Did Mr. Market Just Throw Another Sentiment Boomerang?
Last Friday, sentiment got pretty awful in the wake of North Korea’s threats of an attack on Guam. And then early this week, it went full-on psycho bullish after North Korea blinked and backed off. That was good for me since I’m speculating on a big decline in the VIX… and then it wasn’t so good. With traders fearing that President Trump will have trouble instituting pro-growth policies like tax and regulatory reforms, the VIX spiked as high as 15.77 on Wednesday, up 40% from Tuesday’s 11.25 low. So my nicely profitable trade is now a loser! Let’s take a fresh look at our 4 sentiment measures to see which way the crowd is leaning heading into the weekend. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bearish The VIX is at 14.82 this morning, well above the July 26 all-time low at 8.84, and also above trend for this year. The 3-month spread is at +0.2, which means the VIX curve is flat. Traders are pricing in quite a bit of short-term volatility, so once again, this reading is bearish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bearish The Fear & Greed Index is at 19. The F&G Index operates on a 1-100 scale, and a reading of 19 qualifies as extremely fearful. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 34.2% of individual investors are bullish. This 34.2% reading isn’t terribly far off the 38.5% long-term average, and indicates that individual investors are basically neutral. I thought this would be lower, but the number is what it is. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.78 Thursday, which is well above the long-term average of 0.66. The 3-day moving average is 0.69, which is slight above the long-term average. The 10-day moving average is 0.74, which is fairly high. These numbers indicate that traders are very bearish. Conclusion Out of 4 sentiment indicators, we have: 0 bullish 1 neutral 3 bearish The data indicate that sentiment boomeranged in a big way. Traders were pricing in the end of the world last Friday. Then they got happy on Monday and early Tuesday. And now they’re depressed again. You could say volatility is becoming more volatile. And I think this is a great thing because the market’s actually giving some real back and forth action. That means more opportunities for active traders, and action that’s actually interesting to watch. I don’t know about you, but I found June through late July to be agonizing to watch. Maybe the sudden spike in volatiilty means there’s trouble down the road… but at least we’ll be awake for it. Now I’m still speculating on a decline in the VIX. To be more specific, I am: -Long VXX puts -Short VXX call spreads Will the trade go profitable again? The ideal situation is a repeat of last Friday to Monday, when sentiment boomeranged from extreme fear to extreme greed in the blink of an eye. I guess I’m about to find out if that’s just wishful thinking…
Continue Reading -->What You Don’t Know About Prop Trading… but Should
In this special extended webinar, Amber Capra breaks down everything you need to know about the exciting world of prop trading. Click the monitor to watch the replay: Amber covers the world of prop trading from A to Z, including:How to determine whether prop trading is right for youProp vs. retail trainingWhy you need training, community, and ongoing coaching to succeedHow you can qualify for 100% tuition reimbursement in our prop programThe different licensing requirements for US and non-US tradersDetails about different trading platforms, including Fusion and LightspeedHow profit splits workHow much capital you need to get started as a prop traderRisk management techniquesWhy you need a ‘Forced Discipline’ risk management programPart-time prop tradingTips for avoiding pitfalls that can hurt your trading careerHave a question about prop trading? Call 1-888-998-3548 or email us at info@t3live.com Learn About Our Omega Prop Program
