T3’s Take 3: Volatility Is Back in a Big Way
T3’s Take 3: Volatility Is Back in a Big Way Interested in becoming a professional prop trader? Click here to fill out our eligibility form. ********* 1) Bulls Give Back Yesterday, the S&P 500 rose 1.5%, the first 1%+ up day since July 8. The bears got their revenge today as the index dropped -1.5% to 2126.78, with the VIX rising 17.7% to 17.85. Market observers were scrambling to find explanations for the sell-off, but for me, the story remains the same: we are seeing a good old-fashioned return of volatility after 2 months of markets going nowhere. Some folks are pointing at deterioration in US economic data – but that’s nothing new. The real question is what’s next? There are no easy answers, but crude oil will be in focus tomorrow given inventory releases today after the close (from the API) and tomorrow morning (from the EIA). 2) Apple Booms on iPhone Sales Chatter Apple (AAPL) was a superstar amid a sea of red, rallying 2.4% to $107.95. Early this morning, T-Mobile (TMUS) Chief Executive Officer John Legere Tweeted that iPhone 7 pre-orders set company records. Sprint (S) CEO Marcelo Claure then jumped into the news flow and added that iPhone pre-orders were nearly 4X higher than last year’s. Consumers appear to be upgrading their iPhone at a faster-than-expected rate, and Apple may also be benefiting from a stumble by a key rival Samsung. Samsung recalled Galaxy Note 7 smartphone due to exploding batteries, which certainly tilts the iPhone vs. Galaxy debate in Apple’s favor. 3) VIX-Plosion Trade Update On August 9, I went long VIX calls, based on my expectation that the VIX could break over 30 within 2 months. We may now be seeing the seeds of such a move, so I don’t have plans to lock in profits just yet. On Friday, we had the first -1% down day in the SPX since June 27. Yesterday, we had the first 1% up day since July 8. And today, the SPX fell -1.5% with the Russell 2000 down -1.9%. The Nasdaq was ‘only’ down -1.1%, but that’s largely because of Apple’s (AAPL) rally. So it looks like the summer snoozefest has officially made way for some autumn excitement. Wednesday’s Trading Calendar US Economics (Time Zone: EDT) 07:00 MBA Mortgage Applications (9/9): prior 0.90% 08:30 Import Price Index MoM (Aug): exp. -0.10%, prior 0.10% 08:30 Import Price Index YoY (Aug): exp. -2.20%, prior -3.70% 10:30 DOE U.S. Crude Oil Inventories (9/9): exp. 4000k, prior -14513k 10:30 DOE Cushing OK Crude Inventory (9/9): exp. -100k, prior -434k 10:30 DOE U.S. Gasoline Inventories (9/9): exp. -1100k, prior -4211k 10:30 DOE U.S. Distillate Inventory (9/9): exp. 1500k, prior 3382k 10:30 DOE U.S. Refinery Utilization (9/9): exp. -0.35%, prior 0.90% 10:30 DOE Crude Oil Implied Demand (9/9): prior 17600 10:30 DOE Gasoline Implied Demand (9/9): prior 10250 10:30 DOE Distillate Implied Demand (9/9): prior 4655.9 Global Economics 04:30 GBP Average Earnings Index 04:30 GBP Claimant Count Change 04:30 GBP Unemployment Rate 18:45 NZD GDP q/q 21:30 AUD Unemployment Rate Earnings Before Open: Cracker Barrel Old Country Store (CBRL) After Close: Apogee Enterprises (APOG)
Continue Reading -->Why I’m Still Cautious About This Market
Yesterday’s big rally came as quite a surprise to just about everyone I talked to. It’s pretty funny how the market likes to confuse as many traders as it can. Yesterday we still had plenty of warning signs to keep us from getting back in. 1) The market couldn’t regain the 50 day moving average and stalled out just below. 2) If the bulls wanted to negate that nasty down day Friday, they needed to get into Friday’s gap, which they couldn’t. 3) Small caps remained much weaker on their bounce attempt, showing beta wasn’t as good of a place to be. All this being said, I am still waiting for SPY to get into the $211-ish range. It got very close on Friday, and I am still holding out for that.
Continue Reading -->How to Lose At Trading Like a Winner
There is no opportunity without risk; thus, learning to truly accept risk is the first step to trading freedom. We teach that once we are in a trade, we employ “trade management” strategies for purposes of taking profits or protective stops. Trading involves speculation, which, by definition, involves risk; therefore, accepting “loss” is a necessary part of trading. Our objective is to help you approach the market in a disciplined, objective manner with a high focus on managing risk (and loss), to help you overcome the tremendous hurdles during your quest to become a profitable self directed trader. A trader refusing to accept loss is as ridiculous as a pilot not accepting turbulence during flight. Any winning strategy necessitates the ability to lose properly. It is the ability to deal with, and “make good” of, one’s losses that enables winning traders to keep a positive mental attitude. It also enables them to progress and effectively maintain their winning ways. Losing properly is not easy and therefore requires great skill. You need to be able to learn from your mistakes. Ask yourself if the trade actually met the criteria of your trading plan. If it did, then could you have averted the loss, or was it a good setup, consistent with your strategies? If it was a trade where an error in judgement was made, make sure you learn from it. The discipline involved with losing properly has to do with taking the loss at the right time. Did you sell at an intelligent time, with your stop placed just beneath support? Or, did you not take your “intelligently” placed stop and sell at a lower price than you should have? Discipline is also necessary when preparing for the potential loss. Make sure that your stop allows for a level of risk that you can stomach, and is compatible with your strategy. This will help you to be comfortable with “losing” properly. Seasoning has a lot to do with maintaining a positive mental attitude. Seasoned traders do not let their losses “get them down.” They understand that the loss may actually be a “friend,” as it creates an opportunity to learn from. They apply the knowledge and use it to improve their trading and maintain a winning attitude while accepting and brushing off the loss.
