The Red Dog’s Roadmap
The SPX futures are up 2 ahead of the Fed this afternoon. It has been a methodical move since clearing the descending channel above 2430 to take out 2453 before making a new all-time high at 2481. Now we’ll look to see if the active bulls stay in control with upper support at 2464 and yesterday’s low at 2474. IWM gave another calculated entry Monday after it reclaimed $142.25 and cleared $143.55 to hit a hgih of $144.25. It will need to hold $143.21 to keep active bulls happy and, if it can, extend another day towards a target of $145. XLE is trying to stay relevant as some are long vs the $64.50 stop while others want to see if hold the 50day of $65.86. IBB has its first bearish engulfing candle in a while and I did tweet that I sold around $329.50. After this move from $310, some digestion makes sense. Look for banks to be in play on fed day as JPM had a nice 2 day move. If it is able to hold the $92 area, I will be looking for it to make a move towards all-time highs in the days ahead.
Continue Reading -->US Dollar – Nailed It! What’s Next?
Last week I talked about why the CPI report was not the main reason for the dollar decline and that we would see continued follow through lower. In this video I discuss: What to expect now that the target area has been reached A look forward to how the FOMC may impact the dollar next week Why price may be headed to test the 2011 low
Continue Reading -->Why I Am Betting on a Big Spike in the VIX
Traders are too bullish. Seriously. I typically start this report by saying that “permabears always say everyone’s bullish.” They’re wrong 99% of the time. Today is that 1% of the time when they’re right. Let’s go through our 5 sentiment indicators so you can see the numbers behind my reasoning. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish The VIX hit 9.39 early Friday, putting it awfully close to the 9.37 generational low set back on June 9. That puts the 3-month spread up to 4.57, which means traders have very little fear of volatility. This is up from last week’s 4.0 reading, and qualifies as extremely bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 76, up from 51 last week. The F&G Index operates on a 1-100 scale, and a reading of 76 qualifies as fairly greedy. This indicator has been subdued as of late, so I was a bit surprised to see it this high. 3) AAII Sentiment – Bullish The latest AAII Sentiment Survey shows that 35.5% of individual investors are bullish, up substantially from 28.2% last week. This 35.5% reading is basically inline with the 38.5% long-term average, and indicates that individual investors are basically neutral. This has been the case all year, even though the major indices have been hitting new all-time highs fairly regularly. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.53 yesterday, which is a very bullish reading The 3-day moving average is 0.57, which is well below the long-term average. These numbers indicate that traders are very, very bullish. 5) ISE Sentiment – Bullish The ISE Sentiment Index is at 138 (meaning 138 calls bought for every 100 puts. The 10 day moving average is 105 (105 calls for every 100 puts) Now that 10-day moving average of 105 is technically neutral, I’ll count it as bullish because it’s been subdued for so long. The year-to-date average is just 87, so a 10-day moving average of 105 is a big change in trend. Conclusion Out of 5 sentiment indicators, we have: 4 bullish (up from 1 last week) 1 neutral (down from 3 0 bearish (down from 1) I troll the bears constantly for spreading the outright lie that everyone’s too bullish. But again, today, the bears are 100% correct. It’s not 1999 all over again, but still — traders are extraordinarily bullish, which can sometimes (but not always) mark a top. Remember, using sentiment indicators to time the market is often a fool’s game. But it’s not often that we see so many sentiment indicators pointing in the exact same direction. There is almost no fear and no volatility out there… which means we could be about to see a spike in fear and volatility. Now, let’s be clear: I am talking my book, and I freely admit that my positioning could impact my viewpoint. Earlier this week, I went long VIX call and I own VIX bull put spreads. I am speculating on a market decline that would spike the VIX, preferably over 17 within the next few weeks. And I may even add some SPY or QQQ puts. As we all know, the theme this year has been: Equities steadily grinding higher Volatility near zero Sentiment leaning mostly neutral I think things are about to change.