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:What the Fed is saying about inflation and interest rate policyWhat ECB President Mario Draghi could say at Jackson HoleApple’s Hollywood invasionAnd more! So check out these links right now and get up to speed: 1) Fed Sees Balance-Sheet Move Soon as Inflation Debate Heats Up (Bloomberg)Federal Reserve officials engaged in a detailed debate about inflation while keeping the door open for a September announcement on the timing of balance-sheet reductions, according to minutes from their policy meeting in July. Read the Story ==> 2) ECB’s Draghi will not deliver fresh policy steer at Jackson Hole: sources (Reuters) European Central Bank President Mario Draghi will not deliver a new policy message at the U.S. Federal Reserve’s Jackson Hole conference, two sources familiar with the situation said, tempering expectations for the bank to start charting the course out of stimulus. Read the Story ==> 3) Scott Redler Ultimate Access Interview (T3 Live) Welcome to your FREE preview of T3 Live’s Redler All-Access newsletter. Redler All-Access gives you a complete trading plan from T3 Live Chief Strategic Officer and frequent CNBC guest Scott Redler. Continued Reading ==> 4) Apple is bringing a billion-dollar checkbook to Hollywood, and wants to buy 10 TV shows (Recode) Apple is officially open for business in Hollywood. The company is telling content makers it wants to spend $1 billion on its own stuff over the next year. That’s music to studios’ ears, and a tune they have been expecting for some time — especially after Apple hired two top Sony TV executives in June. Continued Reading ==> 5) Amazon Shares Fall After Trump Says It Hurts Retailers (Bloomberg) U.S. President Donald Trump once again unloaded on Amazon.com Inc., tweeting that the company is hurting other retailers and implying that it’s killing industry jobs across the U.S. Amazon is causing “great damage to tax paying retailers,” Trump said in a Twitter post Wednesday, causing shares in the online retailer to fall as much as 1.2 percent in early trading. Continue Reading ==> 6) 7 Ways to be Just Another Failed Trader (T3 Live) 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! Continue Reading ==> 7) Which Came First, The Taco or the Egg? (AdvertisingAge) Taco Bell is getting “naked” again, dropping its usual taco shell for a Naked Egg Taco, where a fried egg is the shell. Folks eager to try it early can do so by reserving — yes reserving — on Open Table. Chick-fil-A, meanwhile, is replacing its breakfast burrito with an updated version and offering a breakfast bowl with either sliced chicken nuggets or sausage. Continue Reading ==> 8) The Maloof brothers made what is believed to be the biggest bet yet on Mayweather-McGregor fight (Business Insider) Gavin and Joe Maloof are so confident Floyd Mayweather Jr. will beat Conor McGregor that they bet $880,000 on it. And if the Maloof brothers are big winners along with Mayweather on Aug. 26, they are giving the proceeds of their whopping wager to charity. Continue Reading ==> 9) What You Should Know About the Pro-Vegan Netflix Film ‘What the Health’ (Time) The recent pro-vegan Netflix documentary, What the Health, is under fire from nutrition experts. The film, which is co-directed by Kip Andersen and Keegan Kuhn—the creators of another Netflix documentary, Cowspiracy—and co-produced by actor Joaquin Phoenix, is being criticized by some health professionals for exaggerating weak data and misrepresenting science to promote a diet that avoids all animal foods. Continue Reading ==> 10) Life Advice from 100-Year Olds (YouTube) Want some real perspective on life? Listen to a 100-year old, because they’ve seen, heard, and experienced more than 99% of the population.
Continue Reading -->US Dollar Update: Nailed It…Again…
In this video update we revisit the US Dollar Index (UUP) as it has been under heavy pressure. Just recently it tested the key $24 level which was the 2016 low and a level we said would get tested based on a simple and objective method. In this video you will: Hear the analysis that got us to this point See how you could have made money off the bottom Find out where this is headed next
Continue Reading -->Sami Abusaad’s Trade of the Week: BUFF
In this special video, T3 Live Black Room Moderator Sami Abusaad walks you through a trade in fast-moving momentum name Blue Buffalo Pet Products (BUFF). On August 9, BUFF exploded higher on earnings, which opened the door for Sami to step in and take a day trade using a proprietary 60-minute Buy Setup. This trade returned $2,288 in profit in 90 minutes, or about half of his total trading profit for the day — pretty nice! In the video below, Sami’s going to walk you through the trade from start to finish so you can understand: Why a pro gap opened the door for the trade How Sami identified where buying interest could come in The entry off the 15-minute chart The power of simple bar-by-bar trade management The moving averages Sami used to place his 2 targets Here’s the video: Click here to learn about the Black Room
Continue Reading -->Is the Big VIX Move Over?
