significantly that I mentally would use those wins to offset losses. This is not the correct way to trade. Each trade is unique and unrelated to the other trades in the portfolio. By "using" profits, even mentally, it has caused me to modify my trade exits. That ends.
TRADE IDEAS: Often when I am live in the room, I will consider a member's trade idea and instead of doing a deep dive analysis, I will make a decision based on more limited data. This has severely impacted my win/loss ratio as well as again, allowed me to take trades that I would otherwise normally reject. Therefore, while I will still consider member trade ideas I will return to the policy that I was previously following requiring any idea to be accompanied with a thesis as well as relevant support and resistance levels, at the bare minimum. This will enable me to SLOW DOWN my decisions which will have the net effect of forcing me to be more "choosy."
TRADE ACTIVITY: There is a healthy balance between providing good trade ideas and a good number of trade ideas. Frankly, the second point should not even be a primary goal. Therefore, I will focus more intently on sharing high quality, well analyzed trade ideas even if that means less trades.
END OF DAY ONLY: While I think there is value in trading certain strategies on an intraday basis, those are not my strategies. I do not want to be locked into watching my screen all day nor do I think doing so adds significant alpha. In fact, unless a trade has discipline, it almost always will lead to over trading or revenge trading. Therefore, I will return to what I have always used: end of day pricing for triggers, confirmations and stops.
That really is the sum of the "tweaking" that I need to do at this point. But these little adjustments will ensure that my trade ideas revert to the historical mean performance.
Finally, I share this with you not because I am concerned. I share this because I want you all to see that even I view my trading as something that is organically growing. There is no perfect system out there but mine is pretty close, in my not so humble opinion.
Market Levels and the week ahead
On the SPX, price has now entered the October 2022 "Chop Zone" as can be seen on the weekly chart below. While I do expect the SPX to continue to move upward into that zone, I am also congnizent that at any moment, the market could reverse - it is that fragile at the moment.
The SPX has minor support at the 4535 level and major support at the 4500 level. I remain flat from a position standpoint.
The Nasdaq has turned bullish on the daily so all three timeframes are bullish. I still hold my QQQ calls but am going to need to sell them this week as they are 12/29 weeklies and we have entered the beginning of the theta cliff timeframe. There is nothing that indicates that it is time to get bearish although that could change quickly. Until then, the trend is our friend and therefore unless I start seeing more evidence of stalling or reversing, I will most likely remain flat relative to the NQ.
OTHER EVENTS:
EOSE: EOSE will hold its investor update event this week on 12/12 at 11am NYC. Those who want to listen in live can go here: EOSE-EVENT or listen in the conference room. I will be doing a podcast with Banana after the event commenting on what I heard and where I think EOSE is headed.
Tuesday: The Headline CPI reading comes out Tuesday BMO and is expected to rise .1% Y/Y, Core CPI is expected to rise .2% M/M, the same that it did in October. Any reading above those would put a damper on rate cut expectations,
Wednesday: The FOMC announcement should not offer any surprises. I expect nothing except perhaps Powell trying to :sound" more hawkish, although not too much otherwise he risks upsetting the bull conditions. Remember that all of the inflation indicators that the Fed uses are still above the Fed's nebulous 2% goal. The most focus will be given to any language hinting at when the Fed might start cutting and by how much. Of course you know that I am not in the rates are going to be cut camp, but the entire market sees cuts as a foregone conclusion. I think that market is being foolish and will pay the price for being so.
WEEKLY HOW WALLSTREET SCREWS YOU:
February 15, 2022. A date that shall live in - well, pretty obscurity. But it's probably one of the single most blatant criminal acts done by the industry (outside of the destruction of the field offices of the FBI and the SEC in the 9/11 attacks - but that's a whole different discussion).
What's so important about the date is that a warehouse mysteriously burst into flames on that date AND in a facility that had no working sprinkler system.
What was stored there were the records of TD Ameritrade. And here's the clients who Ameritrade had records on:
Isn't that interesting?
So guess what happened to that investigation? Never happened. And no one was ever held responsible for the fire. And the SEC never announced a new investigation.
When I tell people that the industry is rigged and that it is set up to take their money, I am passionate. Sometimes people are surprised by the fact that I despise the industry I was part of for 30 years.
The Financial Industry is a criminal operation. Now, the majority of the people working in it are not criminals of course but the people who lead it most definitely are.
UPCOMING WEEK:
Paid Memberships:
ALL OF THE LIFETIME VIP MEMBERSHIPS ARE GONE! But I am still running a special on VIP memberships and will be announcing a VIP Trial special this week also.
From this:
To this:
CLOSING COMMENTS:
I saw a question about buying the VIX. Don't. Seriously - it is the key component of the short vol / long equities trade being run now. The VIX is THE instrument being used to manipulate the overall market. Stay AWAY. Same goes for oil.
I am getting very very close to entering the next leg of my DOOM trades. The current participants of that trade are $KRE, $TQQQ, $BAC. I am monitoring $TLT but I want to hear what the Fed says this week.
Remember, we DO NOT have to get the actual top. I would rather wait for strong confirmation that the market has rolled over then to take the chance of getting chopped up here at the top. It's not worth it people.
Do not allow yourself to take trades because you "feel" like you are doing nothing. Do not mistake activity for success. In trading, we get paid to wait. Period.
Patience. Be ready.
MERCH STORE IS OPEN AND LIVE!
Don't forget the Discord live chat is STILL FREE but it will be closing to new members soon. In fact, we have already started removing non-active members.
In the meantime, come and join us - its the best community out there: Discord.
Also, be sure to check out the new page for Daytrading on the website, run by the fine gents @BaconTurkeyClub and @Juggernaut. If you ever wanted to learn or just watch two pros daytrade live, they are at it every day here: DiscordFuturesChannel.
Finally, be sure to check out VampireTrades and his amazing penny stock trades.
Thankyou Family!
theBoss
Nothing above is investment advice nor should it be construed as investment advice. It is offerred for entertainment purposes only. Always consult your advisors before investing any money. Do not "follow" or "mirror" any trade ideas provided. Mr.NotAdvice is not a licensed or registered investment advisor. Do your own research.