Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

On the Eve of Options Expiration…..

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I am always amazed how large the opportunity to “make it big” factors into the great magnetism of the market. The belief that anyone, from any background can be successful and make tons of money has quite the allure. But, in all of this euphoria people neglect to think about all of those that failed before them. And believe me the failure rate is high. Yet, investors/traders continue to choose the most difficult of investments to trade – stocks. Stock-only traders are at a complete disadvantage because they have no way to trade the randomness of the market. They have a 50/50 chance of success for each and every trade.

Bottom line – stock investors/traders are truly at a disadvantage.

Again, stock investors only have two ways to make a profit: buy a stock or short a stock. And most retail investors are not willing to short a stock, so basically they are only able to profit in one direction – up.

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Up, Up and Away? Not If History Has a Say.

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The market rallied hard making it the 9 out of 11 tradings days with positive gains. SPY has made since 4.2% during that time, but over the past month SPY has made a staggering 8.7%. And as expected, now we are seeing sentiment change.

But, I am not completely sold on the rally yet.

Why? Well, other than the overbought to very overbought readings in most of the ETFs I follow and all of the reasons mentioned in my post yesterday, we are also entering into the weakest period of the month of January. Just look at the DIA chart below for percentage of times positive over the next five trading days.

courtesy of Sentimentrader.com (click to enlarge)

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Was Tuesday the Top? (by Andy Crowder)

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Numerous downgrades, more European woes, news of inevitable Greek default, financial sector struggles among other bearish news led to a lower, oops, higher open today? Yes, higher.

It has indeed been rather frustrating as a short-term bear since the gap open on 1/3. But, oftentimes when you are a contrarian and you make your livelihood on fading short to intermediate-term market extremes you often get into positions early. Any professional with any cred will tell you the same. It is to be expected. However, we are now nearing the area of max pain. While I thought we would see an immediate push lower after the first week of the year, I was willing to accept a push up to 1300 on the S&P or roughly $130.00 in SPY. We hit that level today and after the bulls pushed and pushed they failed miserably by the end of the day.

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Expect the Unexpected?

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The market, particularly the tech-heavy Nasdaq 100 (QQQ) continue to push higher this week. The rally that began on December 19th has barely paused for a breather. But, if you look closely at the last four trading days it seems as though we are setting up for a move lower as the ETF seems to be struggling with strong overhead resistance.

Most of the highly- liquid ETFs I follow have pushed into a short-term overbought extreme, with several actually reaching a very overbought extreme.

Typically, when we see this type of price action, that is an upside gap (1/3) into overbought to very overbought territory at strong overhead resistance, a short-term reprieve is to be expected.

However, if you recall, I expected to see  a reprieve last week, but the gap in the tech-heavy Nasdaq 100 has yet to close.

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Ignore the Noise. Trade Strategies Based off Probabilities

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“What do you think about the latest economic report, data coming out of Europe, etc?”

That’s a question I often receive. My typical response, I don’t care. Okay, that may be a bit harsh, but it is true. For the most part I really don’t care about the daily news that flows in and out of the market. I am an options trader. I trade strategies based off probabilities. I create statistical advantages based on my current market assumptions.

We must realize that knowing what is going on in the news and knowing how to make money consistently are two separate things. For successful options investors it’s about your strategy, your logic, your process, it doesn’t matter what you think the market the latest economic report is going to say. I realize it’s a difficult concept for the options newbie to understand.

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