Fear is here, courtesy of North Korea. Just a couple weeks after the VIX hit an all-time low, volatility is exploding as traders start to price in a potential conflict with North Korea. This morning, the plot thickened after China said it won’t help North Korea if it launches missles at the US. However, it would not stand for the US attacking first. Way back in July, I used options to make a leveraged bet on the VIX, and the huge spike in the VIX put the trade in the green. I took off part of the position yesterday just before the equity market close, and will likely close out the rest this morning. At the end of this piece, I’ll outline why I may soon speculate on a VIX collapse. That makes now a great time to go through our 4 sentiment indicators to see if the crowd also sees sunshine ahead for equities. (click here for a primer on the 4 sentiment indicators below) 1) VIX Spread – Bearish The VIX is at 16.57, which means it’s nearly doubled the July 26 all-time low at 8.84. The 3-month spread is at -1.05, which means the curve is inverted and short-term fear is very, very high. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bearish The Fear & Greed Index is at 31. The F&G Index operates on a 1-100 scale, and a reading of 31 qualifies as Fearful. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 33.7% of individual investors are bullish. This 33.7% reading isn’t terribly far off the 38.5% long-term average, and indicates that individual investors are basically neutral. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.88 Thursday, which is well above the long-term average of 0.66. The 3-day moving average is 0.79, which is also well above the long-term average. These numbers indicate that traders are very bearish. Conclusion But of 4 sentiment indicators, we have: 0 bullish (down from 2 last week) 1 neutral (flat) 3 bearish (up from 1 last week In July, the crowd was absolutely nutty. But as we’ve seen many times this year, at the first sign of trouble, fear is getting priced in awfully quickly. The action is quite reminiscent of the April 13 volatility spike when the US dropped a 22,000 bomb on ISIS forces in Afghanistan. North Korea and Syria were also in the news. On that day, the CBOE equity put-call jumped to a whopping 0.96 with a 3-day moving average at 0.81. And as of yesterday, the CBOE equity put-call jumped to 0.88 with a 3-day moving average of 0.77.That dip was very short liveed, and the SPX soon spiked 60 points. This chart shows the SPX vs. the VIX (VIX is the purple line, with the April volatility spike highlighted: So I’m looking to close out the rest of my VIX position, and actually speculate on a VIX decline, likely through VXX put options. (UPDATE at 9:45 a.m. ET: I am now short VXX call spreads, and long VXX puts) To make a very long story short, the term structure of VIX futures puts a downward force on VXX over the long run. Shorting volatility has been the best trade of 2017. But the recent volatility spike likely had traders being forced to do 3 things: 1) Close outright short volatility bets on VIX/VXX puts cover shorts 2) Buy SPX/SPY/QQQ puts and VIX/VXX calls to hedge their short volatility exposure And now we’re looking at an inverted VIX curve and traders likely overpaying for VIX options. Meanwhile, China’s posture indicates that they want no part of a North Korea offensive. Saying they won’t tolerate a US aggression allows them to save face, and seems like a happy medium. If the fear gets ratcheted down, I suspect the VIX will be back in the 10-12 range in fairly short order. I’ll provide an update if I actually make a trade.
