Podcast: Stocks & Options 3-23-24

Summary

1. Navigating the late-stage market cycle: How to stay cautiously bullish while avoiding potential pitfalls  
2. Mastering the art of chart-reading: Discover why respecting technicals is crucial for trading success, no matter your opinions  
3. Traders vs. Investors: Uncover the surprising differences in how they approach the market and what you can learn from each  
4. The mysterious bond-stock connection: How the 10-year Treasury yield influences the stock market and what it means for your investments  
5. Brace for impact: Upcoming GDP and PCE releases that could shake up the market and how to prepare  
6. The Fed’s delicate dance: Interest rates, inflation, and the power to sway market sentiment 
7. AI-driven market mania: Is history repeating itself? Comparing the current boom to the dot-com bubble  
8. Sector spotlight: Identifying top-performing sectors and uncovering long and short trade ideas for the week ahead  
9. Mastering options in uncertain times: Strategies to manage risk and maximize rewards in the current market 
10. The secret to successful portfolio management: How diversification and position sizing can help you navigate any market condition  

Transcript

Hey, John. Good morning. Hey. Good morning, Pete. Good morning, everybody, and happy Saturday.

Good morning, everybody. Thank you for being here with us on a Saturday morning. So, John, I think you just said something, incredibly simple and incredibly smart, which is, respect the charts at this particular point.

We we’re in the late innings. I think everybody kind of feels that because even some technology stuff is, pulled back a little bit deeper than it has been. Yep. But you still have to respect the longs until otherwise.

Yeah. I think that once you surrender to the charts, and what I mean by surrender is stop trying to figure out what’s going on. Like, stop trying to figure out why is the market keep going up.

Oh, you know, it’s so long in the tooth. We’re in the late innings, obviously. You know? I don’t know. What? 30% off of the October lows, whatever it is. I don’t even know. Is that about right? I can measure that for you.

Yeah. Maybe 30 percent. I mean, so what do we got left? You know? I mean, you could sit here. We could sit here and debate. We have 5% left, 10% left. You we could talk about the breadth of the market and say, well, there’s room to run.

You know what I mean? You could or you can make the bearish case and say, well, you know, you know, it’s still kind of a crazy year coming up, and you could think of all the gloom and doom that’s out there.

So, you know, the the the the best thing to keep your mental sanity in a market like this is to just surrender to the technicals.

And what I mean by that is take a look at the SPY or the QQQs like you just pulled up and just say to yourself, we’re in an uptrend.

In the case of the SPY, we had a high base breakout that pulled back a little bit. So it’s showing a little bit of, you know, the last 2 days were kind of weak.

Even though it broke out on Wednesday, you know, we have a little bit of a pullback. So to me, that that’s a good end. Now if I was just kind of I said this last week.

If I was in a coma for 20 years and you showed me this chart, I’d be like, oh, we’re in an uptrend. You know what I mean? Right. So so that’s kind of how you have to think. You know what I mean?

And I and I think that, we get into our own opinions and our own biases and, you know, obviously, politics and geopolitical comes into play when it comes to, like, how you feel about things, and and and you end up with every human has a bias.

And when it comes to charts and trading, it’s always better just to kind of, you know, follow the technicals.

And I know that sounds kind of, like, boring advice, but that’s that’s the best advice. You know, just be be bullish. That’s it. Ask you a different question, which is kind of like a a age old question in the markets.

And for those of you that just have recently started trading in the last few years, there there was a time where technical analysis was viewed as garbage. Like Oh, yeah.

Like, you didn’t know enough just looking at the charts, and it seems to be now where it’s it’s a lifting up it’s a very well respected part of what we do, which begs the question, do do you even need to know fundamentals for anything if we’re just reading the charts?

There’s always that age old fight that goes on. I remember when I used to sit on a trading desk and my bosses were, global value managers.

Most of my bosses growing up, know, when I was in my twenties thirties working on a trading desk, I was an institutional trader, so I would take orders from them, you know, and I would trade large blocks of stock.

And they never really cared about technicals. They were so focused on finding cheap stocks and putting them away in their portfolios for years. You know what I mean?

And they had they would they would literally mock me. They would come into the trading desk, and they’d be in their in their French accents. They’d be like, oh, well, what are the charts saying, John? You know what I mean?

Like, in, like, in, like, almost like a smug kind of way. And I’m like, well, the chart’s telling me that, you know, the 10,000,000 shares you’re trying to buy right now is probably going to get a lot cheaper the next couple of days.

You know what I mean? And then they would listen when that happens.

You push and pull, but it really it it depends on your goals. That’s really the the answers, they’re both right. Because if you’re a trader, you should focus on technicals and obviously news matters.

You have to know when things are coming out so you could position yourself. Right? Retraction is news. There is some news next week with GP numbers and PCE. So we got we’ll be on top of that today too. We’ll talk about that in a minute.

Yeah. I mean, you do have some news. So there’s always something going on in earning seasons around the corner coming up, you know, there’s always something going on, so you have to know how to position yourself as a trader.

But as an investor, as a as a portfolio manager or a money manager, you know, you you know, you get a longer time horizon.

So, you know, if if you’re wrong, you have plenty of capital to just hold on to things, me, I’m trying to fill orders. I’m trying to get the best price. So my goal, even as a trader, was always different than that.

Even when I worked for them, even when I worked for a money management firm, my goal was to get the best price possible. Their goal was just to get invested as quickly as possible, big different goals.

So that’s kind of how you have to look at, I always say separate your brain into 2 hemispheres, have your investing portfolio and have your trading portfolio.

So I remember when I had my firm, we had a lot of former New York Stock Exchange specialists in the, come off the floor and start trading in it.

And we obviously had a massive amount of conversations about order flow. Because I was in that I was mostly a Nasdaq trader back then. We trade a lot of momentum, which was reading level 2, very, very short term time frames.

And we would trade, you know, 100, 200 trades a day back then. It was I would never want to do that again, but it certainly helped your decision making. Tell me if you this was your experience.

This is what they told me as specialists from the floor was that for large funds and the order flow that they got, it was more important getting on the full position around a reasonable price as opposed to getting the exact price?

100%. Because if you’re trying to buy 10,000,000 shares, you’re taking out level 2 doesn’t even matter in some cases because you’re you’re going to wipe everything out.

If I try and go in there with 10,000,000 shares, I’m going to wipe every offer out. You know what I mean? And and, you know, you you have to realize the size of some of these institutions, you know what I mean?

So there’s stuff that goes on behind the scenes, like I talked about this a lot with you guys. You know, you you you have these block trades that go on.

So while I’m putting in a 1,000 shares at a time into some little algorithm, trying to poke around to see where the liquidity is, I’m doing that with maybe a little piece of my order.

Right? Then I get all these millions of shares I’m trying to buy. So I’m calling up Goldman Sachs, I’m calling up Morgan Stanley, and I’m saying, hey.

If you have a seller, make some calls. You know what I mean? Let’s put a block together so I don’t impact the price. So if they do their job and they actually know who owns what, they’ll come back to me and say, hey.

You know, we have a client who wants to get rid of a 1,000,000 shares. Okay. Done. And then, also, a big a big print goes up, and everybody tries to catch up.

Yeah. It’s no different. What does that print mean? What does that print mean? And I I had to explain it that it was not it was a negotiated exactly like that negotiated off off of the floor and then they just posted the print.

Yes. But then that turns into a whole other conversation about what does that mean? Is that legal? It’s perfectly legal. It’s completely legal to get a price. It’s called a buyer and a seller meeting at a certain price.

