In this Episode of Allstarcharts Weekly, Steve and I talk about the underperformance of the S&P500 relative to both Gold and US Treasury Bonds. The big question I think worth asking is whether these are massive distribution patterns in US Stocks on a relative basis, or if these are just consolidations within an ongoing uptrend that has been in place for years already? If you’re in the bear camp / recession coming crowd, then you would expect these tops to complete themselves to the downside. If you think stocks go on to make new all-time highs (I do), then these are not massive distribution patterns but just healthy consolidation instead.
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Good Buy or Goodbye?
Earlier in the week, JC & I were chatting online about some possible trade opportunities, and we had the following riff on Microsoft $MSFT:
JC: Hey, $MSFT long straddles.Sean: You in? or are you asking if it’s a good idea?JC: I think it’s tight. It either breaks out and rips, or just get absolutely destroyed.Sean: Yeah. Vol is a little higher than I’d prefer for that trade. But if you think a move is imminent soon, I don’t hate it.JC: I think it breaks out. But like $XLK in October, if it doesn’t it’s over. It’s either a “good buy” or a “goodbye.”Sean: A couple more days of sideways action might lower the vol a little more, which would make me happy 🙂
Fast forward to today and $MSFT volatility has come in a smidgen.
The fact is, $MSFT has been in a $10 range since early June. I’d share a chart with you, but you’d be bored as the range has tightened even more in recent weeks into basically an $8 dollar range. To me, especially in this tape, $MSFT is beginning to look like a coiled spring that can pop in either direction. It just needs a catalyst. That catalyst might be coming on October 23rd when it announces its next earnings report. Or it could be something external in the ongoing Tariffs nonsense or some other clown show move out of Washington.
At the end of the day, the reason won’t matter. But any breakout from this range is likely to be met with some significant range expansion. [Read more…]
Remember To Buy In November!
How often does someone tell you to Remember to Buy In November? Probably not as often as you’ll hear Sell in May and Go Away!
But what does this all mean? What are these silly nursery rhymes all about and why should we care? Or should we even care at all?
You’ll hear even some of the smartest and most experience market participants dismiss market seasonality altogether, almost as if they’re too good for it. Maybe they’re scared of things they don’t understand, like my 2 year old cousin gets when she’s confused. Or maybe seasonality is not as intellectually satisfying to them as say something like, fed policy or trump impeachments.
Either way, we do care about seasonal trends at All Star Charts because they help us with both identifying market trends and risk management. Here’s what US Stock Market Seasonality means to me: [Read more…]
[Options Premium] A New Wrinkle on a Familiar Shiny Play
A funny thing about Gold is, people who have any kind of opinion on it are either EXTREMELY bullish, or EXTREMELY bearish. There tends not to be any middle ground. No surprise it is such a politicized instrument.
Well, I don’t care about any of that. What I do care about is volatility priced into options in this space continues to be pretty juicy at the moment while prices of many Gold underlyings appear to be stuck in a sideways holding pattern. (You won’t hear any talking head loudly yell on CNBC: “I THINK GOLD GOES SIDEWAYS!” LOL).
And the boys at ASC agree with me, having published a neutral opinion on it in their recently published ASC 4th Quarter Playbook. So let’s get into the play that makes most sense from here. [Read more…]
[Options] Rules are made to be broken
Quick little post offering a teachable moment in a currently open position on my books. [Read more…]
All Star Interviews Season 3, Episode 11: Walter Deemer, Technical Analyst With 57 Years Of Experience
Walter Deemer has been a Technical Analyst for 57 years, after starting his career at Merrill Lynch working for legendary Technician Bob Farrell. He is a founding member and past president of the CMT Association and coined the phrase, “When the time comes to buy, you won’t want to!”, which is the title of one of the books he’s authored. We’re lucky to have someone on the podcast who was in the business at a time when interest rates were NOT in a downtrend! In this episode, Walter talks to us about what it was like charting in the 1960s and 70s and what sentiment was like as we entered the 1980s and one of the greatest economic expansions in America history. “Watch their feet, not their mouths”, is what Walter Deemer says when he encourages us to look at what investors are doing, rather than their opinions. This was a great conversation where we discuss what he calls our “Shoulda Fund” and what the Breakaway Momentum Strategy (breadth thrusts) means to him. I really enjoyed this one! [Read more…]
Why We’re Selling Gold
We’ve been bullish precious metals since the 4th quarter last year and even coming into 2019. We’re not gold bugs, thank goodness. The risk vs reward was just skewed in favor of the long side, for a variety of reasons.
One of those was the fact that commercial hedgers were actually net long. They’re never net long, and literally always hedged. For me, these Commitment of Traders reports are usually just noise, EXCEPT when they’re at extremes. We want to pay attention when the rubber-band is stretched. And so we did, and Gold ripped!
Now we have the opposite scenario. Commercial Hedgers last month had on their largest net short position in history (345,145 contracts): [Read more…]
[Options Premium] Charge Back
Risk management is Rule #1.
Last month, I put a trade on that didn’t work out. Believe me, it happens (shocking, I know! /EndObviousSarcasm). There was a level that invalidated my thesis and it was breached. I don’t fight with price action. When price is speaking, I listen. So the trade was exited and I moved on, accepting my manageable loss.
Fast forward just one week from my exit and the chart has repaired itself and has established a newer, clearer level to lean my risk management against. My overall bullish thesis on this stock hasn’t changed, and now with new levels to observe, I’m going back in for a new try with a similar spread, but at new strikes and a new expiration. [Read more…]
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