Continue Reading -->T3’s Take 3: Nuclear Summer
1) Fear Returns Traders were on edge again today on fears of a conflict with North Korea. Japan and South Korea warned that they would not tolerate aggressions from North Korea, including a missile launch at Guam. News reports indicate that Japan moved a PAC-3 Patriot missile system to Tokyo to shoot down North Korean missiles. Sentiment has been rapidly declining. The CBOE equity put-call ratio hit 0.83 yesterday, which is the highest reading since April 13, 2017. And what happened on April 13, 2017? The US military dropped that giant 22,000 bomb on ISIS forces on Afghanistan, which coincided with escalating tensions with North Korea. And a week prior, the US attacked Syria. As of yesterday’s close, the 3-day moving average for the equity put-call is now 0.76, which indicates negative short-term sentiment. And tomorrow morning, it should be much, much higher, since traders often buy lots of put options when the market drops quickly. Stocks immediately sold off at the open, and volatility expectations went into overdrive. the VIX rose as high as 16.17. putting it 82% above the July 26 record low at 8.84. That put my long VIX options trade nicely in the green. I used the pop to exit a big part of my position. I’ll look to get out of the rest tomorrow, and depending upon what I see tomorrow, I may end up getting short the VIX heading into the weekend. 2) Ugly Action The market did nothing in June, but judging by today’s big move in the VIX, August may be another story altogether. The SPX fell as low as 2444.91 this morning before bouncing, and then driving lower into the close to at 2438.21, down -1.5%. We saw relative weakness in key areas of the market like large-cap technology, biotechnology, and small caps. Traders watch these groups to judge the market composure. High-yield, regional banks, and materials ETF’s also took big hits. This implies that traders are fearful of the overnight news flow. Meanwhile, “risk off” instruments like US Treasuries, silver, gold, and utilities stocks performed well, with the Vaneck Vectors Gold Miners ETF (GDX) rising 1.6%. In early June, my colleague Jeff Cooper delivered compelling analysis on gold, saying the folowing: The breakout above $1280 is confirmed by trade over $1295, which issues significantly higher projections which we will detail before the weekend. At the same time, a close in gold above $1285 and especially $1295 on the important Friday weekly closing basis validates the idea of a new leg higher. Gold is now flirting with $1295, so keep an eye on it. If Jeff is correct, we could see a major rally. 3) Scott Redler’s Take: 75% Chance of Stormy Weather This afternoon, Scott Redler appeared on CNBC’s Futures Now Show to discuss the market’s recent breakdown. He estimated that there was a 75% chance that we’d see more trouble ahead. In terms of specific market levels to watch, Scott said it was important to see how the SPX and QQQ handled their respective 50 day moving averages at 2455 and $141.35. Both levels were lost today, so it’s clear that the bears have scored their first real victory in quite some time. Click here to watch Scott’s segment
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 Elon Musk building a hyperloop is good for youWhat Kraft Heinz and Oprah have to do with one anotherCryptocurrency and the next boomAnd more! So check out these links right now and get up to speed: 1) Great News For Everyone! Elon Musk Is Building A Hyperloop (Wired)ELON MUSK IS back in the loop.Four years after encouraging anyone and everyone to try making his crazy hyperloop idea work, the Silicon Valley titan has decided he’s not too busy to do it himself after all. Read the Story ==> 2) Google Memo Drama Is CEO Sundar Pichai’s Greatest Trial Yet (Fortune) In almost two years as Google’s CEO, Sundar Pichai has weathered multiple storms with relative ease. His search engine came out of the fake news brouhaha largely unscathed. Read the Story ==> 3) FREE Preview: Redler All-Access (T3 Live) Welcome to your FREE preview of T3 Live’s Redler All-Access newsletter. Redler All-Access gives you a complete trading plan from T3 Live Chief Strategic Officer and frequent CNBC guest Scott Redler. Continued Reading ==> 4) Kraft Heinz Hopes a Line of Oprah Products Will Boost Sales (Bloomberg) Kraft Heinz Co., struggling to ignite sales growth amid punishing grocery-industry competition, is turning to media magnate Oprah Winfrey to break out of a prolonged slump. Continued Reading ==> 5) Nvidia Earnings: Cryptocurrency Boom Could Lead to New Products (MarketWatch) The explosion in new cryptocurrency seems to be boosting graphics-card makers like Nvidia Corp., but acting on the demand is fraught with potential danger. Continue Reading ==> 6) Trading AAPL Step by Step (T3 Live)Apple (AAPL) hit a new record high at $161.40 today. To show you how I analyze and trade a big mover like this on a day-by-day basis, let’s take a look back at the 3 charts I’ve shared with Redler All-Access readers over the past few days: Continue Reading ==> 7) The New Smoking: Why Young People Are The Most Sleep Deprived (Triple J Hack) If you’re a young Australian who’s not getting enough sleep, the good news is you’ll probably sleep more when you’re older. The bad news is that we may also be heading to a dystopia of wakefulness as you battle to keep your job from sleepless robots. Continue Reading ==> 8) Disney’s New ESPN Streaming Service Is Launching Next Year (The Verge) Disney’s bombshell announcement today that it would be building its own branded direct-to-consumer streaming service, and ending its licensing deal with Netflix, came with another nugget of news… Continue Reading ==> 9) Wait. What? Floyd Mayweather breaks down the reasons Conor McGregor could (should?) upset him (MMA Junkie) We’re about two weeks away from all hell officially breaking loose in the combat sports world, if it hasn’t already. You’ve probably heard a thing or two about unbeaten boxing legend Floyd Mayweather (49-0 boxing) taking on UFC lightweight champ Conor McGregor (21-3 MMA, 9-1 UFC) later this month. Continue Reading ==> 10) Arnold Schwarzenegger’s Motivational Speech (YouTube) Here is a video for inspiration from Arnold Schwarzenegger, including his 6 rules of success speech.