Continue Reading -->Scott Redler’s Morning Call Express: Hanging By a Fed
In today’s Morning Call Express, T3 Live Chief Strategic Officer Scott Redler breaks down the action in SPX and USO following yesterday’s big up day.
Continue Reading -->The Morning Hammer: Panic Is NOT Here
Throughout August, the market loved hawkish comments from Fed members. But by last Friday, traders had enough. The sold the market hard on Rosengren’s hawkish commentary. And of course on Monday, they bought the market hard on Brainard’s dovish vibes. Not that this is anything new, but the market truly is bizarro-land. Now, traders are pretty much taking a September rate hike off the table. Fed funds futures indicate a 22% implied probability of a September rate increase (down from 30%), while December is basically unchanged at 57%. Crude oil is down this morning after the IEA said oversupply will persist well into 2017. Remember that we have US crude inventory data coming from the API today after the close and from the EIA tomorrow morning. SPX futures are down -0.7% in the early going, which means volatility may really be back. Friday was the first 1% SPX down day since June 27, and Monday was the first 1% up day since July 8. And compared to the July-August snoozefest, a -0.7% move qualifies as real action! Bonds are firming up a little bit, with 10YR bund yields inching back down towards the zero mark. Treasuries are also up a tad. Gold is up as dovish vibes come back, though the volatile gold miners (GDX) are red pre-market. If gold stays strong in the early going, maybe those miners snap back up. Now the real fight begins. The bears failed at every turn for 2 months, but they’re starting to take the lead. And sentiment is still somewhat mixed, which for the bears is good because it implies the market is not braced for serious downside. The CBOE Equity put-call is 1.03, which is bearish but not extremely so. The 3-month VIX spread is +1.98, which is neutral. And the 10-day moving average of the ISE Sentiment Index is 87.4, which is modestly bearish. (87.4 calls for every 100 puts) So traders are spooked, but not freaked out. On a scale of 1-10, with 1 being max bearish and 10 being max bullish, I’d say we’re at a 3. Panic is not here… yet.
Continue Reading -->T3’s Take 3: Biotech, Fed Chatter Rescues Crying Bulls
1) Bulls Fight Back The S&P 500 fell -0.4% to 2119.12 in the early going, which had traders worrying that we’d see a repeat of Friday’s horrendous action. We also saw early weakness in overseas equities, crude oil, bonds, and gold. However, traders very quickly bought the dip, and the S&P finished up 1.5% at 2159.04. This was the first 1% up day in the S&P 500 since July 8. And since Friday was the first -1% down day since June 27, perhaps we are seeing a real return to volatility after 2 months of near-zero movement. 2) Biotech Saves the Day The first clue that the bull was ready to fight back was the early rebound in biotech (IBB), which was supported by 3 pieces of favorable news. First, Horizon Pharma (HZNP) announced it is buying Raptor Pharmaceutical (RPTP) for $800 million. Gilead (GILD) CEO John Milligan also said at an investment conference that the company planned on making regular acquisitions. And finally, Presidential candidate Hillary Clinton fell ill at a 9/11 Memorial Service in New York. Since she is viewed as anti-biotech, anything that hurts her chances of becoming President helps the sector. The Nasdaq Biotech Index (IBB) rose 3.0% to $287.11 today. 3) Fed Schmed This afternoon, Lael Brainard, a voting member of the Federal Open Market Market Committee, gave a highly-anticipated speech in Chicago. Brainard’s speech leaned dovish, making a case for leaving rates as-is. Considering that Brainard is considered to be one of more dovish members of the Fed, this was not a major surprise. However, her speech had a big impact on markets: the US dollar fell, while gold and stocks ripped higher. Traders are also now pricing in a mere 22% of a September rate hike, down from 32% a week ago. Throughout August, traders loved hawkish Fed chatter. It looks like that’s flipped around now. Tuesday’s Trading Calendar US Economics (Time Zone: EDT) 06:00 NFIB Small Business Optimism (Aug): exp. 94.8 , prior 94.6 14:00 Monthly Budget Statement (Aug): exp. -$107.0b , prior -$64.4b Global Economics 03:15 CHF PPI m/m 04:30 GBP CPI y/y 05:00 EUR ECB Pres. Draghi Speaks 05:00 EUR German ZEW Economic Sentiment 18:45 NZD Current Account Earnings Before Open: None of Significance After Close: None of Significance
Continue Reading -->If Trump Wins, I’m Buying Mexico… and 4 Other Thoughts on Today’s Action
