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What You Must Know About Inter-Market Relationships (Part 1 of 2)

What You Must Know About Inter-Market Relationships (Part 1 of 2)

It is naïve to assume that seemingly unrelated markets move independent of each other.  The financial and commodity markets are littered with relationships that might be helpful for those attempting to speculate on price changes.  Further, simply assuming that the historical relationship you once read about in college textbooks is consistently valid is a mistake.  At the hands of government intervention, the relationship between many markets has morphed into something unrecognizable to...

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There is Something “Skewy” Going on Here

There is Something “Skewy” Going on Here

I have recently focused on the options-skew index as a tool to help me define overbought/oversold markets.  It is not the most conventional or even cleanest tool, since we’re talking about outlier trades.  By definition, the options-skew index measures the tail risk of the SPX 500 basically over 30 days.  Traders who add to the skew are looking for outlier moves of 2-3 standard deviations, which happen 5% or less of the time.  These are cheap bets, but, if they come through, they pay off...

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Day Trading Is Hard Enough

Day Trading Is Hard Enough

Day trading is tough enough as it is. Don't make things harder on yourself when you are using options. There are a number of things you must concern yourself with if you are going to employ this methodology, but three are key – liquidity, delta, and theta. I hear many "options professionals" tell their clients to just trade in-the-money options, as they offer a lot more leverage than going out and buying the underlying, and they act just like the underlying, as the market moves up and...

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SPX: The Fed To The Rescue … Again

SPX: The Fed To The Rescue … Again

The S&P 500 mini futures (ESH5) got the oversold bounce we were predicting yesterday, thanks to what has become the “new normal” – an unofficial and sometimes covert intervention from the Federal Reserve anytime the market shows signs of faltering. Yesterday it was a closed-door presentation by Fed Chair Janet Yellen to a group of congressional Democrats indicating that there will be no “immediate” increase in interest rates. The US equity market, which had been trading lower, promptly...

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A Fan of Volatility? Think March E-Mini S&P 500

A Fan of Volatility? Think March E-Mini S&P 500

If you are a fan of volatility and wild rides in the markets, you are probably enjoying the first month of trading for 2015. Central Banks around the globe have made things interesting, as some of their decisions have sent secondary markets into frenzy. Crude oil continues to grab attention, and it has consumers and investors both asking, “How low can it go? “ In the Eurozone, we started off the week wondering how elections results in Greece would be felt in the currency markets. The euro...

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Futures Market Review and Forecast: Three Downside Targets

Futures Market Review and Forecast: Three Downside Targets

As I noted yesterday, “another move below the Floor increases the odds of much lower prices (1984 and then 1962).”   The Floor support at 2027 was tested for several hours on Wednesday, but turned into resistance after the FOMC announcement. This puts three levels in play to the downside: 1984, 1963 and 1842. A Note on Volume Profile The histogram on the left side of the chart shows the volume distribution in the S&P futures for the entire year of 2014 through today. Key levels are...

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Learn To Navigate Your Assets In Times Of Big Change

Learn To Navigate Your Assets In Times Of Big Change

One Risk Aspect Often Overlooked When Assessing Risk There are many aspects to trading risk. The risk to capital exposure due to excessive position size relative to one’s stops is obvious. Co-relation of your positions in today’s highly co-related markets is another aspect that must be considered, and, of course, you know about the risk of not diversifying your assets. But have you ever considered the risk you are assuming from your brokerage account? I am talking about your brokers’...

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Three Questions With The Power To Transform Your Trading

Three Questions With The Power To Transform Your Trading

There are three simple but powerful questions which can transform our trading when we ask them of ourselves consistently over time.  They are powerful because they form the basis of mental flexibility and mental agility.  Wouldn’t you like to be mentally more resilient and deft? The three questions can be asked anytime you are preparing for trading, executing, and managing trades, or reviewing your trading results — in other words, anytime you are engaged in a trading-related activity. ...

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Look To Platinum And The PGM in 2015

Look To Platinum And The PGM in 2015

Given a growing global demand for platinum, palladium, and rhodium, three of the six metals in the platinum metals group (PGM), and the increasing cost to mine platinum, we are focusing our efforts to accumulate platinum over the course of the year. PGM, specifically platinum, is an excellent store of value and it performs well as an inflation hedge.  One could argue that platinum – and the other meals in the PGM - are a better long term hedge than gold, as there are a number of industrial...

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Taking A Peek Inside (the) Box

Taking A Peek Inside (the) Box

The volatility roiling the broader markets has, at least thus far, kept a lid on the IPO market in 2015. To date, just two companies have braved the elements with County Bancorp (ICBK) and Patriot National (PN) going public on January 16. This week, however, the IPO market will once again find itself in the spotlight as a well-known tech company makes its long-awaited debut in the public markets. Specifically, on January 22, Box, Inc. (BOX) – a provider of cloud-based storage and file...

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Could AutoNation Be A Target Of Soros?

Could AutoNation Be A Target Of Soros?

On January 25th, CNBC’s Phil LaBeau reported that representatives of the Soros Management Fund (run by billionaire George Soros) were in California to attend the National Automobile Dealers Association’s annual meeting and they spoke with car dealer owners about possible deals. If Soros does decide to take a stake or acquire an entire dealership, this would follow Warren Buffett’s purchase of Van Tuyl Group last October (5th largest dealership in the US). Valuation AutoNation (AN) is a $7B...

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ESH5: S&P Mini Futures Bust Support, Crash, And Burn

ESH5: S&P Mini Futures Bust Support, Crash, And Burn

Early Wednesday morning, we were leaning long on the S&P500 mini futures (ESH5), hitching our wagon to modestly hopeful technical indicators. The futures didn't fall out of bed in the overnight trading, and the ESH5 clawed back up to the 20/40-day moving average line from the previous day's decline. No real strength, but enough to dull the fear and encourage the greed. By the end of the day session Wednesday, the market had broken all of the support levels and closed near the low of...

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