The Trading Edge http://thetradingedge.org Exploring Markets and Trading Performance Sun, 18 Aug 2019 21:29:16 +0000 en-US hourly 1 https://wordpress.org/?v=5.2.2 https://i1.wp.com/thetradingedge.org/wp-content/uploads/2019/03/cropped-THE_TRADINGE_EDGE.png?fit=32%2C32&ssl=1 The Trading Edge http://thetradingedge.org 32 32 65286121 Weekly Perspectives – Summer Social http://thetradingedge.org/weekly-perspectives-summer-social/ http://thetradingedge.org/weekly-perspectives-summer-social/#disqus_thread Mon, 19 Aug 2019 00:30:04 +0000 http://thetradingedge.org/?p=4143 […]]]>

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I’m pleased to announce that our next Meetup is just a few days away.

Unfortunately, we weren’t able to secure a venue for presentation so as the Summer season comes to an end we’re going to take this opportunity to have a hiatus from our regular presentation schedule and do a Summer social instead.

Join me, Etienne Crete, and others in the Meetup community this Wednesday, August 21 as we take over the Sauvage Bar A Vin for a fun night of networking, drinks, and snacks where you can meet other traders, make connections, and of course talk trading.

The event will run from [7:00][9:00] PM.

RSVP here for tickets.  

See you on Wednesday!

 

 

Prepare for the coming week

A lot of you have been telling me you have found the Weekly Market Outlook videos useful so thank you very much for the feedback. 

As I stated in last week’s video, “buyers need to continue to keep control and defend their levels else risk sellers stepping in and selling the pullback and flipping things back to full-time frame alignment to the downside“. 

This past week the bulls were met with a number of bearish macro scenarios and ultimately the bulls lost control and markets buckled due to the intensified selling.

By mid-week sentiment had turned overly negative and compelled me to share the possible reversal, which set up the buying opportunities on Thursday and Friday.

See – Overly negative.

In the short term, the buyers are once again in control.

Watch the Weekly Outlook video to see the levels we’ll be watching to see if the rally has legs.

In this week’s video, we look at the technical outlook for the VXX VX! SPY SPX QQQ IWM DIA EEM TSX TLT GLD XAUUSD GDXJ BTCUSD TOTAL UKOIL EEM BABA MJ TLRY CRON AAPL CELG for the week of August 19 – 23, 2019.

 

Bonds 101- 

All eyes were on the bond market this week as news about the inverted yield curve and the possible consequences of negative yields were front and center in minds of traders.  

If your knowledge on bonds is a bit rusty on here are two great pieces that are a must-read to get you caught up.

Bonds Meet the Four Criteria for Defining a Bubble

What Negative Interest Rates Mean for the World (Podcast)

 

Happy trading,

Houston

PS – Feel free to share this newsletter and our videos so we can reach more traders!

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Weekly Market Outlook For August 19 – 23, 2019 http://thetradingedge.org/weekly-market-outlook-for-august-19-23-2019/ http://thetradingedge.org/weekly-market-outlook-for-august-19-23-2019/#disqus_thread Sun, 18 Aug 2019 16:39:42 +0000 http://thetradingedge.org/?p=4140 […]]]>


As I stated in last week’s video, “buyers need to continue to keep control and defend their levels else risk sellers stepping in and selling the pullback and flipping things back to full-time frame alignment to the downside“.

This past week the bulls were met with a number of bearish macro scenarios and ultimately the bulls lost control and markets buckled due to the intensified selling.

By mid-week sentiment had turned overly negative and compelled me to share the possible reversal, which set up the buying opportunities on Thursday and Friday.

See – Overly negative.

In the short term, the buyers are once again in control. Watch the Weekly Outlook video to see the levels we’ll be watching to see if the rally has legs.

In this week’s video, we look at the technical outlook for the VXX VX! SPY SPX QQQ IWM DIA EEM TSX TLT GLD XAUUSD GDXJ BTCUSD TOTAL UKOIL EEM BABA MJ TLRY CRON AAPL CELG for the week of August 19 – 23, 2019.

Feel free to drop any questions into the comments and hit the subscribe button to receive notices of our weekly market analysis videos.

Follow us at: http://thetradingedge.org


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Overly Negative http://thetradingedge.org/overly-negative/ http://thetradingedge.org/overly-negative/#disqus_thread Thu, 15 Aug 2019 13:00:59 +0000 http://thetradingedge.org/?p=4132

I wrote about the possibility of a sell-off at the end of July in Watch Your Downside and since then markets have swooned down due to a number of macro and technical factors.