Learn to Trade From Our Pros This Week: Tuesday 9/13: Dynamic Short-Term Trading With Dave Green Thursday 9/15: Day and Swing Trading Signals You Need to Know – Part 2 (Click here to watch a replay of Day and Swing Trading Signals You Need to Know – Part 1) ******** 1) Biotech Saves the Day The first clue that the bull was ready to fight back today was the early rebound in biotech (IBB), which was supported by 3 pieces of favorable news: Gilead (GILD) talking its willingness to make more acquisitions The HZNP-for-RPTP acquisition Hillary Clinton’s unfortunate illness. (she is seen as an enemy of biotech, so anything that favors Trump over her supports the sector) 2) Buy Mexico on Trump? Since Trump’s prospects are looking up today, the Mexican peso is selling off, as are Mexican equities. Given that Presidents tend to moderate once they’re in office, a Trump victory could mean a buying opportunity in Mexico once we’re past the initial fallout. The average person may think Trump spells disaster for Mexico. But I imagine that a worst-case scenario would get priced in immediately — courtesy of the same media that sold the Brexit as the end of the world. So if Trump wins — I am going long Mexico through an ETF like EWW or a closed-end fund. I’m not making a political endorsement here — I’m just looking for an opportunity. 3) Strong Oil Crude oil made a beautiful pop off the morning lows after OPEC fractionally increased its global oil demand forecast. However, the OPEC meeting in Algeria is still a total mystery. We are still seeing tons of conflicting headlines regarding production freezes or cuts, and there’s no telling what will actually happen. Maybe some confusion is good, because heading into the June meeting, traders were pretty certain that we’d see a freeze or cut, and they were sorely disappointed. 4) VIX Mix The VIX is slowly grinded lower today as equities penetrates further into the green, which is eating away at my calls. However, I still think the VIX made a major low in August and it’s likely to spike again. The reason? Time. We had 51 days without a real down day, but there’s a very good chance the pendulum is swinging the other way. 5) Watch the Regional Banks XLF started rotten and has made a big turnaround intraday. I’d watch for more upside catch-up in the regional bank ETF (KRE), which is still off -0.5%.
Continue Reading -->What’s Moving in the Forex Market
Kurt Capra, of T3 Live, talks about the USDJPY and where he sees it going over the next couple of weeks and even into the end of the year. In this episode, Kurt talks about why he believes the USDJPY is going to collapse.
Continue Reading -->Scott Redler’s Morning Call: It’s Time to Get Tactical
Editor’s Note: This is a special FREE edition of Scott Redler’s extended Morning Call Video, which is released at 8:30 a.m. ET each day as part of Redler All-Access. In today’s special edition of the Morning Call video, T3 Live Chief Strategic Officer Scott Redler discusses the market action in the aftermath of Friday’s ugly down day. Scott breaks down SPX and XLF, as well as individual stocks like GOOGL, FB, and AAPL. Please call our team now at 1-888-998-3548 if you’d like to try Redler All-Access for FREE.
Continue Reading -->The Morning Hammer: Round 2 for the Bears!
Friday was the first -1% down day in the SPX since June 27 — and it was an ugly one. The SPX and Nasdaq each fell -2.5% while the Russell 2000 dropped -3.1%. And the VIX spiked an incredible 40% to 17.56. Many traders blamed the initial weakness on hawkish comments from Boston Fed President Eric Rosengren, who is a voting member of the Federal Open Market Committee. That obviously impacted the lousy action in US Treasuries and gold, but didn’t seem to fully explain the broader downturn in the market. Crude was slumping and the ECB disappointed, but to me the real factor was time. Volatility is mean-reverting and after an extended period of failures, the bears were due for a victory. The news is the justification after the drop — not the cause of the drop itself. As my friend Jeff Cooper says, “the news breaks with the cycles.” We’re seeing some follow-through this morning. European and Asia markets are off. WTI crude is down -2.4% to $44.80, breaking its 50 day moving average. The yen is soaring. German bunds and US Treasuries are falling. Gold is getting hit. SPX futures are down -0.7%, which doesn’t exactly spell disaster, but it’s clear that traders are feeling very, very spooked about what’s to come this week. SPX sliced through the key 2147 level Friday, and it’s below the 20/50 day moving averages. The 200 day is below at 2057. The 2090-2120 range looks key short-term. I really wonder what happens at the open: I wonder if traders will dump in the hopes of avoiding a catastrophe. Full disclosure: I have a position in VIX calls and that makes chaos my friend. Traders seem to be worried about Democratic Presidential candidate Hillary Clinton’s pneumonia scare, which could presumably help Donald Trump’s chances. In fact, the Mexican peso, which has been tracking Donald Trump’s perceived odds of winning, is down on this news today! BofAML actually issued a note today saying the market is not paying sufficient attention to Trump, who has been moving up in battleground states. The market is largely assuming a Clinton victory (which partially explains the weakness in biotech). I believe Trump has a better chance of winning than most people assume, and I would not count him out until the votes are tallied.
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