So it might not be the current price because what you see in front of your screen, I don’t want to call it smoke and mirrors, but what you see on your level twos or what you see on your screen is is maybe a 100 shares offered at 1 price, a a 1000 shares bid at another price, you know, whatever.

And what if I have a 1,000,000 shares? That’s not the right price. You know what I mean? Because if I’m will if I’m if I’m a seller of a 1000000 shares, maybe I’m willing to take a half a percent discount.

So now all of a sudden the thing drops like a brick. Right? And people are scratching their head wondering what what went on.

It was just a institution getting rid of a 1000000 shares because they’re happy. They they want the they’re if I made 20% on my position, I’m happy to lose half a percent on the way out.

So a lot of the specials that we had, they they actually went to an extreme and they said that, obviously, as you mentioned last week, VWAP is is is really important for where they’re getting and reporting those filled back.

They said they actually lost order flow because sometimes they tried to get too cute to get the price and did not actually get all of the shares filled.

And the the institutions would actually come back to them and be like, what do you mean you didn’t fill the entire order that they had this liquidity, traded this much around VWAP, and they would actually lose order flow because they weren’t doing a good job of filling the entire position, not the exact price.

I’ve had numerous fights with brokers and and sales traders over that very conversation where it’s like, why did you fill my order?

Well, you know, they give you some excuse that, you know, like you said, the price moved, and I didn’t want to be too aggressive. I was like, I told you to get the order done.

Why isn’t it done? You know what I mean? And, you know, we I wanted to be 25% of the volume. Why weren’t we twenty 5% of the volume? You know? And that’s, you know, that’s that’s just the way it is.

I mean, it so, yeah, institutions care about getting your orders filled because they have a gazillion dollars, literally gazillion dollars, and they they just want to put that money to work.

So we’ve actually, you know, there’s been the age old saying in the you know, that everything known is in the charts.

Yep. That’s kind of like the belief system you need to have for leaning heavily on technical analysis without necessarily saying, I’m going to go learn about macroeconomics.

I’m going to go understand financial statements and those kinds of things. And to a certain degree, it is.

But when you expand your knowledge a little bit more, you add a deeper level of conviction behind what you’re seeing on the technicals. Does that make sense? Yeah. 100%. I think that, again, it all depends on what discipline you’re in.

You know? If I was an analyst, I would be looking at balance sheets, income statements. I’d be looking at future cash flows and trying to figure out what the what the discounted models are.

Yeah. I would I would be putting together an assessment of what I think the overall economy is doing and how can I expect the stock to perform in these different environments?

That’s that’s research. That’s, that’s investing. You know what I mean? And then how it affects trading though, I mean, you have to keep in mind if you’re in a bullish market or if sentiment is positive, that affects trading.

So it so it does there is spillover. I don’t want to say that there’s just this line between fundamentals and technicals, but as a trader, charts matter the most, but you have to be very aware of what kind of environment you’re in.

Are you in a high vol for an options trader? Are you in a high volatility environment?

Are you in a low volatility environment? How is the sentiment? You know what I mean? Like how is market sentiment right now? Where are we in the cycle? And we we’ve been talking about that right now.

We’re long in the tooth. We’re in that, like, 8th inning right now. We could argue whether we’re in the 7th inning or whether we’re in the 9th inning, but at the end of the day, we still need to be bullish.

You know what I mean? And that’s that that’s it. So one thing I one thing I would add though is, you know, putting bearish trades on in a market like this kind of makes sense, in some ways.

So you want to be balanced. Right? If you want to And maybe not necessarily as, like, I want to be heavier on the short side.

Right. So you don’t want you want to be hedged or balanced. And what I mean by that is, you know, maybe if you have I always use a basket of 10 because everybody could kind of picture 10 in their head. Right?

If you have a basket of 10, have 7 to 8 bullish trades, maybe not expecting the world out of them, expecting them to maybe, it’s going to roll over pretty hard most likely because, you know, the high the the, you know, the the further you do get along go along, usually, you know, the the the more steep the slope gaps, the more things roll over pretty aggressively.

Those 3 bearish trades will will that are that are dragging on your performance right now will help you, you know, in in a bad week, you know, if if the market does decide to roll over.

The the traders that I’ve worked with that have been the most aggressive trading both sides of the market from, from an active trading perspective.

So let’s say either day trading up to 5 days, like, within that window, which is usually what most prop traders are doing.

Prop traders are usually not investing. They’re not, you know, they’re not making a thesis for the quarter and hanging on to something for 90 days.

Matter of fact, most firms won’t want you to do that. They want you to keep churning your buying power because they’re paying for the buying power. They they want you to churn your tickets even though they’ll never admit that to you.

They want you to churn your tickets. A 100%. But the, probably the most successful guy that I ever mentioned, and I’ve done a video on this in the past, he was long and short all the time.

Now, again, the kind of market we’re in right now and this guy made million like, 5,000,000 a year as a prop trader easy.

And he actually ironically happened to be down here in my friend’s office in Florida, which is down, in Boca. He, he would owe he would let’s just use 10 again as an example.

He would have 7 if the market was long, he’d have 7 aggressive long positions, but then all of his short positions were, let’s say, 1 third of what he was eventually looking to build up to.

So as the long started to roll over, he would now be in the money and start adding to the shorts, and he’d make money on the short side as a hedge against the longs.

And when the longs pull back, he’d now be sizing up when the short stopped making money. It was just fascinating to watch. It was really fascinating.

And a lot of people could, like, I don’t understand. The markets are strong way short. And he’s like, well, the market’s ripping to the upside, and these three stocks are negative in in whatever the time frame that he was trading.

And it was kind of again, not to be disrespectful, right, but we just had this conversation before we started, John, about the difference between, trading experience versus trading from the textbook.

There is there is a separation between the two where an experienced trader can just simply see more. An experienced trader can react, emotionless if if those shorts don’t unfold. And I I had a few of them over the last couple of months.

I put on a couple of hedges that I I liked. RCL broke down after earnings. AMT broke down. I, you know, I take those trades over and over again, but the overall market just caught a bid again.

I would I would take these shorts anytime. I mean, this this thing was here. I mean, I shorted here. You know, it’s not like that’s a bad idea there, and it actually rolled over in our favor. And the same thing with the, RCL trade.

2 weeks after earnings, I shorted this breakdown, and they re upped their guidance 2 weeks later. Yeah. Shorts again. I didn’t get hurt because I was very clear to the community it was smaller size because of your market.

You’re that bullish. The professional mindset is is a small piece of a short as a hedge. It’s not an aggressive position. I would have to be crazy to be aggressively short with the way the market was trading.

Exactly. Like, I got hurt on Datadog and Google. It was the same kind of concept. They were in down trends. They were on and this is a very important concept that you said. They, they were underperforming while things were doing well.

So what one of the candidates, one of the things you want to look for when you’re trying to find a bearish trade in a crazy market like this is you want to find stuff that’s underperforming because when the market rolls over, that there’s a good chance that’ll roll over harder because, you know, they’re already not doing that great.

They’re already not kind of participating in this crazy rally we’re in. Right?

So when when you see something that’s not participating, you have to kind of scratch your head and, you can try to get into that and say well why maybe there’s news, you can get into the why, the fundamentals, but really at the end of the day the chart is telling you like you said, hey listen, There’s more sellers than buyers.

This this stock is not going up in an uptake. What’s going on? Yeah. That’s the kind of stuff you want to maybe add some bearish exposure to.

And again, small, you’re hedging, you know, you want to be at a smaller position, you want to be a little less aggressive, and then you could always be more aggressive later as things unfold.

So you take your bullish trades off when the market does start to top off and roll over like your like your friend does.

