Category: Trading

Another eventful week where the stock market rallied into FOMC rate decision and dropped hard right after. Yet, by Friday, magic buying came back and S&P successfully go back to the middle zone of this year’s range.

Blockworks’ Alfonso Peccatiello sees a recession coming quickly and that can take down the stock market too.

An opposite view of where the S&P is heading by a guest of the one and only Hugh Hendry. You may not agree with the guest’s opinion but understanding the views from all sides of the market can help one making sound judgement in this complex market environment.

Personally, I like to use simple common sense to look at the situation. We have some regional banks scr#wed by the Fed. We have Credit Suisse taken down suddenly. By Friday there is rumor that Deutsche Bank is next one in trouble. What does that tell us? It means more uncertainties and news shocks are coming. That translate to S&P will swing two ways crazily but it may not go far either way until there is clarity. So trade accordingly.

One thing worth mentioning here is the geopolitical risk is rising again with even more countries are engaged in “hot” wars. This looks very much like the environment right before WWI. As inflation is getting out of hand, more people are facing hardship. When this reaches certain level, it will provide a platform for madmen to rise in power.

That’s something I don’t want to see happening.

Time for a bunny video to ease the negative thoughts.

Have a great weekend all!

Next week is going to be a very difficult option expiration week not only because it is a quarterly option expiration, but that we have major economic data like US CPI, PPI, and then ECB rate decision, etc. It will be a mess to deal with …

The biggest news for this week was the “sudden” shutdown of the Silicon Valley Bank. Here is the latest take on the event by Chris Whalen on Blockworks Macro. It’s just half an hour and obviously it represents the view of majority of those in the financial industry.

So, everyone is pointing their fingers at Fed and Powell. Next is how the US government will weaponize the event to force the Fed to stop raising rate or even start to do QE forever. More drama is ensured as US is also heading to the standoff game of debt ceiling in coming months.

One thing I don’t agree with these financial industry insiders is that SVB fails because of bad practice encouraged by bad policies put in place since year 2008. There should never be multiple boom and bust crisis since. By punishing bad behaviours like sending those bank executives to jail for their reckless behaviours back then you would have a very healthy economy built on organic growth from there, instead of the massive bubble we are seeing now.

At this point most of the people in the financial industry all playing along the bubble game because if they don’t, they need really good understand how trading really works to make money. For example, Renaissance Tech’s Medallion Fund will continue to do fine, so are the other few firms like Jump Trading. Since almost everyone is guilty, they would blame anyone who ends the gravy train.

Here is a different take on the subject by Patrick Boyle. He talks about Silvergate situation in details. As usual, I find his sarcasm on these subjects quite funny but it may hurt the feelings of those crypto fans.

Instead of keep talking about this heavy topic, let’s watch a happy desert making video.

Lately, I find posting on twitter with my charts on longer term trading outlook much easier than doing it through the blog or in an article within daytradingbias website. For those of you interested in these updates, you can check it out.

Back to work for me.

Have a nice weekend all!

This month we do not have Non-Farm Payroll report on the first week. Instead it will be next week due to February being a shorter month than the other months. The usual NFP week bias, however, will face a serious challenge this coming week with Powell going to speak for 2 days in a row. I am sure we will see more extreme intraday swings thanks to that.

Very interesting take of Warren Buffett’s annual letter that is just released. The explanation of the good and bad of share buybacks is a great lesson for everyone. I do not agree to many things Warren Buffett says but that’s because of my view on risk management is very different from his “empire building” mentality.

For those of you who are long term investors interested in figuring out a strategy to navigate the current market environment, here is an updated talk from Howard Marks. Great lessons from Marks as usual. If you prefer, you can choose to read the pdf instead of listening to the audio.

I find this youtube channel quite interesting because the way how intense the guy is with his presentation on global economic topics. His conclusion is a much more useful take on the current financial market environment. If he manages to find someone or a team to improve his production, his channel should gain a lot more subscribers.

Have a great weekend all!

First month of year 2023 finished with one of the best monthly performances in S&P500 history. Many anxious retail traders are now very pissed that they listened to those perma bears and failed to hop on the boat. Well, they have no one to blame but themselves. If they have access to non-free market analytics, many of them already identified at least a 50/50 chance that we see 4100 and above.

The more interesting question is whether this rally will have legs like some people comparing this to the bottom of year 2009. They have a point – years after 2009, we’ve learnt that the central bankers agreed back in end of year 2008 that they will work together when the time comes to “save” the financial markets. So those who know about the secret agreement made billions off that bottom in 2009.

This time, that very interesting bottom in year 2022 was the work of Bank of England. If it did not intervene, the UK financial system would go under and the damage will spread worldwide. So, it is reasonable to speculate that all these major central bankers will do whatever it takes to save the game from total collapse.

The problem is, what if something happens that is bigger than these central bankers can handle? Are we at such risk now?

As long as these potential disastrous events have not happened, investors worldwide will pretend that all is fine and continue to seek for alpha.

Here is a funny video from Cathie Wood on her takes about various markets. It is funny because she is really just trash talking. At this point, she couldn’t care less whether her fund will perform or not. The hefty fees she has collected in 2020 and 2021 already put her in a very good place financially. Of course, if she is stupid enough to believe her own calls and put the money to work ….

In contrary, Jeff Gundlach, speaks things he believe in with much less fluff.

