Weekly Raid Weekend Edition #3
All Quiet on the Volatility Front
Hey ya’ll, it’s Pasco this week.
Low volatility regimes can be great for some styles of trading and investing. They can feel as thought it will just last forever. We all know that is not the case. All is quiet on the Western Front, almost eerie - until the rug is pulled.
We watch the VIX. It is down 44.8% YTD as of Friday’s close. Lows of the year, and, by and large, lowest levels since pre-pandemic. Everyone is full-boat-loaded long. Everyone is excited, as always, for an end of year run. The market just experienced the best November in decades. The vol crush in November saw VIX drop from 21’s, down to the mid 12’s. Holiday season sleepiness is in full effect.
Not saying it can’t continue through the end of the year, but environments such as these past few days keep me a little extra cognizant.
As a reminder of last week’s announcement, I am just about done with the squeeze scanner. For the time being, I will post daily updates on Twitter account and try to remember to do it on Substack as well. Eventually, I will create a separate daily email for those scans daily. They have so far proven to be reliable with a roughly 70% win rate given my trading parameters. If you scalp them the day after the signal it’s actually significantly higher. So stay tuned.
Additionally, the volatility tool I showed last week is still in the works, I am hoping to have that done after the first of the year. Some of the signals that thing has put out have returned upwards of 1000% (on options).
As just stated, the action has been slow. My personal finance tip for this week is to match pace. Slow down, read a little and work on processes when the action doesn’t particularly give you many intra-day entries. I’m diving into an interesting book right now on the psychology of trading and investing. In “Best Loser Wins”, Tom Hougaard describes his journey - starting from picking up Liar’s Poker as a kid, to almost quitting the trading game totally, to becoming a massively sized trader that remains calm as a cucumber.
Statistics from all major brokerages show the unabashedly large failure rates of traders. Tom delves into the obvious and discouraging fact that there are no magic indicators in the markets. Everyone would be rich if all you had to do was sit down over the weekend and leaf through “Technical Indicators for Dummies”. The ONLY solution to achieving a break through in this industry is to conquer the mind.
The Week Ahead
Below is a snapshot of the more important news this week.
We will be watching ISM PMI, Inflation numbers, and of course watching the Fed meeting.
The Fed is not expected to move. But ya never know…
I included some data out of China to watch in the upcoming week due to the services and manufacturing PMI data softness we saw this week. Those numbers were 50.2 and 49.4, respectively.
As noted last week, December trading is typically light. If you’ve had a great year, this is not the time to be taking huge shots in the market. Another fun study is The Kelly Criterion. It basically proves a growth-optimal portfolio on how to size individual positions (i.e. don’t let one position ruin your whole year!).
If you follow the action in oil, it was QUITE a week. The OPEC+ decision for voluntary and additional voluntary cuts, after they had emergently postponed the meeting and transitioned it to online, was a quandary that many players did not see coming. Watch for continued volatility in the oil markets.
Three other keys to watch this week:
The 10-year has been on a face-ripping tear. I’m personally looking for a pause in this action. Not playing it directly, but using it for market context. A similar play would range-bound (or sell some spreads), TLT. I’ve personally been selling some puts in TLT. Cautious in this area, to slightly higher.
Gold and Bitcoin are in the same camp. Both in major rip-mode. Looking for gold to keep that 2000 mark, while looking for BTC to hold the 36,200 area. Below these levels, will be reassessing any longs.
And finally, as stated last week, we continue to sell puts and spreads to create some additional cash flow through the holiday season. So the watchlist below will be mostly from my long-term/cash flow accounts.
ET 0.00%↑ - This is both in equity and cash-secured puts. They have a nice div yield and I want to be long a few hundred more shares all said and done. Looking for the 13.50 round area to hold.
TSLA 0.00%↑ - Tesla followed our expectation with a small spike this past week. Will continue to monitor the 260 area to be the reversal spot.
As always, Good luck and Trade Well.
-Pasco, of TV