And then what you essentially does, what you do then is you take that capital and you add to a few bears. And you say, okay, well now I’m positioned a little bearish.

If the market rips higher, like in your case, you know, then you take those losses. But you made no Oh, yeah. It was it was 2 losses in a row within a week, but they were both small pieces. I was very clear about that.

It was it’s one of those things that, the language I use to myself when I’m looking for those kinds of ideas, like, when I when I’m scanning at the end of the day and usually over a 5 day rolling period, I’m I’m looking to see what’s not participating.

Yeah. Like, just in case, what’s not participating that if the market does happen to be, you know, a little bit weaker, maybe rolling over, again, we’re not it’s it’s still a 2 day pause just in front of all time highs.

I’m not saying it’s bearish. But I want to be prepared in case.

I I don’t want to be scrambling for a list of stocks that I might be looking for at the last minute. I I again, I have every single night I put out shorts. It doesn’t mean I’m trading them, but I want to be ready for it.

Absolutely. And this is another thing I think. And, again, like you said, not to knock on new traders or anything like that, but, like, you have no single trade is in a vacuum.

You know, no single trade is in a bubble. So I think when you’re a new trader, you get so compartmentalized into the idea that you’re putting your money into.

You’re saying, okay, this is a great idea. Right? This is a great trade. But it’s it’s not in a vacuum. You know, if it’s a bullish or a bearish trade, you have to look and say, well, what sentiment?

What’s where are we in the cycle? You know? What sectors are up? What’s going on here? So now I need to kind of build that basket, build that portfolio where now that idea that I have is part of a larger picture.

And And that I just want to cut you off just one second. A big clarity for everybody. When you you’ve mentioned net where are we in the cycle?

Are you talking about the economic cycle of expansion and that kind of stuff? Or are you talking about we’re up for 21 weeks in a row, and reality eventually is going to sink in a little bit.

Which of those 2 I know. Really, it’s a little bit of both, but I was thinking in terms of this the market cycle for 1 because we’re in a bullish market that just keeps going up.

So eventually, we’ll get some corrective action. So those cycles tend to be a little shorter. Right? But we’re also in an economic cycle where we’re at the point now where rates are starting to going to get cut.

Right? Now the market’s been largely anticipating rate cuts. Obviously, you know, the Fed was pretty clear this week that they’re looking at 3.

They were pretty they they they gave some clarity, which I think helped the markets. I think what really kind of drove things a little bit higher on Wednesday was the clarity.

It wasn’t so much, you know, it wasn’t so much they were doing anything unexpected or anything like that, but it was it was it was the it was the, it was the color they gave, the clarity on GDP, the clarity on inflation, and the clarity on 3 3 reductions.

And and and the same thing happened in Japan, the same thing happened in Europe and Switzerland.

So there’s been this global shift to, hey, we’re going to start raising, we’re going to start, like, you know, we’re going to you know, the market the the economies are doing well.

You know what I mean? So there’s this little bit optimism that pushed into the markets.

But We talk about that often in our community. It’s kind of hard to quantify, but this is where you have to do a little bit of reading. You have to do a little bit of I don’t want to say research, but you have to stay up to date.

And when there’s indecision, the market can’t stand indecision. Because if you’re a large player, you’re not going to be allocating money when when you’re not sure what the Fed’s going to do next.

But I think that what you said, you know, again, if I read a little bit into it, the Fed was a lot more, explicit in what they plan to do for the back half of this year, and that’s why the market reacted.

We’re okay. We’re not in the dark anymore. It all goes back to the institution.

So if you’re some money manager sitting in your Hamptons mansion and you’re, you know, you’re sitting on top of $40,000,000,000, you know, when you’re let’s say you’re 20% in cash because you didn’t know what to do.

Right? And now this person is telling you, hey. We’re going to do 3 cuts. GDP looks great. Inflation is under control.

You’re going to say, holy crap. I don’t have enough money in the stock market right now, and I’m going to underperform my competitors, and now I’m going to have to sell this mansion because I’m going to get a bad bonus next year.

You know what I mean? So that’s that’s how they think. That’s, you know, that’s that’s the world they’re living in.

So they have to put money to work. So the 10 year actually gave us some signals this week as well. And heading into this week with the Fed where there was some indecision and positioning ahead of that, then the Fed pops out.

They’re like, no. We’re pretty clear on what we’re doing. And now the money that would have been shifting into fixed income lightened it back up into equities now because of again, we got GDP numbers coming out this week.

PCE is more inflation number coming out this week. This is not the final GDP.

They have preliminary numbers. At the end of April, they come out with the Q1 this year. But there’s some more numbers coming out this week, which by the way, in case everybody doesn’t know, we actually have a, 3 day weekend coming up.

Yes. So it’s interesting about Good Friday, next this Friday, is that the PC is coming out on Good Friday, which so we’re not going to really be able to do anything about it until Monday.

But the thing is, that’s a pretty important number. The future’s trade. I believe future’s trade. Right? I think it’s just the stock market. I’m not sure.

But, yeah, with PCE, that’s that’s their that’s their preferred number. That’s the one that’s going to really There’s no point you say that because now, like, everybody and their grandmother was always, CPI, CPI, CPI is the fed.

But now now every it’s like everybody gives it the the, the the Fed’s preferred measurement of inflation is now PCE, personal consumption expenditures.

Yeah. Well, the CPI is kind of what hits our wallets. Right? So I think people care more about the CPI and then and it gets it gets the most news headlines.

But, yeah, the PCE is really what the Fed kind of looks at, and I mean, they look at everything obviously, but that’s the one they kind of scrutinize.

And, that’s coming out on Friday, so that should be that should be interesting on Monday to see how the markets will react to that, but that’s, that’s an important number.

But but on a shortened week, you know, it’s kind of I I I think we we kind of stay the same to drift a little higher. That would be my guess if I had to, like, you know, if I had to take a bet, but, I’m going to be bullish.

Well, even the even the market leader, so to speak, the one that we’ve been kind of tracking for the last, I don’t know, year and a half, NVIDIA kind of perking up now towards the top of the breakout level that we kind of stalked out.

Yeah. So it’s going to be hard to bet against the market with NVIDIA breaking out of this 3 week trading range.

Yeah. And like you keep, you know, you kept pulling up the 10 year. The 10 year just tucked neatly, but back in its range. You know what I mean? So like that was threatening a breakout too.

And and that, you know, that’s a big deal. And the fact that that kind of pulled back, you know, and the VIX rolled over. So all the I mentioned last week dark clouds on horizon, I think I used that language. The clouds dissipated.

So that means that I need to be more bullish. So for that for everybody who’s like, it’s too far, you know, I could put it on the video here. It’s too far. There’s economic headwinds right now that it can continue.

Might yeah. My answer to that is don’t be scared and trust the technicals. So don’t be scared, meaning go long, but be cautious. Obviously, manage your risk and know that you’re in the late stages of the cycle.

So sentiment is good, but they’re in the late stages. So I just want to clarify what we’re talking about before about why that’s important that the tenure rolled over.

So there’s a choice between the uncertainty of the return you would get on equities versus if the 10 year starts to rise and start right now, 4.

3 was the kind of the big number. That’s 4. 3 of what you’re getting for your money from the government. 4. 3, you know, risk free, so to speak, versus the uncertainty with the equity market at 22 week rally right now.

So that’s why it was so significant that they that the 10 year rolled over. It’s like, okay. We’re not staying there. Rates are coming down, not going up.

So money flowed out of that and went back into equities, and that’s kind of why we had the rally that we did this week on top of the clarity from the fed. Yeah. It all goes back to where is the institutions putting their money.