While I think there is some more downside possible and that macro risk is real, sentiment has turned wildly negative in a short period of time so would not be surprised if we saw some respite in selling.

The S1FI chart below shows that we now have fewer stocks above their 50day MA than we had even back in May when we had lower prices.

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Weekly Perspectives – 6 Reasons We Make Bad Trading Decisions http://thetradingedge.org/weekly-perspectives-6-reasons-we-make-bad-trading-decisions/ http://thetradingedge.org/weekly-perspectives-6-reasons-we-make-bad-trading-decisions/#disqus_thread Mon, 12 Aug 2019 00:57:31 +0000 http://thetradingedge.org/?p=4126 […]]]>

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Happy to report that I am now back in Montreal.  I spent the last week in Playa del Carmen, Mexico and while the weather was beautiful I, unfortunately, caught a nasty case of food poisoning that left me spending most of my trip bedside.  

On the bright side, I did get a chance to binge-watch Season 1 of the new Amazon Original series The Boys which is about a group of vigilantes set on taking down corrupt superheroes who abuse their superpowers. 

Highly enjoyable spin on the classic superhero genre and couldn’t agree more with the 9/10 rating on IMDB.

By the way, long-time Montreal Traders Meetup contributor Etienne Crete is in town for a couple of weeks so we are trying to arrange a last-minute Meetup during the week of August 19th.  The exact date will be published in the next couple of days – keep your eyes open for the Meetup notification in your inbox/mobile phone!

 

Prepare for the coming week

In case you missed it, this past week, markets broke to the downside but buyers stepped up creating a mixed technical picture.

The short term momentum is to the upside but the technical damage has been done. Buyers need to continue to keep control and defend their levels else risk sellers stepping in and selling the pullback and flipping things back to full-time frame alignment to the downside. 

Watch the video to see the levels I’ll be watching.

Lots of earnings on the tap for the coming week so expect continued volatility.

In this week’s video, we look at the technical outlook for the VXX VX SPY QQQ IWM DIA EEM TSX TLT GLD XAUUSD GDXJ BTCUSD TOTAL UKOIL EEM BABA CZR SMH ON QRVO OIH WLL PVH for the week of August 12 – 16, 2019.

 

6 Reasons We Make Bad Trading Decisions – 

This short piece from HBR discusses 6 obstacles that plague good decision making. 
Unsurprisingly these 6 obstacles are also very real risks for making good trading decisions.  

The 6 reasons are:

  1. Decision fatigue

    Decision fatigue is a well-known phenomenon where the quality of our decision-making process can suffer when overwhelmed with having to make too many decisions.  

    This phenomenon often plagues intraday traders who are constantly evaluating markets and making 100’s or 1000’s of decisions inside a day.

    One way of alleviating decision fatigue in trading is to cultivate the process of skill development

    Anytime we learn a new skill to the time we master that skill we move from unconscious incompetence, to conscious incompetence, to conscious competence, and finally to unconscious competence.  

    Remember what it was like when you first learned to drive a car.  There were so many moving parts and so many decisions to make.  Compare that to now where you simply hop in the car, think about where you want to drive, and point your car in the general direction.  Sometimes we don’t even remember how we got to where we were going.  

    The key in applying this in trading is the application of deliberate practice and practicing said skill to the point where the decision can made without a lot of conscious exertion hence unconscious competence. 

  2. A steady-state of distraction

    Too many traders spend the bulk of their time distracted – distracted with the notifications on their mobile devices, emails, YouTube, stock alerts, StockTwits, social media, phone calls, etc.

    The consequence of all this distraction is that many traders have the inability to sustain long periods of focus and also lack self-awareness which leads to inconsistent performance.  

    What can you do to remove the shallow distractions in your life so that they don’t intrude into your trading and further deepen your level of focus inside and outside of trading?

  3. Lack of input

    The trading world is filled with excessive noise and information masquerading as wisdom.  

    We do ourselves a great service when we can surround ourselves with trusted advisers and colleagues to share new and different trading perspectives so that we don’t get caught up in our own little bubbles and fall victim to the same blind spots over and over again.  

    Personally, I find the Meetups a great forum to connect with other traders and hear those different perspectives and experiences.

  4. Multi-tasking

    The verdict is in on this one and the science shows that multi-tasking is a fool’s game.  

    Machines can multi-task well because well they are machines.  

    Where in your trading do you find yourself trying to act like a machine?
    The answers here will form the basis for things that you should consider scheduling, batching, or perhaps automating.

  5. Emotions

    It goes without saying that emotions form the basis for the trading psychology issues we see in trading.  Each trader brings their own set of emotional baggage to the trading game.  

