Tuesday, August 4, 2020

Why Gold $3000 Is Next: Bank Of America's Full 'Must Read' Client Call Transcript | Zero Hedge

Why Gold $3000 Is Next: Bank Of America's Full 'Must Read' Client Call Transcript | Zero Hedge

Tuesday, June 16, 2020

Trading and Persistence: the lethal combination

The Way of the World:  People with enormous persistence are usually rewarded:  they do hard things, go to medical or law school, build sterling careers, build businesses, become sports stars, etc.

However.

Traders with enormous persistence -- get crushed.  The art of trading is to keep losses small.  This is exceedingly difficult for one with drive and ego, for one who doesn't like to admit they were wrong, and then worse, capitulate, take a loss.

Doctors usually have big egos, and are especially prone to failure as traders.  Ironically, doctors are attracted to market speculation like children to hot dogs on the Fourth of July.......it may be that there is a part of the brain that continually puts out the message:  "you know more than anyone else about everything....because you are a doctor."

Why these notes?  We heard the story of a doctor who made a killing shorting Wayfair.  The doctor projected it would go to 0, so kept shorting it at 80, then 40.  You know what happened next: rebound, 100, 130....now 200.  Last update was that the doctor was committed to a long-term short on the stock.

We told the storyteller there was no such thing as a "long term" short, stocks tend to rise over the long term.

We also relayed that a short position in a volatile stock should be covered with long calls.  That was about 100 points ago.  The trader, being a doctor, of course knew better.  "Nothing done," as they say in markets.

It's a sad story, and didn't have to be.

Tuesday, June 2, 2020

Rising market, sideways VIX spells

....potential for big drop, straight ahead, according to options guru, Mark Sebastian....

His words:

What you are seeing is a chart, on top is the S&P 500 rising all month...About 200 points.  
What you are seeing on the bottom is a chart of the VIX index over the same period of time.  
Over the last month it is lower.
BUT over the last couple of weeks we have seen the VIX index do NOTHING.  
For long time readers of mine, you know that one of the 4 major factors I look at in my traffic light is VIX correlation.
Right now VIX correlation is the only major indicator in VIX that is not in the Red, it is yellow.
I can have the traffic light be red with 3 reds and a yellow.
If we start to see the VIX actually rally (this is something that DID happen in February 2020 and in January 2018) then my stock market signal could quickly warn us of danger ahead by changing to yellow or even green.
VIX correlation is about as important as the structure of the curve when formulating my traffic signal.
With the run we have had, the disconnect between the real economy/ the stock market,  US-China tensions, AND civil unrest in the United States…
I think we have a tinderbox, we have thrown a BUNCH of matches at it and nothing has lit...YET!
We are pressing our luck.
The VIX Traffic Light is Red..Your Only Option,
Mark