They have to money has to go somewhere. And if and if people are managing 1,000,000,000 of dollars, it has to go either in, equities or or stocks or for fixed income or, you know, or cash equivalents.

So and and right now the if you’re getting 4. 2, 4. 3 percent on treasuries, that’s not a bad deal. You know, historically, the last couple of years, it’s a pretty good deal.

Yeah. But if you think you could get 5, 6, 7% more juice out of the S and P or the Nasdaq or out of Nvidia or whatever, you’re going to put you’re going to put money to work.

Because again, you it’s a very competitive business and, you have to beat the guy next to you or the girl next to you. So so that there’s always that pressure. So, Chris, first, Chris, I haven’t spoken to you in a long time.

Oh, gosh. Pleasure to see you here again, and I wanted to catch up on your business. I know you got really busy in the last year or so, so I can’t wait to find out about how that’s going. But it’s it’s a great question.

Is is the Fed is the Fed talking about cutting for the sake of cutting, or is it getting to the point now where, inflation numbers, which have perked up a little bit, you know, they have they have perked up a little bit.

Inflation hot. Employment’s a little bit hot, or the last couple of ones have been a little bit hotter than expected. I think that I’ll give my answer, and then John maybe give give clarity on it, if I say it wrong.

But I think because of these other economic, events that have inflation and unemployment being just a little bit hotter the last few reports.

We’re coming into the year supposed to be 6 rate cuts. It’s already now pretty much predicted that it’s going to be 3. So I don’t know that they I I know that they said there was more clarity, but they still haven’t cut anything.

I think they’re still watching whether or not the inflation is going to get down to that 2% number and whether or not they’re going to have to leave it there because, employment is continuing to be hot.

Yeah. I think that the fed is the That you’ll never hear them say that.

Right? What they do watch is they they say they’re data dependent. So the reason why it went from 6 to 3 is because, you know, they basically saw the economy remaining kind of strong and hot, and they were a little concerned about that.

So now that things are, you know, employments, like you said, has ticked up a little bit, unemployment ticked up a little bit, but inflation is remaining somewhat, sticky.

Right? So we say it’s easy to go from 9% inflation down to 6 percent. It’s very difficult to go to to lose the last 2%.

So if you’re at 5% inflation, it’s challenging to go down to to 2%, which is what they’re trying to do. So in my opinion, they waited too long. They kept using that transitory language, remember that word, transitory? Yeah.

That was to me, that was a joke. I mean, I I couldn’t believe they couldn’t read the charts and see what was going on. But I think that and this is where they did follow the market because the market wanted them not to raise rates.

Right? So this is where they were nervous. They were like, well, this this stock you know, they they they look at the fragility of the market, and they say, well, there’s so much money sloshing around.

If we start raising rates, we’re going to hurt people. And I think they did listen to the market a little bit, and they wanted to quick, though.

I mean, isn’t isn’t like, why does the Fed and I mean, this is, like, way out their statement, and maybe this is kind of what you implying before about your opinions on the Fed.

Their job is is is for the economy, not the stock market. Yeah. But they definitely I think there’s a lot of pressure. You know what I mean?

There’s a there’s definitely a lot of pressure in in behind the scenes to, like, get it right. You know what I mean? So they kept using the word transitory, and they finally sort shoot up to whatever 8, 9% they were.

We need to do something. Right? So then they got really aggressive. They made really aggressive, really consistent rate cuts, and they had that luxury because they were they were they were able to be really aggressive.

Rate hikes rate rate rate hikes, right? They they were able to go from like 9% inflation down to like 6%, 5%. And then we gradually went down now to 2.

8, 2. 9, wherever we are right now. And that last 1% is the tricky part. So now they’re trying to get it right, that soft landing that everybody keeps talking about, they’re still behind the curve because they started too late.

So in my opinion, now it makes sense for them. And I think I think waiting is a good thing because they’re they want to make sure they get it right and they have the luxury of a good economy right now right?

Like they, the economy is doing okay. Like, like the GDP is good. And even though inflation perked up a little bit, it’s okay. Employment is really the big one. They, you know, they have a very low historic unemployment rate right now.

So as long as wage growth kind of keeps up with inflation somewhat and they’re not losing too many jobs, they can wait, and that’s pretty much the game they’ve been playing for, like, the last 6 months.

And that’s and that’s so they do pay attention to everything. I think they’ll you’ll never hear them say, oh, we we follow the stock market or what the market’s telling them to do, but there’s always that pressure.

So I think that the pressure to wait for too long sometimes is very great because nobody wants to raise rates. Right? Nobody wants to do that, but they felt that pressure. And now they’re getting pressure to lower rates.

And and and it’s like they they kind of stuck between a rock and a hard place. But I think That’s a good question. This whole rally has happened without them doing anything. Well, that’s the thing.

We went from 6 rate cuts estimated down to 3, and that’s and now if you told me like 2 years ago, hey, they they said 6 and now they’re only doing 3, what do you think the stock market’s going to do? I would say, wow.

I would say, probably get a nasty nasty correction. Right? Yeah. But it’s the economy. The economy is doing okay. So they have that lower. The consumer is supporting it right now. The consumer spending is still way up there right now.

Blah blah blah, but right now things the economy is doing well because employment is doing well. So they have the luxury to just chill out and do the 3 cuts and kind of take their time.

And I think that’s the that that’ll be the highest probability for a soft landing if they if they just take their time no matter what the stock market tells them to do.

You know what I mean? And and that’s That’s a good question a lot of newer members of the community have been asking about why why are we continuing to go up?

Like, why is there no pullback right now? And it’s because there’s really a tsunami right now of good news, the economy, employment, GDP numbers, and then you throw AI on top of that and the Fed discussions around.

We are cutting. It’s just a question of when. So that so even though the Fed hasn’t done anything yet, the whole conversation is around we we are planning to.

So that again, I’m going to put airports. There’s no bad news out there right now. Yeah. And, the market tries to get ahead of itself most of the time. So, you know, those 3 cuts are already priced into the rally.

So keep in mind if there’s only 2, you know, or if, there’s a big change in unemployment or if inflation, you know, spikes up for some reason, this could quickly unravel. But you have. So we got GDP coming out on Thursday.

So that’s that’s important. Obviously, inflation numbers coming out on Friday even though the market’s closed. I think that you’ll start to see some of the market leaders other than AI stocks breakdown before that happens.

There’s some smart people that you know, the market discounts the future. It doesn’t wait for the news to come and be like, hey.

Let’s all start hitting the bid and get out of this thing today. Yeah. Sometimes what’ll happen is you’ll start to see a pullback and people and people will ask the same question in reverse.

They’ll be like, well, why is the market going down when everything’s great? Well, it’s because everything’s priced in, and there’s just no more buyers left.

That’s that’s a really important phrase that a lot of people, don’t really understand. Like, it’s not that it’s bearish. We ran out of buyers at those at that level. Yeah. Nobody’s there. Everybody’s in already.

And that’s that’s something that could happen. I think that’s a more likely outcome the next couple of weeks. You get sideways to slightly down and not because we’re getting a corrective action, but because there’s just no one left.

Now we still have a little bit of juice. There’s still some breath left in the market. There’s places to go. Yeah. That certainly picked up a little bit. This is the last 5 days.

Yeah. So, you know, there’s there’s a but eventually just as the normal buyers left. Everybody’s kind of piled into equities and, okay, what’s the next trade? What’s the next, what’s the next phase? What are are we going to get?

If you get in now, let’s say you manage to squeeze out another 2, 3% in the stock market or in individual names if you’re a money manager and you actually do the homework and you find the names that, like, you know, you you outperform, let’s say, 6, 7% in the next couple months, you outperform treasuries, then what’s the next trade?

