At least, it sure looks that way at the index level as the biggest of the big caps begin new legs higher.
Though, curiously, the two short positions I have on are also showing signs of working out for us.
With $VIX readings continuing to remain low, most bullish bets I’m looking at involve buying options premium since it is quite affordable in this environment.
In this week’s portfolio review, I fielded an important question: “What’s an appropriate account size for trading options?”
Of course, there is no one-size-fits-all for options accounts. But I get into a number of considerations to mull over to determine what is the right size for you.
The Nasdaq is ripping to new all-time highs. NVIDIA’s market cap is surpassing the three-trillion-dollar mark. And US T-bonds are registering another buy signal.
But the market’s still a mess.
Just look at yesterday’s intraday reversal—a bullish reaction to inflation data in the morning, followed by a bearish reaction to the FOMC meeting in the afternoon. Investors are still trying to make sense of the mid-week hoopla.
Friday’s close (the most important data point of the week) will reveal critical information regarding market conviction heading into the weekend.
Meanwhile, you can track high-yield bonds for risk-on confirmation.
Check out the HY Bond ETF $HYG overlaid with the high beta-versus-low volatility ratio (using the $SPHB and $SPLV ETFs):
It's "Fed Day." So I'm not interested in putting on any trades that might be material affected by any post-fed reaction. But I did find one that is trading in it's own universe, divorced from whatever may or may not come out of Washington.
This is a trade that will be hard for many people. Not hard to execute, just hard to comprehend the why?
Some people will look at the chart and be afraid of a pullback.
Some people will see that it's a $4 stock and say: "no thanks."
OK, the title of this note is a little tongue-in-cheek.
But let me explain.
I’m a rules based trader. I’m nothing without my rules. Without rules, I’m just a trader pissing in the wind, driven in multiple directions by my volatility and ever-changing emotional reactions to my intraday PnL.
That’s no way to live.
Once I committed to being intentional about every trade I put on, my trading jumped to a new level. This process includes a thoughtful rationale for my thesis, position sizing, stop loss, and profit-taking levels.
So these days, whenever positions are moving either for or against me, I take comfort in knowing that I don’t need to make any new decisions – even as my emotions tug at me to do something! I already know what to do because I laid it out in my original trading plan.
And for me, that works 95% of the time.
Why not 100%?
Because nothing is perfect. Not the setup. Not me. Not the rules. Nothing.
Occasionally, I need to use a little discretion. Thankfully, not often. But when I do, I do it from a position of strength.
It's not a bad thing for America, Americans or the American Stock Market that the largest companies in the country are going up in price.
The best players are scoring a lot of points.
That's perfectly normal.
In fact, if you go back and study every bull market over the past 100 years, you'll notice that Technology is a leader in almost every single one of them.
Tech stocks doing well, and outperforming other sectors, is just a classic characteristic of a bull market.