There might not be a bull market everywhere. It seems interest rates are taking a breather here and deciding their next move. And while they consolidate, options markets are currently pricing in some elevated premiums that are pretty tempting to sell if you're a believer in options volatility mean reversion (I am!).
If you weren't too busy reading reports of upcoming recessions, you may have noticed that the MSCI World Index broke out to new all-time highs this month. The award for best ETF Ticker goes to the good folks at iShares: $URTH
After a 21-month bear market, the planet Earth is now starting a new leg higher. I continue to believe very strongly that if stocks are above last year's highs, it is incredibly irresponsible not to be aggressively long.
There is information everywhere. We analyze both the Indexes and the ETFs. We look at markets all over the world priced in both local currency and in US Dollars. We often use Gold as the denominator as well as the Indexes themselves to analyze relative strength. It's one big giant web of money flow.
Today I want to call your attention to an interesting divergence that has come at important turning points in the past. Specifically I'm referring to the Wisdom Tree Hedged Exchange Traded Funds for Europe and Japan: $HEDJ and $DXJ respectively. These funds are priced in local currencies as opposed to most other ETFs around the world that are priced in US Dollars.
First, here is the Europe Index Fund priced in Euro breaking out to all-time highs. I've been chuckling to myself a lot lately because when was the last time you could say the words "Europe" and "all-time" highs in the same sentence with a straight face?
I got a lot of great feedback on that post and feel that it's a lesson worth reiterating every once in a while, so today I want to share a great example of the constant barrage of information we have working against us as market participants.
Technical Analysis doesn't give us all the answers. But it certainly goes a long way in helping us ask the right questions. That's really what this is about. No one knows what is going to happen next. Contrary to popular belief, this makes it an even playing field (don't @ me). Where the advantage truly lies is in those who analyze the behavior of the market vs those who ignore it.
There are many investors, most in fact, who completely disregard the behavior of the market in favor of some other brilliant strategy they believed they've come up with. My point is, if at the end of the day, price is the only thing that will pay us, why not start and end the entire process with the study of that price?
Not to get too philosophical on you guys, but just try to think about the things you're thinking about. What are the questions you're asking? Because you certainly don't have the answers. You have no answers, and neither do I. We have, what we think, are higher probability and lower probability outcomes. But we don't actually know.
In this Episode of Allstarcharts Weekly, Steve and I discuss the relentless buying pressure in stocks throughout the first half of November. Even when the Dow Jones Industrial Average did not register a positive day, the market didn't really go down either. In fact, we've just seen the two smallest down days in the history of the Dow Averages that date back to the 1880s. This is what we're talking about here. Some might think we're overbought, but I would argue that the overbought readings are just normal characteristics of uptrends. They should be overbought. I still think the Dow sees 30,000.
Sean, what is your strategy for handling the impact of Theta on an open position? Is there a bailout point where the time decay outweighs the potential upside?
The answer is YES. Theta, as well as Gamma often become my enemy as we near expiration. Here's how I approach it...