You know, the next trade will be okay, I’m going to pull money out and go into treasuries, and that’s what’ll happen, you you get this kind of that’s why charts don’t usually go straight up, they kind of ebb and flow, but, sometimes it takes a little bit of time, you know, and we’ll see what happens with the Nasdaq.

The Nasdaq actually, out of all the sectors, I think the Nasdaq was the one that kind of, you know, it was it was up last week, but it it didn’t really break out like the S and P did, which was interesting.

Up until this week, they were actually all neutral for the month.

And that’s kind of that’s kind of, convincing that I think we still might even have a little more room because if the S and P is the one leading, think about that. It’s 500 stocks. Right? Just from a math standpoint.

Right? You have 500 stocks that are go that are that that perform basically a a a a high base breakout basically, and so did the Dow. The Dow had a high base breakout, but the S and P basically that was basing for a while there.

We finally broke out on Wednesday and we pulled back Thursday and Friday. So now we might pull back more, but it’s still that’s an uptrend to me, and and that means that we have to be bullish.

So that so these 5 days these 4 days here are are screaming to me a little bit now where we had these 2 days of rallying on below average volume.

We made a new breakout to all time high that reversed on light volume, and then the next day, follow through on heavier than average volume.

So that’s a little bit of an indicator to me. So if I kind of look at the last 3 weeks, the heaviest volume has been on the bearish side of the tape, and the bullish rallies have been on lighter.

So from a tape rating perspective, going all the way back to what we said before about my early days in Nasdaq where we watched the market price action and volume like a hawk.

I’m not going to say that’s, bad as much as that’s telling me the tape changed a little bit. Just, like like we mentioned earlier, just less buyers up there. It doesn’t mean that we’re going to roll over or we should get really bearish.

It just means it’s less less people to care, less people that are going to put money to work there. So if I was managing my office, I don’t know if you did the same thing too, John, when you were managing.

When I see these kinds of things, we have premarket meetings, and we spend a lot of time saying, okay. Are there pockets of opportunity we can reallocate money to?

If not, we have to be aware what we just pointed out in the charts. And I say, we could still be long, but I don’t want anybody being long with the same kind of aggressiveness you might have been a month ago.

Yeah. I would I would I would kind of repeat what I said last week and say, don’t be super don’t be stepping on the gas up here.

You know, you, you, you want to be bullish, but you want to, you want to pick your spots definitely filtering and sector selection and finding those opportunities. This is where filtering is so important.

Don’t be trading the same 5, 10 names. You know, there’s some there are pockets of opportunity. They’re becoming more challenging to find. And that’s that’s what our job is. You know, it’s important to see the week and the day.

Yeah. It’s a huge difference, and there are some areas where you could say, well, some of this stuff might have pulled back. Maybe there’s maybe it’s going to take a final, like, higher, and those are the ones we have to try to find.

And that’s that’s the challenge. And if you can’t find anything, you could sit on your hands. You don’t have to have all your money in the stock market.

You could if if if it’s really becoming challenging to find an opportunity of an entry point for a bullish opportunity, I’m sure there’s other institute there’s institutions out there that have an exact same problem, and they’re like, you know what?

I’m just going to maybe not do anything this week, and then you’ll see kind of a boring week.

You’ll see a week where we just kind of go sideways, maybe down 1% one day, up 1% another day, kind of in a trading range with the day traders take over. That could happen too.

I would actually love for everybody to internalize what you just said because I I I definitely understand that we all get excited when we learn how to trade and we want to be involved because we just learned something and you want to apply it and can’t wait to make money.

But the reality is in the long term, there are certain situations that are simply better or worse than others.

So, yeah, you’re kind of matching them out, and you have to consciously decide if you’re going to trade and, what that means for how much risk you’re willing to take based on the quality of the market and how close you are to a good entry at that particular moment.

And if if if if you do the homework, if you do some, research at night and and you start to dive in a little bit and I’ll give you for an example. Like, this list heading into Friday was a 105 names.

So you start to notice these things. It is your responsibility as a money manager of your trading account to recognize these things and adjust your allowed risk based on the way it’s changing. And it’s okay not to trade.

Yeah, absolutely. I haven’t been I haven’t felt or wanted to be bullish since December. Mhmm. Wow. So that gives you any kind of indication. Like December, we had, you know, going into year end, we were really strong.

I figured that, you know, Santa Claus rally, I was excited about that. I was, like, very bullish. I was, like, this is going to be a really good, and I was I was pretty right about that.

Right? I mean, it wasn’t about being right or wrong, but it was, like, that’s what the markets were telling me. But then January came along, I figured we’d pull back.

I was more bearish than I should be because I was thinking of the January effect and historically what happens and everything else. And ever since then, we’ve just kept going higher.

So I eventually had to kind of shake that off and say, I need to be bullish and I need to stay bullish, but I don’t feel good about it. But it it’s scared is what I tell people. Like, don’t don’t be scared.

Just, you know, be bullish, but do it in a cautious way and do it in a way where you know where you are in the cycle and and you and you have a couple of bears in your back pocket like you said, where you have a watch list and you’re like, okay.

This is what I’m going to load up on if the market gives me a different picture next week.

And that’s So we we have been getting a lot of questions about, obviously, some AI fuel boom as well, and a lot of people asking if this is what the trading the dotcom boom was like.

And I would this is nothing what the dotcom boom was like.

Not even close. It was The strength of this rally is amazing. But just to give a visual, and this this is what my experience was, this kind of price action was what the dotcomboom was like on a daily basis.

Stocks rallying $250 going down, $150 before lunch, rallying another $200 at lunch. Across all of Nasdaq, this is limited to just a small group of stocks that are going crazy like this.

Knew it’s a day trader’s paradise. Yeah. And, That was the intraday. That chart that you showed you with daily charts, that was intraday I’m talking about.

Yeah. It was cray it was crazy back then. And, yeah, it’s definitely not as crazy as it was, but I think that someone said this to me just now speaking to a friend of mine who he’s the CFO for a very large money manager.

He’s one of my best friends. And he said and I and I he didn’t make this quote up, but he he might it came from somewhere. But history doesn’t repeat itself, but rhymes.

So, you know, there’s always that expression history repeats itself, otherwise you destined to repeat it, you have to study your history, but he says, you know, it’s never exactly the same and I think that’s so that resonated with me so much because it’s never the same story but rhymes, there’s always, you know, so, you know, with the dotcom bubble, you know, in in in 1998, 1999, and now you have the AI bubble.

And, you know, what’s going to be the next thing? You had the what did you have?

The meme stocks a couple of years ago, right? It’s always something. I mean, it rhymes. And the charts look the same. There was tulip bulbs in 16/37. I had that thing back there. I had the big tulip thing, and I’ll show it to everybody.

It’s always something. It’s, you know, history or history doesn’t repeat itself, but it rhymes. People that are behind it and and all the money that’s pouring into it, that could last a really long time.

And and it it could it could really get out of control. I’m talking about not AI itself. I’m talking about investing in AI. Right? Or trading in AI. And then, you know, you also have Bitcoin and the cryptos. You know what I mean?

It’s the same it’s the same thing, just a different it’s just a different story. It’s just a different so just know where you are, you know, there’s there’s obviously valuations that make sense and valuations that don’t make sense.

And So I I could tell you from somebody who uses AI pretty much every day, there really is not a commercial application for you yet.

The same way that the Internet was exciting, and all you had to do is have a dotcom behind it and you you you people would be throwing money at you.

There isn’t a commercial application yet. There’s still a lot of red flags where literally every one of them says, beware of hallucination.