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today? We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:Morgan Stanley’s surprise victory over its #1 rival Goldman SachsHow 2 ex-Tesla engineers are making big breakthroughs in self-driving cars10 steps you can take to achieve your dreamsAnd more! So check out these links right now and get up to speed: 1) Morgan Stanley claims another trading victory over rival Goldman Sachs (Reuters) Morgan Stanley beat Wall Street’s profit expectations on Wednesday, reporting gains across most of its businesses and producing more trading revenue than rival Goldman Sachs Group Inc, a rare feat. Read the Story ==> 2) 2 ex-Tesla engineers are using an old trick from Elon Musk to build their new startup (Business Insider) Andrew Kouri was working at Tesla when he noticed a big problem standing in the way of self-driving cars. Read the Story ==> 3) Scott Redler: Is Crude Oil the Next Big Market Catalyst? (T3 Live) On Monday, T3 Live Chief Strategic Officer Scott Redler appeared on CNBC’s Futures Now to discuss the action in crude oil, and energy stocks. Continued Reading ==> 4) Wall Street Efforts to Improve Its Image Fail to Sway Americans (Bloomberg) Bad news for financial titans like JPMorgan Chase & Co.’s Jamie Dimon and Goldman Sachs Group Inc.’s Lloyd Blankfein: Most Americans hold unfavorable views of Wall Street banks and corporate executives, and distrust billionaires more than they admire them. Continued Reading ==> 5) Vertex Pharma shares surge 26% after cystic fibrosis study results leaves Wall Street ‘speechless’ (CNBC) Shares of Vertex Pharmaceuticals surged more than 26 percent at the open of trading Wednesday, as the drugmaker crushed Wall Street’s expectations when it reported an improved response in patients suffering from cystic fibrosis. Continue Reading ==> 6) How to Learn to Trade Options Like a Pro (T3 Live) Want to create a safe, steady stream of income? You can do it with options. In this special webinar, T3 Live Options Strategist Doug Robertson’s going to show you the right way to get started as a highly profitable options trader: Continue Reading ==> 7) Nvidia and AMD must brace for competition from a super-powerful artificial-intelligence processor (Marketwatch) Increased competition may be coming to Nvidia and AMD in the form of a new artificial-intelligence processor that’s 10 times more powerful than their current offerings. Let’s take a look at this. Continue Reading ==> 8) Google introduces the feed, a personalized stream of news on iOS and Android (The Verge) Google today is rolling out its take on the news feed, a personalized stream of articles, videos, and other content. Google is hoping you’ll begin opening its app the way you do Facebook or Twitter, checking it reflexively throughout the day for quick hits of news and information. Continue Reading ==> 9) 9 tips to boost your energy — naturally (Harvard Medical School) Go to the store, and you’ll see a multitude of vitamins, herbs, and other supplements touted as energy boosters. But there’s little or no scientific evidence that energy boosters like ginseng, guarana, and chromium picolinate actually work. Thankfully, there are things you can do to enhance your own natural energy levels. Here are nine tips: Continue Reading ==> 10) 10 Steps to Achieving Anything You Want (Jim Rohn) Want to start taking clear, concrete steps towards achieving your goals? Check out this video from personal development legend Jim Rohn and get some hard-hitting advice about what it takes to succeed:
Continue Reading -->Weekly Sentiment Report: Are You Afraid of the Big Bad Earnings Wolf?
Are traders afraid of earnings? That’s the question to ask following JP Morgan’s (JPM) kick-off of second-quarter earnings season. Last week, traders were in a pretty happy mood despite a pickup in volatility, particularly in tech stocks. Active traders are enjoying the back-and-forth action, because it’s bringing in more opportunities. But let’s take a deeper look at market psychology to see how fear is in the market ahead of a pivotal earnings season. So let’s take a look out our 5 sentiment indicators to see just how bearish traders are after yesterday’s volatility spike. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish The VIX broke under 10 today in the aftermath of the weak retail sales and CPI numbers, which presumably support and accomadative Fed policy. That puts the 3-month spread up to 4.0, which means traders have very little fear of volatility. This is up from last week’s 2.8 reading. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is at 51, up from 44 last week. The F&G Index operates on a 1-100 scale, and a reading of 51 is right smack in the middle. 3) AAII Sentiment – Bearish The latest AAII Sentiment Survey shows that just 28.2% of individual investors are bullish, down slightly from 29.6% last week. This 29.6% reading is well below the 38.5% long-term average, and indicates that individual investors still don’t trusth the market. This has been the trend all year, even when the SPX was hitting record highs with basically no volatility. In fact, despite the market’s stunning resilience since the election, the average bullish reading this year is just 33.3%. Since so many traders make comparisons to 2007, let’s take a look at the averages back then. From the start of 2007 to July 12, 2007, the average was 41.6%. That’s a huge difference. 4) CBOE Equity Put-Call – Neutral The CBOE Equity-Put Call ratio was at 0.62 yesterday, which is a slightly bullish reading The 3-day moving average is 0.64, which is right in-line with the long-term average. These numbers indicate that traders are modestly bullish. 5) ISE Sentiment – Neutral The ISE Sentiment Index is at 85 (85 calls bought for every 100 puts. The 10 day moving average is 101.6 (101.6 calls for every 100 puts) This indicates that traders are neutral. Conclusion Out of 5 sentiment indicators, we have: 1 bullish (down from 2 last week) 3 neutral (up from 2) 1 bearish (flat) We’re seeing a tad less bullishness relative to last week. The market’s had a pretty nice little move off the June lows, with decent strength in biotechs and small caps. But it looks like traders aren’t quite ready to put the pedal to the metal as we start to move into the heart of earnings season. Netflix‘ (NFLX) report on Monday could indeed be pivotal since the reaction will tell us how the market may treat other tech sector reports.