All these famous analysts and macro players are telling the world that S&P will have to fall a lot this year yet the stock market has been doing the opposite against these calls. Here is another one of these macro guys, Alf Peccatiello, talking about his current take on the financial markets. I like Alf and his vids often offer very comprehensive views. But I like to point out price dynamics is not a function of macro factors.

To make things simple, consider a funny story happening now at a house just a few blocks from mine. This house was sold a year ago at a very high price to the current owner. Since then this new owner tried to rent it out at $9,000 CAD for a few months. When it is not working, he lowered the price to $7,000. And then lowered it again to $5,000. A friend of mine checked out the place and offered to rent it at $4,000, which is already too much (reason below). The owner said he would never rent it out below $5,000. He even boasted that he has a lot of money so he does not need to rent it out at all. This house is still listed for rent today.

Participants in a market do not need to be rational. This owner of the house may not know that other houses bigger than his on the same street all rented out at or below $4,000 before he bought his. Yet he paid a price that top ticked the market with the belief he can rent it out at $9,000. The other properties in the area of similar size are sold at 30% lower than his purchase price lately. He must have his reasons when he made his decision to buy the property at that very high price, no matter how dumb those reasons are. And same goes for his conviction that he will not rent the house below $5,000, he must have his reasons. As long as he has holding power, he does not need to follow what others do.

If everyone is rational in making every decisions, human race should have been gone for a long time. I would say majority of people are irrational beings and majority of their decisions are made emotionally. That’s why it is fun to watch how price moves.

Back to work on my projects.

Have a nice weekend all!

This week even some of the biggest bearish analysts from major financial firms finally admit the stock market can keep going higher. Is that a sign of too fast too much? We will see how things unfold in coming week as January will end by middle of the week and then FOMC decision on February 1st. It will be very interesting how the world will react on that day.

For those of you who think the economy will do fine, maybe you need to watch this video. From Theresia Gouw’s perspective, it will be tough going forward over the coming few years. Her perspective is very unique as a venture capitalist.

Interesting video about foam rolling (Warning: it use real dead people’s body parts) that makes me think. Maybe majority of the exercise tools or fitness products are not really useful after all.

I love watching videos of opposite opinions on the financial markets. Here is one with bullish view and another with bearish view.

Who will eventually be proven right? I have no idea. The only thing I like to point out is that no one talks about the biggest elephant in the room – geopolitical risk.

Thanks all of you who expressed interest in my proprietary trading venture lately. It has been two years of hard work and things are looking very good now. I should have written more about it in my article series on automated trading but my schedule is very hectic for a long time. I may not have answered all your messages and in case your have not received my response, please remind me again.

Back to work.

Have a great weekend!

What a Non-Farm Payroll Week we experienced. Chairman Powell, once again, has made it clear that the Fed will fight inflation and keep rate at higher level until inflation comes back down to their target. Yet, all we hear from MSM and those talking heads is that Fed will “pivot” soon. Such misleading bullshit shapes the minds of majority of the retail investors to keep on piling into the stock market. Insanity indeed.

It is so simple and clear where the overall stock market is heading. But those who grew up in this zero interest rate environment would not understand, or choose to not understand, why everything is so expensive suddenly. It is not going to end well for many people if they continue to live in their own bubble …

Some people asked how come we are getting high inflation suddenly? It is not a sudden event. Watch this video with Milton Friedman explaining where these inflations come from. He made that speech back in 1978. And it tells you everything you need to know and why it will end badly.

Lately, I was re-introduced to this old game by a friend. It is called the Universal Paperclips. Wikipedia has a page about it with link to the game site. If you like playing this type of games, it can easily kill half a day off for you.

Here is a recording of Zoltan Pozsar debating his long time collaborator Perry Mehrling on Pozsar’s idea of the upcoming Bretton Woods 3.0

Notice that MSM are avoiding Pozsar on their shows lately not because what he suggested is too bizarre. In fact, what he suggested is happening now and is predicting a very bad outcome for the United States. That’s why he is being silenced.

I have some heavy moving tasks to take care of this weekend, again. Hopefully this is the last ones for the year. I need a break to to let my back heal.

Have a great weekend all!

This week we got another confirmation of red hot inflation still on-going, yet “Brandon” dares to tell the world inflation is under control thanks to his government. This feeds the animal spirit of the market participants to push the market much higher. Very interesting dynamics going on in the stock market right now. Could this be the start of yet another major bull market just like that crash low of year 2020 as suggested by some, or, a bear market rally as others keep saying?

For a snapshot of the current situation, this is a good summary from David Hunter. He is the guy who thinks the S&P 500 will go up to 5000 or even 6000 quickly and then we face a bust that wipe out everything in 2023.

On the other hand, there is also a more pessimistic view of the near future.

I do not have strong opinion of which way the stock market will go at the moment. If you study history, especial the Weimar Republic, you would know that in a chaotic environment with hyperinflation, under the pressure of currency devaluation, the stock prices of the regime can go parabolic. But it does not mean that you are making money, because the actual value of the stocks do not rise fast enough to compensate for the loss in purchasing power. In short, it is best not to hold anything at all with the sinking ship.

The tricky issue is whether this is the end game of the financial system of the Western world. No one knows the answer.

Here is a good video from Patrick Boyle on the ARK fiasco and good lessons for retail investors.

Moved some heavy stuff around my house so that I can better utilize the space. I find doing chores like that and stay away from my regular research projects helps me clear my mind. When I get back to my work I often manage to see new ways to solve the problems on hand. If you do a lot of algo design work or deep research like me, you can try taking a break doing something else all together for a day or two. Give it a try!

Have a great weekend all!