Since its President’s Day, I think I’ll write about something Presidential. And this quote from our patron saint George Carlin is absolutely crucial to the piece:
“When you’re born you get a ticket to the freak show. When you’re born in America, you get a front row seat.”
See, I want it crystal clear at the outset that there is nothing political about what I’ve got to say. Our nation is deeply divided along political lines – – the worst I’ve ever seen – – and I can write or tweet about just about anything under the sun without repercussion, but the moment I so much as mention the word “Trump” without words of gushing adulation next to it, some Duck Dynasty-watching mental midget flips out.
I’ve been so busy this afternoon, I’ve been racked with guilt about not being able to sit down and do a post. But here I am, so I’ll get on it…….
The bear market was supposed to really kick in full-force a year ago. News flash: it didn’t. Allow me to show you what I mean by this.
Before I get into the Trade Idea, I’m going to review the context of the S&P500 from a structural standpoint and a typical deviation standpoint. First of all, structurally, the Weekly and Daily charts show higher highs and higher lows, the very definition of an uptrend. In November of 2016, the SPY completed a $20 wide trading channel of which currently price is a stone’s throw from its high resistance. The channel would suggest that buying potential is limited.
Now, anyone who hangs around the comments has seen that I use 5% simple moving average envelopes around a 100MA as a measure of movement potential (oversold, neutral, overbought). Where are we now? Yep, hit it on Friday. Again. (Click on any chart to see a larger version).
Before we discuss the basic of options parameters for trading, we need to understand the concept of volatility. This is not simply an observational number, thought it can be used as such. In general stock investors want to avoid volatility. They want to minimize the standard deviation of their investments, as large drawdowns can be petrifying to some. This is a reaction that encompasses more than trader psychology; when the broker taps you on the shoulder with his margin call, it really is game over for you. This can be unfair, but those with the gold set the rules.
Note from Tim: our own Davis Ramsey was kind enough to compose this breakdown of his trading performance. I’d say he’s got Gartman beat!
Conducting a thorough year end review of your trading results is of the utmost importance. While regular monthly reviews are good snapshots and can keep you on the right track, looking back over a full year can show you some important big picture mistakes or successes that you might otherwise overlook.
Greetings from the Knight household, as each member of my beloved family is doing their own thing. Me? I’m composing you a post for absolutely no charge. I’m a helluva guy, aren’t I? Let’s begin our story.
About a week ago, I got a series of tweets from a fellow whom I don’t know and have never heard about. He wanted me to know about a big bet he was making………..
Being an equity bear has been brutal for, oh, nearly eight years now. With the S&P up about 250% since bottoming in March 2009, equities have been, on the whole, raging higher, with some sectors in particular benefiting tremendously from the Trumpgasm. One area, though, seems to be recognizing a bitterly cold chill of reality, and that is retail.
Not everything retail is weak, of course, Amazon has had an astonishing run (and we’ll see if it holds together when they report next week), and some stocks such as Autozone (AZO) and O’Reilly Auto Parts (ORLY) have cranked out multi-hundred percent gains for years now. But many retail companies, particularly those having to do with clothing, have been getting whacked. Take, for instance, Abercrombie & Fitch, which I’ve picked on endlessly: it is actually lower than it was at the greatest depths of the financial crisis. For how many stocks could you make that statement?