    As such I have often said that self-awareness is one of the most important traits of a successful trader.  

    Most traders have spent the time building out some sort of trade plan so to that end, most traders would be well served to spend some time fleshing out a “trading psychology plan”.  

    Spend some time considering some of these questions.  What are your triggers?  What is your typical reaction?  How would you prefer to respond?

  6. Analysis Paralysis

    This phenomenon is all too common for traders who have too many conflicting indicators and a method that generates conflicting signals.  

    This week, try this one simple exercise.  Look at your trading layout, now what one thing can you remove from your charts?

 

Where Did This ‘Bull Market’ Come From, Anyway? – 

If you ever wondered where the term “bull market” and “bear market” come from and how they came to be defined then this WSJ article will be insightful for you.

Learn the history of the terms and why wanting more precision than the mood swings of markets tend to offer could be a bad thing.  

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Weekly Market Outlook For August 12 – 16, 2019 http://thetradingedge.org/weekly-market-outlook-for-august-12-16-2019/ http://thetradingedge.org/weekly-market-outlook-for-august-12-16-2019/#disqus_thread Sun, 11 Aug 2019 16:33:12 +0000 http://thetradingedge.org/?p=4123 […]]]>


Markets broke to the downside this week but buyers stepped up creating a mixed technical picture.

The short term momentum is to the upside but the technical damage has been done. Buyers need to continue to keep control and defend their levels else risk sellers stepping in and selling the pullback and flipping things back to full-time frame alignment to the downside.

Lots of earnings on the tap for the coming week so expect continued volatility.

In this week’s video, we look at the technical outlook for the VXX VX SPY QQQ IWM DIA EEM TSX TLT GLD XAUUSD GDXJ BTCUSD TOTAL UKOIL EEM BABA CZR SMH ON QRVO OIH WLL PVH for the week of August 12 – 16, 2019.

Feel free to drop any questions into the comments and tit the subscribe button to receive notices of our weekly market analysis videos.



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Markets careen lower and my roller coaster ride http://thetradingedge.org/markets-careen-lower-and-my-roller-coaster-ride/ http://thetradingedge.org/markets-careen-lower-and-my-roller-coaster-ride/#disqus_thread Mon, 05 Aug 2019 23:03:15 +0000 http://thetradingedge.org/?p=4109 […]]]>


Greetings from Playa Del Carmen, Mexico.

Today the markets suffered their biggest losses year to date and as the markets careened lower and I had my own personal roller coaster ride after catching a nasty case of food poisoning that I’m chalking up to some not so well prepared seafood.

Nothing quite like spending your vacation cooped up in your hotel room. Wish me a quick recovery! 😀

As I’ve been warning in the Weekly Market Outlook videos and last week’s heads up on the potential sell-off, after taking out the prior week’s lows, monthly lows, and turning the quarter red the sellers have wrested control from the buyers and we are now trading full-time frame alignment (TFA) to the downside.

This is the type of price action you can expect and today as warned the VXX buyers took the monthly inside-bar reversal condition and took out June’s pivot high.

SPY’s June outside bar lows are now in play and there’s a high probability that that pivot gets taken out.

The elevated volatility calls for reduced position size and lower timeframe trades as there is plenty of intraday range to capture.

Enjoy the volatility traders!

VXX – M
SPY – D


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Weekly Market Outlook For AUG. 5 – 9, 2019 http://thetradingedge.org/weekly-market-outlook-for-aug-5-9-2019/ http://thetradingedge.org/weekly-market-outlook-for-aug-5-9-2019/#disqus_thread Sun, 04 Aug 2019 02:49:17 +0000 http://thetradingedge.org/?p=4104 […]]]>

It was a move we’ve been portending for a while and the bears finally took control this past week as the combined volatility from AAPL’s earnings, an FOMC announcement, a Trump tweet, and the start of a new month allowed sellers to finally break the multi-week long bullish move that began back at the beginning of June.

Earnings will be the primary news driver this week however there has been sufficient technical damage done that we can expect to see additional downside volatility.

In this week’s video, we look at the technical outlook for the VXXB SPY QQQ IWM DIA EEM TSX TLT GLD XAUUSD BTCUSD TOTAL UKOIL EEM FB AAPL AMZN NFLX GOOG DIS for the week of August 5 – 9, 2019.



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Watch Your Downside http://thetradingedge.org/watch-your-downside/ http://thetradingedge.org/watch-your-downside/#disqus_thread Thu, 01 Aug 2019 03:25:28 +0000 http://thetradingedge.org/?p=4099

Mid-week market update as trends have started to shift and sellers have finally wrested the upside momentum.