So there isn’t the degree other than making search engines easier to use because it’s just giving you the information instead of telling like, it’s summarizing the information.

That’s the part that’s going to be really interesting to me is when there’s a breakthrough where it’s it’s kind of used as an everyday thing and it works all the time, which is not working all the time right now.

So the the the hype behind it is the expectation of what it can do.

It’s not even close to being there yet. See, the expectation is probably that it’ll make search engines obsolete. It might even make many aspects of the Internet obsolete.

And it might make a lot of companies obsolete and and and and and it it’s your and it’s it’ll replace it with, you know, with technology, like you said, it’s reliable and that you could that you could really use.

And then it’ll help make companies more efficient.

And then there’s a fear, there’s always the fear of it. Obviously, you know, the, the conspiracy theorists and the people who think it’s going to take over the world, and there’s always that too.

And I think there’s a legitimate concern there if there’s if there’s some sort of hack or if there’s some sort of evil type player that creates an evil AI that does something.

There’s so many scenarios where it could be used for harm. So I think there’s a lot of, there’s a lot of question marks still, and it’s still for early stages why people are getting excited about it.

But it it’s getting hyped up, and it’s it’s it’s becoming a little bit of a bubble. So Tony’s got a good question here.

The lower rates meant there is more demand for bonds versus stocks. Well, usually, it’s it’s complicated because it bonds, you have to separate. So bonds, you’re talking about corporate, so you’re talking about treasuries.

Right? That’s one thing you have to kind of think of too. So I’m assuming, like, you’re thinking about treasuries. Treasuries, like you said, is like a risk free yield.

So there’s risk on this world and there’s risk off in this world, so sometimes people want to bonds when there’s risk off, when people think that the market’s getting inflated or when there’s a bad news or when something happens.

What happens is the yields go down because the demands for treasuries go up. So bond so bond yields and bond prices are like a seesaw. So bond prices, go up because people pile into them that’s causing demand for bonds.

So people are willing to take a smaller yield just to get in, just to be in a fixed income security that’s risk free. So that’s how the whole thing works.

It’s really about risk on and risk off. So, you know, there is there there’s that. So sometimes, you know, it doesn’t necessarily matter what the Fed does on a day to day basis, it’s it’s what people are perceiving the markets to be.

So there’s the fed funds rate which kind of sets the yields for everything, but then there is something called a spread between the fed funds rate, which is what the fed does and what treasuries are actually yielding and what mortgage rates are actually yielding and what corporate bonds are actually yielding.

It’s all about perceived risk versus reward.

That’s kind of a nerdy answer, but that’s kind of how Yeah. It’s it’s not as simple as the yields are higher, but it’s close. Yeah. Okay. So what we’re going to do now, I’m going to start to dive a little bit into some ideas for next week.

Obviously, reminding everybody, with your swing trades. Super important to know now, we just actually mentioned this. The market’s closed Friday, but there’s big economic data coming out Friday.

So you don’t want to be scrambling or on the golf course Friday and, where, you know, wherever you live, and all of a sudden, no, data comes out 8:30 Friday morning and say, I didn’t know about that.

So everybody needs to be aware of that if any positions that they’re holding into Friday.

And, actually, we, we actually got out of a position that, was kind of dancing right around our entry into the Fed, last week. I actually got out because it was kind of, like, right where we got in.

I’m like, I don’t know what the Fed’s going to do. They actually ended up rallying on us after that. So be aware. I don’t care that rally after the fact. It was, like, right on the bubble of where we got in.

Be aware of that because, again, John, something that you had brought up, which I made it to a separate video about, It’s kind of related to earnings, how much the, the option market’s expecting, the, the announcement to create in volatility.

Yep. Going into Friday, are you on the bubble of holding a trade, and would an adverse move upset the card for you, if if the PCE data that comes out on Friday is negative? Don’t leave it out on Friday and not able to place a trade.

Make that decision by Thursday. I’m going to have cash on the sidelines. I’m going to be long, and I might still have some bear bullish trades going into Friday, going into the holiday.

But if let’s say let let, let’s say out of my theoretical basket of 10 stocks and let’s say a couple of them are close to my target going into Thursday, going into, like, going into Friday, going into the holiday, I might be inclined to take those off a little early just because I’m derisking.

So there is a derisking factor, when you I’m not going to let it make be the only decision like if if if a stock, if if one of my stocks is in an uptrend, it’s doing fine, but it’s very close to its target, the risk reward profile no longer makes sense going into the weekend.

Like, if I have only one more point to my target, let’s say, and I I I already made, let’s say, 5 points.

Right? I’m just giving, like, a theoretical example. What’s the point of holding on to that name over the weekend when there’s uncertainty when I’ve already made 85% of what I should have been making?

So that’s you have to kind of have that mind, and you have to kind of look at your whole basket to think about that. Now conversely, if I get into a bullish trade on Wednesday, let’s say, right, and it does hasn’t done much.

It’s kind of still sideways. It’s just maybe up a little bit. I’ll hold on to it over the weekend. I’m not going to let it shake me out either.

So that’s that’s how I kind of look at it, and same thing on the bearish side. If I have a bearish trade that’s working out, I’ll look at it and say, well, if it’s a big surprise, it might surprise the upside.

So it’s the same mindset, like, how am I am I kind of close to my target going into the weekend? Should I start derisking a little bit and just be more in cash?

So I just want to John, I don’t I don’t want to speak for you, but for those of you that don’t know how John trades options and teaches options in his community, he keeps mentioning basket, and we’ll use 10 as an example.

Yeah. Grading the market and then balancing the portfolio over that period of time with longs and shorts.

So he’s not necessarily dependent on one trade working out. He’s balanced with his options over a group of 10 based on again, I’ll just use super round numbers.

70% of it long, 30% of it it short within that 10. So we’re managing the portfolio of that basket, not the one trade that absolutely needs to work out.

Yes. I never I never put cadence on 1 on on one trade. I don’t care about 1 trade. I I look at I look at things in holistically as a as a basket that and that’s maybe that’s from my money management background.

I just look at things that way, and I I never think one trade should matter from a risk standpoint as well as a psychological standpoint or whatever, and that’s kind of how I look at it.

So even if let’s say I only have let’s say I have a really small account. Let’s say I have $5,000 and I have SPY call options. Right? Let’s say I’m not even in any stocks. I’m just in index.

Right? Because I’m somewhat bullish going into this week a little bit. I think it might go up another percent or what have you. Chances are if I get that 1% going into Thursday, I’m going to probably just be in cash on the weekend.

Right, just to kind of refresh and see what happens, right, so managing a small basket isn’t that much different than managing a large basket, I’m just saying I have less choices to make because I have have smaller account size, but I’m still saying okay well I kind of positioned myself going into the week a certain way, and now I reach that level, I’m 85% there, I’m going to take that off now.

But again, if I if I’m flat for the week, I might just keep it on over the weekend because I’m not going to let one thing sway me one way or another.

So there’s there’s a there’s a lot to unpack here because not only not only grading the market and getting down into sector specific longs or shorts, then there’s so that’s just the raw number of split.

I’ll I’ll just get to you in 70 30 because it’s easy to separate. There’s 70 30, and then there’s also the level of aggressiveness within the 70 and within the 30. So we might we might be 70 30 bullish, but then we might be like, wow.

That one sector, for example, right now, energy, which has been on fire, even though it’s within the 70 30, we might even have a bigger concentration in that sector, which is a part of the 70 because of how far it’s outstanding.

So our job, like, higher levels of trading is making those distinctions.

