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Steve - we're almost halfway

Posted by DigiNomad on 13th of Sep 2022 at 03:41 pm

Steve - we're almost halfway to your observation that a 1000 point move was possible if the market pushed up to a high....way back on 16 August.  A month later, and it doesn't seem so crazy   

  
Thanks for the feedback. Tracking now. 

XLE - no one got my dumb pun. I'll live ;) But does anyone have any idea where that spike came from? 

XLE - whoa, someone just

Posted by DigiNomad on 13th of Sep 2022 at 01:30 pm

XLE - whoa, someone just flipped a switch? 

rfa300 - Yes, using UNINTENTIONALLY was intentional, on my part. I have plenty of clients that persistently forward me links to various people talking about "the Great Reset," etc, etc. Or Robert Kiyosaki links. Most of the links are from people that profit from the sale of gold and silver, in one way or another. I choose not to go down those rabbit holes and didn't want to trigger anyone to think i'm on board with the theories surrounding conspiracies to bring down the country. I have nothing against people who choose to believe in these theories. I'm just not personally in that camp. 

Wedges & Flags - I have some code / scripts that identify them, but they suck for now. Will probably be hard to beat the computer approach once they get better!  

Anyway, your systems have been rocking, Matt. Thanks!

Agree. Pattern recognition is all based on history. But it's a different kind of pattern recognition. I'm sure you have seen the Ciavacco video on YouTube, right? He attempts to overlay time periods from previous historical events and includes mentions of things like recessions, inflation, etc. Instead of just looking at the short term levels and patterns that are presenting themselves. 

Ciovacco Capital - this is

Posted by DigiNomad on 13th of Sep 2022 at 11:54 am

Ciovacco Capital - this is why I stopped watching stuff that relies on historical analogy to predict movements instead of just trading level to level. For one, there is no historical analogy to this period. There just isn't. Fed, Congress and the Executive branch all worked together and, unintentionally, created an almost unsolvable maze of economic conditions. The only way out is to, eventually, fall on our sword. But we're going to fight tooth and nail to avoid that eventuality. 

Inflation Reduction Act 2.0? Why

Posted by DigiNomad on 13th of Sep 2022 at 11:14 am

Inflation Reduction Act 2.0?

Why am I stuck with an uneasy feeling that Biden is looking at outcomes today on inflation and markets and scheming where to drop the next trillion dollar bomb on the economy? 

"Climbing a wall or worry" saying should be renamed. What was really going on all those times over the years was "Climbing a wall of Fed stimulus." Not happening this time. 

I  only trade SPX options in taxable account and SPY options in retirement accounts (better liquidity but I have to use more contracts).  Since I've focused my efforts on what amounts to a single product / index, my results have been outstanding and predictable.  Unfortunately, I know that someday I'll likely have to transition over to more volatill e products again. But with the VIX where it's been at recently, I can stick with a single index for my option set ups and do just fine. I'll cross the lower volatility bridge when we come to it. 

"Focus, Grasshopper" - Mr. Miyagi, 1984   

CPI in the  morning. System trades? 

Ballsy close with CPI before

Posted by DigiNomad on 12th of Sep 2022 at 04:02 pm

Ballsy close with CPI before the open. Market thinks if the print is even a little below that they will force the Fed to pause. I think they have another thing coming (unless JP is bluffing)

Clearly they were hedging their purchases (based on VIX)

Ladder happens naturally if you're watching the market daily and doing credit spreads on both sides of the market (selling calls spreads wehn overbought and put spreads when oversold).
I tend to sell options with around 45 days to epiration and they are always out of the money (no more than 20 delta when sold). Given these parameters, I'm not sure what you mean by "flat market is no good."  I would LOVE a flat market right now. Although, you want the vol to be high when you enter the trade, you WANT it to collapse after you're in (with credit spreads) 

The TA from the site is critical to my credit spread selling strategy. I use it to pick the levels / strikes that I sell and when to sell them (overbought = start selling call spreads, oversold = start selling put spreads). 

Never heard this quote but agreeing with it somewhat explains why I sell credit spreads on both sides of the market as my primary strategy. If I was more confident in market direction and timing, I would logically be buying debit spreads instead for the larger potential returns. Selling credit spreads allows me to win on 3 out of 4 outcomes. Buying debit spreads means I only win on 1 out of 4 possible outcomes...and I'm essentially admitting to myself that my base case has a high likelihood of not playing out the way I imagine. 

VIX higher - people buying

Posted by DigiNomad on 12th of Sep 2022 at 12:46 pm

VIX higher - people buying puts into tomorrows print to offset their long exposure makes a lot of sense. Would be a bit surprising to see the normal VIX / SPX relationship today. 

retirefire - I don't know this to be a fact, but I keep hearing the Fed has never paused a rate hiking cycle with their rate below the current inflation rate / CPI (not simply below say the 5 year expected inflation rate). If that's true, we could print a 6 on CPI and would still be nowhere near the end of the tightening cycle (we're not going to print a 6, FWIW). 

Right, so you're in the "The Fed might be bluffing" camp. That's fair. They might be.  It wouldn't be the first time. Talking a strong game sometimes does a lot of their work for them. But in this case, they are talking a strong game and monetary conditions are still loosening (loosening across the board today).  I think that was clearly why JP did such a short, forceful speech last time around. He is annoyed at not being taken at face value. 

Bearishness doesn't have to be complicated right now. The most important rule in this business is "don't fight the fed." No other rule comes close in importance.   The market is openly fighting the fed at the current time. You hear it all the time in various interviews on CNBC. They believe that either JP doesn't have a cajones to do what he needs to do or that inflation will roll over sooner rather than later which will make the Fed pause sooner than advertised...or both. Either way, the market it refusing to take the Fed at its' word. We saw what happened on the way up when people were trying to figure out why in the world the market was levitating in the midst of a global shutdown (answer: The Fed and just the Fed) and we'll see what happens now if the Fed keeps it word on rates and QT. Unless the market is right to fight the fed this time. Fighting the Fed always ends in tears. The only hope for bulls is their belief that the fed is bluffing.

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