As we enter into the first trading day of August pay close attention to see if the indices can continue to trade above the quarterly open.



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Bearish Divergence http://thetradingedge.org/bearish-divergence/ http://thetradingedge.org/bearish-divergence/#disqus_thread Tue, 30 Jul 2019 02:05:00 +0000 http://thetradingedge.org/?p=4093

I’ll keep this post brief but it’s been a while since I updated the chart of the SPY overlayed with S1FI (number of S&P100 stocks above their 50 day MA).

We’re now seeing a bearish divergence between the # of S&P 100 stocks above their 50 day MA while the SPY tags all-time highs.

No actionable signal yet but with the end of the month approaching it will pay to keep your attention on whether or not the buyers can continue to defend each prior week’s lows.

SPY vs. S1FI – Daily
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Weekly Perspectives – The Psychology of Prediction http://thetradingedge.org/weekly-perspectives-the-psychology-of-prediction/ http://thetradingedge.org/weekly-perspectives-the-psychology-of-prediction/#disqus_thread Mon, 29 Jul 2019 00:00:27 +0000 http://thetradingedge.org/?p=4088 […]]]>
Shooters Waterfront, Ft. Lauderdale, FL

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I am back from Ft. Lauderdale, FL for a few days before leaving to Playa del Carmen, MX at the end of the week.  If you ever find yourself in Ft. Lauderdale, do yourself a favor and check out Shooters Waterfront for some great drinks and seafood.  

Here’s to enjoying the rest of the summer and depending on the internet at the resort I hope to be able to deliver next week’s Weekly newsletter to you at the regularly scheduled time.

Now this past week, buyers once again took control and pushed the SPY and QQQ to all-time highs.

This coming week marks the final trading week of July and the beginning of August so we’ll want to pay close attention to see how price trades around the monthly open. 

Plenty of macro news and earnings on tap but AAPL’s earnings on Tuesday and Wednesday’s FOMC will be front in center for investor and traders.

As we’ve been noting on the weekly charts on SPY, QQQ, and DIA the buyers continue their dominance – when will the sellers be able to create a new weekly low?

In this week’s video, we look at the technical outlook for the VXXB SPY QQQ IWM DIA EEM TSX TLT GLD XAUUSD BTCUSD TOTAL UKOIL EEM KRE BPOP SMH INTC AAPL EA for the week of July 29 – August 2, 2019.

 

The Psychology Of Prediction – 

In Excel, the difference between wrong and early isn’t that big a deal. In Word, it’s enormous.

Why is the art of prediction so difficult?

Morgan Housel describes 12 common flaws, errors, and misadventures that occur in people’s heads when predictions are made.

Take a read at the list and see if you’ve ever fallen into some of these prediction traps.

  1. The distinction between “wrong” vs. “early” has less to do with analytics than the social ability to prevent listeners from giving up on you.
  2. Credibility is not impartial: Your willingness to believe a prediction is influenced by how much you need that prediction to be true. 
  3. History is the study of surprising events. Prediction is using historical data to forecast what events will happen next.
  4. Predictions are easiest to make when patterns are strong and have been around for a long time – which is often when those patterns are about to expire.
  5. Prediction is about probability and putting the odds of success in your favor. But observers mostly judge you in binary terms, right or wrong.
  6. Past predictions that end up on the unfortunate side of probabilistic odds might cause hesitancy to make more predictions in the future.
  7. Predictions are often calibrated to promote or preserve your reputation and career goals.
  8. Enough effort goes into an initial forecast that updating your views when new information becomes available can trigger the sunk-cost fallacy and cause you to be right or wrong for the wrong reason.
  9. Predicting the behavior of other people relies on understanding their motivations, incentives, social norms and how all those things change. That can be difficult if you are not a member of that group and have a different set of life experiences.
  10. Some predictions are intellectual stimulation and don’t need to be acted upon even if they’re right.
  11. If you refuse to make predictions because you know how hard they are you may become suspect of everyone else’s predictions even if they have insight and skills you don’t.
  12. Effort put into a prediction may increase confidence more than accuracy.

 

Why do investors buy bonds with a negative yield? – 

Bond market investors are often credited as being smarter than stock market investors. 

One of the basic assumptions of debt is that ­borrowers pay interest to lenders. That idea has been upended in the global bond market. There’s now about $13 trillion in negative-yielding bonds. Investors who hold them to maturity will end up getting less money than they paid for them, even including interest.

This Bloomberg piece gets into the rationale on why bond investors are still taking the trade.

Happy trading,

Houston

PS – Feel free to share this newsletter and our videos so we can reach more traders!

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