It’s not just I want to be long or short and everything’s the same. Yeah. Absolutely. And also with options, it gets even I don’t want to use the word complicated because I hate saying options are complicated.

Once you option. Once you, you know, once you once you get once you get into a groove, it’s really it’s really straightforward, but basically, level of aggression to me means what strategy do I use?

So if, if right now I’m somewhat bullish, but a little bit like, I don’t think we’re going to go too much higher.

That’s kind of how I feel. Right? Oh, it’s what the charts are telling me. Right? Based on what’s happening, I’m going to have probably have a lot of vertical spreads on.

I’m not going to have, like, straight calls. I’m going to have, like, vertical spreads, maybe a few diagonals, but mostly verticals where there’s defined risk, defined reward.

And if the market was to roll over for a couple of days because of bad PCE number, it’s not going to really affect my vertical spread that much because I have a short leg and a long leg.

Right, so my my long leg is my anchor leg, I obviously want the stock to go up, but I capped my upside, so that short leg will kind of help me handle the bumps or handle the volatility, so, you know, so level of aggression is a very important point that you just made on how aggressive.

Now if you’re a stock trader, the only way you could really handle your level of aggression is position size and how many names you have on and what groups or sectors you’re in and how weighted you are in each sector.

So if I was a stock trader, I would have decisions to make like, hey. I I think that, you know, communications kind of did really well last week, but I’m going to pull back a little bit going into the weekend.

I might be thinking of individual situations like that a little more, but I would definitely pare back my size if I was a stock trader going into this weekend.

I would say, you know, why has to be finishing actually pretty pretty good across the board. Yeah. So I mean, you know, and not because I’m so scared of a PCE tape. I’m just I just know that we’re in late stages too.

So any any slip up when you’re when you’re in a late stage kind of rally, any any slip up will probably be a little bit exaggerated. You might get more of a deep sell off than you would have had an early stage uptrend.

So what what I’m excited when I was on my trade when I had my trading floor, when everybody’s on the same side of the boat, you have to start to be really on top of your trailing stops and your position size.

When that goes down fast. Yeah. It’s a great analogy.

If everybody and I feel now everybody’s on the long side of the boat, so that means that you have to be low you know, as a stock trader, you have to be more cautious going into the weekend and not having too many things overnight maybe and just seeing what happens on Monday.

So just to really give everybody something to think about over the weekend, because it’s higher level stuff. Not complicated. Just more stuff to think about. You know? It’s not just a question of do I want to be a buyer in which stocks.

When you elevate your thinking and start to make more distinctions, you’re now talking about what percentage, and I think 10 is a perfect example because even on our side, we use something called 10 perfect trades.

And I explained it in a basically, in a way, if we make 10 perfect trades, we have no idea which of those 10 are going to be profitable or negative.

But if we do our job with recognizing which one’s in better positions, making sure our downside over 10 trades, we’re going to be fine, which is kind of the same thing with managing a basket 10 right away.

It’s the same thing. We’re just getting there a little bit a little bit in duration. Yep. Or if you have more capital, like, that’s a big prop trading thing too, and we kind of joke around about this.

A lot of retail traders wouldn’t necessarily know this. But if you give a prop trader half a $1,000,000, they’ll find a half $1,000,000 worth of ideas.

You give that same trader a $1,000,000 the next day, they’ll find a 1,000,000 house worth of ideas. That’s so true. It’s so true. It’s really, are you are you tying it up in the best ideas?

So it’s not even it’s just not a million across the board, are you heavy someplace that’s better? So thinking that through, I want to give everybody something to think about over the weekend.

Are you using the research and doing your own research, even just something as simple as this, and really thinking about, is there some place I could be a little bit heavier versus I just want to be a buyer?

That’s probably the easiest way to say it. Yeah. 100%. And, right now, it’s 5 out of the 10 sectors are are really an a a plus, a a plus.

And then we had, real estate looks like bad. I would say if I’m looking for bears, I would probably look there. And communications was the biggest surprise, I think, last week. Up to the top of the list, actually.

That was a very big mover. And, yeah, I didn’t get a chance to really dig into it and see why, but I think it just, it was just, lagging and it just decided to poke its head back up to the leadership position.

Consumer’s a little disappointing. But yes, I’m going to add some bears. I’m probably going to look in real estate and consumer.

The financials look good. Communications looks good. So yeah. You know, we’ll we’ll see. Financial had one bad day on Friday. It had a nasty pullback. That’s true. So we’ll see profiting though.

JPMorgan was up, I think, 5 days in a row right after they got that $350,000,000 fine. See, that’s an example of when you’re on one side of the boat and and something pulls back, it pulls back pretty hard. There was no let up.

Look at look at that candle, You know? That’s that’s a no let up candle. It it actually made new highs, and then it pulled all the way back. So here’s, here’s the communication stocks that kind of rallied over the last week or so.

Google is obviously, working its way back into the conversation with the news that came out about being put into iPhones. Yes. Meta is still hanging out near all time highs. Netflix is near all time highs.

Disney, after consolidating for a couple of months, also broke out again. So there’s some big dogs here, including Netflix. They’re these are all still pretty close to optimal entry even with everything we just said.

Yeah. I think out of that group, I like Netflix. And, yeah, that’s probably the one in that group that I’m going to look at. But, yeah, there is there’s definitely pockets, but, again, it does become more challenging.

I mean, take a look now. Technology is a little bit, like I said, it was one of the laggards, believe it or not, but Microsoft actually looks okay.

It kind of showed up on my screener. But, basically, you know, on the short side, there are there you know, there’s a couple.

You know, Microsoft, you know, it it’s one of those where it was kind of sitting around sideways there for a while, and now it’s starting to it it kind of broke out a little bit.

It had it it had some nice price action last week compared to compared to everybody else in that space.

You know. That looks almost like an s and p chart compared to a NASDAQ chart. So that that’s, you know, that that had outperformance compared to other technology names.

I believe they’re the most valuable company in the world at the moment. Yes. It changes weekly and we’re talking about trillions, which is crazy. It is crazy. There’s more than $1,000,000,000,000 company now, which is nuts.

NVIDIA made a $1,000,000,000,000 since January. I think there’s, you know, there’s definitely I’m going to show you a bearish trade because we keep keep talking about bullish stuff.

Look at GMED, g m e d. I just want to clarify this. It’s not only having longs and shorts when the market’s unsure. It’s I don’t want to put work, John.

Maybe you can explain a little bit. It’s not only when the market’s unsure. I missed it. What was the question? I missed it. Robert’s saying, the number of bullish and bearish trades you have based on market conditions.

So right now we’re bullish, which means you should have mostly bullish trades. Right? If I was mostly bearish, I would have mostly bearish trades, so it’s not about being unsure. We’re we’re never a 100% sure. Right?

So you have to kind of you do what the market’s telling you to do and rely on the technicals and say right now the market’s bullish, but it’s kind of long in the cycle which means we need to be more cautious, maybe a little bit smaller in position, and have a few bears in your back pocket, that’s the strategy, but that’s that could change if things roll over next week, if PCE comes out and technical stuff to fall apart, we start going through moving averages, guess what I’m going to do?

That 10 that 10 theoretical basket’s going to quickly go from 7 bulls to 7 bears or maybe 5 and 5 or something like that.

So I’m always shifting. Always shifting. So with GMED, this is kind of in the middle of what I call, like, a little bit of a bear, a bear rally.

It it kind of poked its head up close to its moving averages at a converging downwards. So this is, this is kind of an not a really nice looking chart.

If you if you’ll notice, they’re they’re crisscrossing. The the 20 is kind of about to crisscross that 50. That’s a bearish signal, by the way, that it that attracts more sellers.