Continue Reading -->Why The US Dollar Continues to Fall
It has been a while since I provided the last update on my standing call that the US Dollar is headed towards the $24.50 level. So, with the NFP report released earlier this morning it felt appropriate to provide an updated video with how everything is shaping up, especially considering the NFP report beat expectations. In this all-new video, I break down: The reaction to the NFP report Why $24.50 is such a key level that price is being drawn too How to take advantage of both the short and long term trend
Continue Reading -->7 Ways to Be Just Another Failed Trader
Do you want to fail as a trader? Do you want to miss your next mortgage payment? Or pull your daughter out of private school because you can’t make tuition next month? Well you’re in luck! Because we’ve got 7 surefire tips for failing as a trader! Just kidding… sort of. We’ve worked with thousands of traders over the years. The best of them ended up with 6 or even 7-figure incomes. But many flamed out. They end up holding bad trades too long or doubling down on losers. Even worse — we’ve seen traders that spent more time on Twitter and Instagram than on their trading platforms! 9 times out of 10, it’s easy to spot a failing trader. So we’re laying out 7 habits of unsuccessful traders so you can avoid them. How many of these apply to you? 7. Don’t Develop a Daily Routine Successful people don’t have time to figure out what to do next. That’s why they use routines and checklists. Why? Because if you’re asking yourself “what should I do now?,” you are wasting time and energy. If you have a daily trading routine, you’ll accomplish all your key tasks in less time, which will actually frees you up to be more flexible and creative. 6. Don’t Learn New Things Dinosaurs go extinct. And so do traders that refuse to learn and adapt. Chasing novelties can be very dangerous. But if you want to succeed, you must keep yourself up to date. Always strive to understand what’s working in the market right now. And explore new tactics that may work with your current strategy. You don’t want to wake up one day and discover that everything you know is useless. 5. Don’t Analyze Your Results A wise man once said “you can’t manage what you don’t measure.” Traders have bad memories. So it’s important to carefully go through examine your trading results to see exactly what you’re doing right, and what you’re doing wrong. Maybe you think you’re great at trading Tesla (TSLA)… but does a detailed P&L back you up? And who knows? You may find out that you have some strengths you didn’t know about. You may just be a dynamite gold trader, or a genius on the short side. Just let the numbers do the talking. 4. Don’t Talk to Other Traders The biggest myth on Wall Street is that great traders are lone wolves, getting rich on instinct and talent alone. In reality, most profitable traders join a pack. Because there is power in numbers. You may have 3 good trading ideas. But if you’ve got a buddy with 3 more ideas, you’re up to 6. Add a 3rd friend and you’ve got 9. And it’s not just trade ideas. We’re talking trading techniques, news flow, and support when things get tough. 3. Don’t Do Your Own Homework Newsletter, trading rooms, and trade idea generation services can be tremendously valuable. But you must also do your own homework. For example, if you see a stock make a big move, study it and create your own case study. Or, go back to a major historical event like the 1987 market crash or the 2008-2009 financial crisis and study the price action. You can obviously learn a lot from other people’s summaries and explanations. But if you want to build a truly valuable knowledge base, roll up your sleeves, and do the work yourself. You’ll be shocked at how much you learn. 2. Don’t Learn an Actual Strategy Individual tactics are great. And you can learn thousands of them for free. But if you want to actually create wealth through trading, you need a complete strategy. There are 2 major problems problem with just learning random tactics. First, it’s hard to know who to trust. And second, it’s hard to know which tactics work together. So instead of focusing on bright shiny objects, learn a real trading strategy that includes technical analysis, entry/exit parameters, and risk management. And THEN start exploring additional tactics that may work with your evolving trading style. 1. Don’t Pay the Price for Success You may lose money and waste time in learning to trade. That’s the price of success, and you have to pay it. If you start your trading adventure with a legitimate strategy with specific risk-reward parameters, you can keep a lid on your losses. However, you must be willing to put in the time. If you haven’t paid that particular price yet… it’s time to ask yourself why. Ready to take your trading seriously? Check out: Trading the Pristine Method Home Study Program Sami Abusaad’s 5-Day Elite Private Mentorship Program
Continue Reading -->Weekly Sentiment Report: Do Traders Fear the Nasty Nasdaq?