Continue Reading -->The Bull Market Can Continue Forever. Really?
It’s foolish to read too much into any one anecdote, especially when it comes to soundbites and one-liners. But this statement from Leuthold Chief Investment Strategist Jim Paulsen on CNBC really caught my eye: “We’ve got a fully employed economy, rising real wages. We restarted the corporate earnings cycle. We’ve got strong confidence among business and consumers,” he said on “Squawk Box.” “The kick is we can do all of this without aggravating inflation and interest rates,” he said. “If that’s going to continue, I think the bull market could continue to forever.” To be fair, Mr. Paulsen tempered his statement with by saying “if that’s going to continue.” Nonetheless, it seems a little overboard to even imply a bull market can go on forever. That makes now a great time to go through our 5 sentiment indicators to see if the crowd also sees sunshine ahead for equities. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish The VIX is at 9.82, which puts it within range of generational lows. That puts the 3-month spread at 3.97, which means that traders are fairly bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 63. The F&G Index operates on a 1-100 scale, and a reading of 63 qualifies as mildly greedy. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 36.1% of individual investors are bullish. This 36.1% reading is roughly in-line with the 38.5% long-term average, and indicates that individual investors are basically neutral, even though the major indices are still near all-time highs. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.71 Friday, which is above the long-term average. The 3-day moving average is 0.70, which is above the long-term average. These numbers indicate that traders are moderately bearish. 5) ISE Sentiment – SUSPENDED! For months, I’ve been pondering kicking out this sentiment indicator since it has seemingly lost predictive value. However, ISE has announced it has suspended the index, so now I’m being forced to eliminate it. I’ll likely replace it with the CBOE Skew index (SKEW), which uses options prices to determine whether traders are pricing in extreme risks. Conclusion Out of 4 sentiment indicators, we have: 2 bullish 1 neutral 1 bearish So it looks the crowd is in a more neutral state of mind after getting nutty a couple weeks ago. They definitely don’t believe in a “this bull market can last forever” scenario. That’s been pretty common this year. We’ve seen a few stretches with hyper-bullish sentiment, but they’ve never lasted. That’s been very frustrating for the bears, because these rapid pullbacks in sentiment seem to prevent the market from topping out. At the late 2007 market top, sentiment was incredibly bullish, but we’re seeing nothing of the like in 2017. So I’ll ask a question: can the market top without the bulls buying in emotionally? I really don’t know the answer.
Continue Reading -->How Sami Abusaad Made $1,800 In Less Than an Hour with ZYNE
In this special video, T3 Live Black Room Moderator Sami Abusaad takes you through a trade in red-hot biotechnology name Zynerba Pharmaceuticals (ZYNE). This trade, which used the proprietary Climactic Daily Buy Setup, returned $1,800 in less than 50 minutes. You’ll learn about: The daily chart pattern that gave Sami the setup for this killer day trade How Sami entered the trade Sami’s management method for momentum plays A key signal that tells you when there’s panic in the air The ‘beautiful reversal signal’ that told Sami to take profits Where Sami placed his stop, and why Click here to learn about the Black Room
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