These last six months in the crypto market have reflected the utility of patience in trading. Because we view trading through a financial lens, we always assume that risk management is preventing financial loses. And as such, we integrate strategies to mitigate against such losses.

These include stop losses, invalidations, and hedging strategies.

And while these are imperative in preventing losses from spiraling out of control, there is another aspect that gets commonly overlooked.

And that is psychological risk management.

Just like our portfolio value, we need to maintain a healthy balance within our inner emotional and psychological wellbeing. When we have a prolonged stretch of losing money in the markets, it negatively weighs on our mind. As such, this can create a negative feedback loop whereby we make decisions without awareness of the emotions in behind them.

A common misconception in investing psychology is that we should block off emotions entirely. By running a trading system, it is said that this eliminates bias and emotion from the picture, allowing us to make objective decisions informed by data. However, what this approach fails to...

A few years back, Robinhood made a big splash in the retail trading world by offering Commission-Free options trading.

Retail traders and the media that served them rejoiced! 

"This is a game-changer!" they shouted.

And in some ways it was. But not in the way you might think.

It changed the game for retail options brokers to be able to attract multitudes more sheep to get shorn. How?

For one thing, retail brokers are able to command top dollar from market-making firms who pay the brokers for the opportunity to take the other side of retail trades. This is called Payment for Order Flow (PFOF).

From Robinhood's August 7, 2024 earnings report:

In the first half of 2024, Robinhood earned substantial revenue from payment for order flow (PFOF), particularly from options trading.

In Q1 2024, options trading contributed $154 million to Robinhood’s transaction-based revenue, a 16% increase compared to the same period in 2023. This represented a significant portion of...

The dollar is weaker than you think. 

This is a major development in the forex market. And when we look under the hood, things are even worse than they appear for the greenback.

With more and more global currencies showing relative strength each day, it’s time to take a look at US dollar internals and see what’s moving. 

Relative strength is not just the cheat code for stocks, it also works for the currency market and everything else in between. 

We also learn a lot about the breadth of a given market through analyzing internals. This helps us determine how we want to position ourselves to make money. 

And right now, it looks like we should position ourselves for a lower dollar over longer time frames. 

The following table shows the US dollar is in, or moving toward, a bearish trend regime against most other major currencies.

As you can see, over 60% of currencies are in uptrends against the dollar… and this is now true on every timeframe we analyze. 

This is...

They can't even sell the Chinese stocks!

Chinese stocks!

The worst stocks on the planet. Yes those. They're even buying those.

That's what happens in bull markets. 

The CSI 300 is up over 4% overnight. This is the Chinese equivalent to the S&P500, which is now bouncing off support from Q1 and potentially putting in a historic double bottom:

Think about what this could mean to global markets, if even the worst stocks can't go down.

I mean, just look at the returns in China compared to the United States over the past 4 years, taking it back to before the prior cycle's peak.

Using this timeframe, you can really see the lack of recovery in China.

And I'm not just cherry picking the CSI 300 here.

It's just that this index is a good representation of the Chinese Market.

But if you want to compare that to the more popular China ETFs, you'll see the same thing, or worse.

While the CSI300 and China Large-cap 25 Index $FXI are only down 26% for this period, the China Technology ETF $CQQQ is down double that. So is Chinese Internet ETF $KWEB.

I...

Gold futures have been relentlessly rising and printing new all-time highs. The precious metal is now overbought on a 14-day, week, and month RSI. 

We've recently seen Palladium rip over 20% in a few days and momentum thrusts for the Junior Gold & Silver Miners ETFs.

With this new Gold bull market now almost 7 months old, maybe it's time for Silver futures to break out of their multi-year range.

Let's talk about it:

From the Desk of Steve Strazza @Sstrazza

Welcome to The Minor Leaguers.

We've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.

For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.

That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.

We expanded our universe to include some mid-caps.

Nowadays, to make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.

And it doesn't have to be a Russell component — it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe.

The same price and liquidity filters are applied. Then, as always, we sort by proximity to new highs in order to focus...

No need to get cute, and no need for an elaborate explanation of what's going on.

Quite simply, we're in a bull market. And it would be irresponsible to think that technology and high beta names won't be playing catchup soon.

We could try to pick the individual winners, or we can just buy a basket. Today's trade is that.

Here's a current one-year chart of ARK Innovation ETF $ARKK:

In the video above, me and Steve Strazza discuss that we want to be owners of the March 55 calls for a breakout move that kickstarts a recapture of all the lost mojo here in ARK over the past couple of years. It's crazy that this ETF once traded as high as $159.

Today's trade is not a bet that we'll be back there any time soon. But we think the battleship is turning and we'd like to catch the first wave.

Here's the Play:

I like buying a $ARKK Nov/Mar Diagonal Call Spread. We're going to short the November 53 calls and simultaneously purchase the March 55 calls for an approximately $1.25 net debit, which represents the most we can lose in this trade (as currently constructed).

The March 55 calls are the position I...

In today’s Daily Digest, we’ll review the following:

1. No new positions today.
2. Rolled XLI position to November options.
3. Exited IWM (profit), XRT (profit), and XLK (loss).
4. Current status of open campaigns.
5. Volatility Snapshot.

Let’s dig in!

The Best Morning Show in Finance is BACK!

After a week long hiatus at the FutureProof Conference in California, and then our ...

The world's important stock market index just made new all-time highs, again.

We don't know what the market is going to do next. No one does.

But here's what we do know.

Going back and looking at all the data since the beginning of time, we know FOR A FACT, that there is nothing more bullish for a stock than the price going up.

We know.

We have the data.

So do you!

But have you gone back and actually taken the time to count?

The most bullish thing a stock can do is go up in price.

Here is the Dow making new all-time highs (in price), after breaking out earlier this year from a multi-year bear market.

People keep looking for bear markets that aren't there.

We just had a bear market a couple of years ago.

And we had another one a couple of years before that.

If we're going into a new bear market, you're going to need stocks to go down in price first, or at the very least they need to stop going up.

We know mathematically that you CANNOT have a bear market, or a correction of any kind without the prices of stocks falling. (See: ...

In today’s Daily Digest, we’ll review the following:

1. No new positions today.
2. Rolled XME position to November options.
3. Exited XLB position for a "profit."
4. Current status of open campaigns.
5. Volatility Snapshot.

Let’s dig in!

Momentum has returned back to the crypto asset class over the short term.

Although there is work to be done, it is positive to see the S&P 500 reclaim a new high and Bitcoin traders return back to making money.

I have changed my intermediate bias to bullish while keeping my short term bias at neutral.

I remain insistent on the value of patience in this tape.