Finally, volatility is picking up. The Nasdaq’s big June 9 pop and drop broke the “buy the dip” crowd’s will to some extend, and tech stocks specifically are showing much more movement. And if you’re an active trader, that’s a good thing. It means more opportunities for action on both the long and short side. So let’s take a look at whether the sudden rise in volatility is affecting trader psychology. Last week’s sentiment report showed a spike in fear. And as you can see in the chart below, the VIX has started stair-stepping higher: So let’s take a look out our 5 sentiment indicators to see just how bearish traders are after yesterday’s volatility spike. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish We saw wild action in the VIX last week, with the curve actually inverting before reinflating back to very bullish levels. The VIX is at 12 with a 3-month spread of +2.8. This is down from last week’s +3.75 level, but it still indicates bullishness. 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is at 44, down from 53 last week.. F&G operates on a 1-100 scale, and a reading of 44 is close enough to the middle to be considered neutral. 3) AAII Sentiment – Bearish The latest AAII Sentiment Survey shows that just 29.6% of individual investors are bullish, down slightly from 29.7% last week. This 29.6% reading is well below the 38.5% long-term average, and indicates that individual investors still don’t trusth the market. This has been the trend all year, even when the SPX was hitting record highs with basically no volatility. On a related note, three weeks ago, I compared 2017 AAII numbers to those back at the 2007 market top. Individual investors were insanely bullish in October 2007. Banks had been weak, but overall, investors were not the least bit worried about the deteriorating housing market. 2017 has been a different story altogether. Even if individual investors are buying in, they’re doing so begrudgingly. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.65 yesterday, which is a neutral reading. The 3-day moving average is 0.60, which is below the long-term average. These numbers indicate that traders are modestly bullish. 5) ISE Sentiment – Neutral The ISE Sentiment Index is at 86 (86 calls bought for every 100 puts. The 10 day moving average is 96.4 (96.4 calls for every 100 puts). This indicates that traders are neutral. However, I’m considering removing this indicator from the Weekly Sentiment Report because it so rarely turns bullish, no matter what the market’s doing. Conclusion Out of 5 sentiment indicators, we have: 2 bullish (up from 1 last week) 2 neutral (up from 1) 1 bearish (down from 3) So Nasdaq volatility is picking up… and fear isn’t. Last week, 3 of our 5 indicators were bearish. Today, just 1 is bearish. But if we pull back to a longer time frame, it’s obvious that sentiment is nowhere near as bullish as it was at the last market top back in 2007. That’s a bit odd. As I’ve written again and again, we’ve seen very little volatility this year, at least up until the last month. You’d think with a market going straight up all year, there’d be widespread optimism. But there just isn’t.