And, you know, I would like to see it kind of, drift its way lower. But again, because markets are so bullish from a strategy perspective, I’m going to do something like a vertical spread where I have defined risk and reward.

But those are, you know so there are bearish situations out there to look for too to kind of balance out your basket, like I said.

But Microsoft looks good on the bullish side, and, like, Disney, like you mentioned, the communication stuff, Netflix.

Let’s yeah. I mean and also basic materials is a pretty decent sector too. That was another one that I that I really liked.

I was I I didn’t get into this trade, but I should have. DuPont, DD, that was one that had a high base breakout as well. As you can see it based, if you look the last couple of days, it kind of based and broke out.

So that was one that I kind of missed. But, I mean, you can get over 77, 78 for the next move. There’s a lot of sellers up here. Yeah. But, yeah, it could it could get up to 78 if the market, again, if the market kind of helps it along.

If if the markets go up, it might drift to 78. So not expecting much from it. You could do you know, even if it pulled back on Monday, you can do, like, a 74 call option and then maybe have a 78 target.

So sell a 78 call against it. This way you don’t risk too much. I have a couple of, stocks pausing near new breakout levels.

Actually, like PGR heading into next week, it kind of it didn’t rally and break out with the market, but I love the way it’s stair stepping up. The the importance you’re looking for a breakout over 208?

Yeah. The insurance names are really good. But, yeah, I don’t have too much I’m looking at. Those are like, those are kind of like the the probably health care also would be a little bit bearish.

You know, if I if I had to, like, kind of do a screen, I’m not saying you should be bearish on health care, but if I’m going to be screening for stuff, definitely in health care, you know, I’ll I’ll be looking.

More, you know, more of a sideways to down is, t a tech, t e c h.

I don’t I’m not I’m not a fan of biotech companies because they could be very volatile, but, you know, there’s Johnson and Johnson go back to your health care, sitting at support and inside candle looking for a breakdown here for next week?

Yeah. Now if you think about something like that, think about how much the market has performed over the last couple of weeks and look at Johnson and Johnson. This is, you know, relative underperformance is what we’re talking about.

So these are the names you want to have in your back pocket or maybe even have a little bearish exposure to, as we get into these later stages, because these guys might might break down even more, if the market completely breaks down.

So we did we did have a call last week. One of the members of the community actually called out Abercrombie and Fitch, and we’re talking about how hard this pulled back.

And I had mentioned that I believe it was over here they were looking at. I said my target on this would not be new highs.

My target would based on how strong it that’s not a normal pullback, especially considering what it did. It actually said my target would be back to there and be getting out. Yep. It it kind of made sense.

Actually, it might even be with both of these candles here. You can see it pulled back a little bit. We kind of have something lining up similar to that in GIS right now, after earnings came out, which is absolutely amazing.

That’s great. Yeah. Not a big dollar move, but, I’m actually looking for this to punch back up towards that 74, 75 numbers. So maybe risk $2 to make 5 something along those lines. And that’s a defensive name.

Right? So that would be General Mills. So that would be, you know, that could definitely happen if, even if markets were to sell off, that might be something people pile into because it’s defend more defensive tone.

Same thing with health care too, though. So you need to be careful. Like, I mentioned Johnson and Johnson.

If the market really if there’s a real sector rotation, you know, Johnson and Johnson might catch a bid because it’s it’s technically, you know, health care tends to be a little more defensive, but that would be like if the whole market shifted, you know.

Other than that, it’s showing a lot of relative weakness.

So there’s a lot of, I like second tier names because, you know, they are less popular and they tend to move. You know, they they tend to under you know, if they underperform, they’ll continue to underperform.

Perform. That’s why I like these weird, kind of not weird, but obscure names like the one I just mentioned, g med and and t e c h. Another one that I’m looking at is, this is all healthcare, ISRG.

Now this one I’m looking at more on a sideways kind of trade, look it’s gone absolutely nowhere, it’s in an uptrend, right, but this is something where if you’re expecting the market to do nothing, this might be a sideways play from my options traders, you could do a butterfly on something like this where you just expect it to stay where it is.

So you just basically have a 195 or 197 target on that and you and you put together a sideways strategy where you just melt down the clock basically.

A little bit of a retest, so that might be a good entry point, you know, but you want to wait for confirmation, I would say.

Right? You want to see if it you don’t want it to completely fall apart, you want to make sure it has a little bit of support.

So to me, Goldman, based on that chart, it’s a wait and see, to see what happens Monday or Tuesday to see if it kind of confirms back to the upside. Do you read about the, Chipotle 50 to 1 stock split?

No. But, a stock split, by the way, obviously, doesn’t matter as far as market cap, but it it doesn’t affect the value of the company. But there’s always a psychological thing. It does attract more buyers when there’s a split.

So that that could be, you know, that that Back in the nineties, I don’t you ever heard of Wayne Cook? No. He, he was a really popular financial guru back then, mostly in real estate, but then they started doing stuff in in, in stocks.

And, there was one strategy that they were selling the a crazy for years, which was, selling puts on stock split companies.

So it kind of matches what you were just saying. But instead of buying it, basically, they had this entire strategy of every time the stock splits, sell the puts.

That’s not a bad strategy because what you’re dent what you’re essentially doing is giving yourself an edge to the upside. You’re saying, you know what? The worst is over.

And I’m and I’m buying if I’m selling a put, I’m assuming it’s a way out of the money put where you’re giving yourself some latitude for it to go down even further. And the price you wanted if it did go down, you got put out.

That’s the that’s the real thing about selling naked put what I call it naked, but cash secured puts is you have to be comfortable in owning the stock, and that’s that’s what it comes down to.

So nothing wrong with selling puts, you can sell all the puts you want in the whole world, collect all the premium you want, just be happy owning what you end up with, and that’s so don’t oversize, don’t be greedy, don’t be premium happy.

That’s the advice I give everybody. Giving that advice to my brother right now because he’s managing his IRA, and he’s like, what should I do? What should I he’s always trying to do something, And I’m like, listen.

Do you really want to own, like, a 1000 shares of this thing? You know what I mean? And and it because the premium might be juicy. So just be careful, you know, that’s that’s what it comes down to.

That’s a cool strategy though because it kind of it gives you a little bit of an edge, you know, you’re thinking, well, if it’s splitting, it probably will not go much lower because there’s going to be some buying interest.

Mhmm. So it kind of makes sense. Yeah. I’ve I’ve just thinking about to make myself sound a little bit old, I wore out that cassette on my Sony Walkman.

Oh, wow. So, anyway alright, everybody. Let’s, let’s call it a meeting. I will have new picks and updated research for everybody by email, and I’ll post it to Discord, within the next couple hours.

Again, market is closed on Friday, so be aware of that really thing for your swing trades or any positions you have because there is economic data coming out on Friday despite the market being closed.

So we have GDP. We have PCE numbers coming out this week. And, also, it’s going to be fun to watch what I pointed out there on the heavier volume on the downside in the SPY for the last, 3 or 4 weeks.

That’s literally the definition of of distribution when you’re in a trading range and you start to see more heavier above average volume during that box.

It’s not all on one day, but we’d like to see it over a 20 day period. It’s something to notice. Absolutely. So we’ll see what happens. It should be kind of interesting.

And, you know, again, you know, this going into the weekend, just be a little bit cautious, be bullish, but, you know, there there’s just well, we’re in late stages, so there’s no reason to to be stepping on the gas here.

You know? Alright, everybody. Have an awesome weekend. Thank you so much. John, I will speak to you soon. Thank you again. Have a good weekend, everybody. Take care. Take care, everybody.