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today? We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:Why the Fed just joined the masses of traders worried about the low VIXGoldman’s big bad bear case on hot momentum stocks Tesla (TSLA)What you can do to start your day like a winnerAnd more! So check out these links right now and get up to speed: 1) Now Fed Officials Are Starting to Wonder If the VIX Is Too Low (Bloomberg) Wondering why three Federal Reserve officials were moved last week to make public pronouncements about rising asset prices? Evidently, it’s the potential for “buildup of risk to financial stability.” Read the Story ==> 2) Goldman predicts Tesla shares will get cut in half on ‘plateauing’ Model S sales (CNBC) While some investors may be optimistic on Tesla’s Model 3 production plans, Goldman Sachs is concerned over slowing sales growth of the company’s current electric cars. Read the Story ==> 3) Why You Need a Trading Checklist (T3 Live) Checklists keep planes in the air. Checklists keep nuclear power plants operating safely. And checklists can keep traders like you avoid simple errors that can cost you money. Continued Reading ==> 4) Cryptocurrencies: Coming To A Quote Screen Near You (Forbes) When Amazon announced last week that it will acquire Whole Foods Market… you could almost hear the three-year plans of every grocer, and nearly every other traditional retailer, grinding through the shredding machines. Continued Reading ==> 5) Milton Friedman: Why Economists Disagree (Economically Speaking via YouTube) In this video, free market proponent Milton Friedman sits down for an in-depth discussion with fellow economist Walter Heller. 6) 5 Sentiment Indicators You Need to Know About (T3 Live)Permabulls always say everyone’s bearish. And permabears always say everyone’s bullish. Most of the time, neither actually gives evidence for their views. Continue Reading ==> 7) Nvidia and Baidu team on AI across cloud, self-driving, academia and the home (TechCrunch) Baidu and Nvidia announced a far-reaching agreement to work together on artificial intelligence today, spanning applications in cloud computing, autonomous driving, education and research, and domestic uses via consumer devices. Continue Reading ==> 8) Apple News is a sleeping giant — and Apple might be about to wake it up (Business Insider) Apple released a news-aggregator app called Apple News in 2015, and nearly two years later, it may be gaining substantial traction. Continue Reading ==> 9) Poor Sleep Tied to Increased Alzheimer’s Risk (NY Times) Poor sleep may be an indication of increased risk for Alzheimer’s disease, a new study of older people suggests. Sleep problems and daytime sleepiness were associated with increased spinal fluid indicators of Alzheimer’s disease. Continue Reading ==> 10) How to Solve the “I Wake Up With No Motivation” Problem (Thomas Frank) Need help getting started in the morning? Check out this video from blogger and education expert Thomas Frank, and get some helpful tips on starting your day off on the right foot:
Continue Reading -->Weekly Sentiment Report: Fear Is Here!
Last week, I asked if the bulls went too far. Options traders were buying call options like crazy, betting on a big pop into quarter-end. Turns out, the only thing that popped was the VIX, which rose 56% intraday yesterday, its 5th largest range ever. Take a look at this chart: So let’s take a look out our 5 sentiment indicators to see just how bearish traders are after yesterday’s volatility spike. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish This VIX rose so fast yesterday that the curve actually inverted for a short period, indicating extreme fear. But less than 24 hours later, the VIX is around 11ish and the 3-month spread has reinflated back to +2.75. So everyone that bought puts yesterday to bet on a further decline today is getting spanked. 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is at 53, flat from last week. F&G operates on a 1-100 scale, and a reading of 53 is right smack in the middle. 3) AAII Sentiment – Bearish The latest AAII Sentiment Survey shows that just 29.7% of individual investors are bullish, dowm from 32.7% last week. This 29.7% reading is well below the 38.5% long-term average, and indicates that individual investors are fearful. Throughout this year, individual investors have tended to not trust the market, and this latest reading indicates that nothing’s changed. On a related note, two weeks ago, I compared 2017 AAII numbers to those back at the 2007 market top. Individual investors were downright loony in October 2007, not the least bit worried about the deteriorating housing market. They’ve been much more skittish in 2017 even though we’ve had almost no volatility this year. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.69 yesterday, which is a bearish reading. The 3-day moving average is 0.66, which is slightly above the long-term average. These numbers indicate that traders are modestly bearish. 5) ISE Sentiment – Bearish The ISE Sentiment Index is at 90 (90 calls bought for every 100 puts. The 10 day moving average is just 81.5 (81.5 calls for every 100 puts) This indicates that traders are bearish. Conclusion Out of 5 sentiment indicators, we have: 1 bullish (down from 2) 1 neutral (down from 2) 3 bearish (up from 1) Clearly, traders are more bearish than last week. So we’re seeing the same old trend — every time the market hits the rocks, traders get real real bearish real real fast. I know it’s trendy to say that everyone’s bullish, but that’s just plain wrong. If you want to see what real bullish sentiment looks like, go back to 2007. As I noted earlier, we’ve seen very little volatility this year. So the fear isn’t coming from troubling price action. The problem seems to be two-fold: 1) People are fixated on Washington DC headlines and assume that political volatility will lead to a down market 2) The bull market’s gone on for so long that people assume it just has to hit the wall — what goes up must come down The bears will be right eventually, but who knows when? Jeff Cooper is making a very good case for further downside, so I suggest you read his latest piece: These Rallies Were Made for Selling
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