Stocks were a bit spooked by Halloween, does anyone have the phone number for the Ghostbusters? It was a busy week of earnings with 22% of the S&P 500 reporting and 14 of the top QQQ names. The good kids were busy selling puts on solid companies that gapped down after earnings.
Even though this week’s market wasn’t as bullish—SPY was down about 2% with our second consecutive down week—we’ve had quite a nice run with 6 of the last 8 weeks being bullish. It’s normal to have some breaks; nothing goes straight up.
Did you notice how SPY bounced right off the 10 EMA in the image above? Moving averages are a key indicator for me. If you want your charts to look like mine, you should check out my free trading guide on setting up moving averages!
As for the QQQ, tech remains in a third week of indecision. Tech just can't break through 500. Notice the expansion each week?
Although this week was more bearish than the previous two dojis, we can thank GOOGL and AMZN for their nice earnings, which kept the QQQ above the 10 EMA.
So far, SPY and QQQ are bouncing where they need to, briefly touching the 10 EMA where buyers stepped in.
We have a huge week ahead with the U.S. election followed by Jay Powell and the Federal Reserve meeting.
I have no idea what the election will do to stocks. I've read both bullish and bearish cases for the market in the coming weeks—the truth is, no one really knows. The wall of worry in a bull market is a real thing, that we have to guard ourselves against. Less speculation, more blocking out the noise and executing our plan with logic not emotion!
I’ve positioned my trading account in a fairly defensive way. Indexes are near all time highs, VIX is spiking, gold is high. Lets just be careful!
I have some short puts on quality companies I don’t mind owning at lower prices. If we pull back, I could get put shares, and I would sell calls. If we keep moving higher, these puts would close for profits.
No matter who you want—or don't want—to win the election, I hope you go out and vote. That’s as political as I’m getting here.
Bonds are acting really strange since the first rate cut. TLT ran nearly straight up into Jay Powell’s announcement that he was cutting rates, followed by a decline.
We have an obvious break down in the weekly trend line, TLT has pulled back since the rate cuts.
TLT's price action this week looks like he’s going to raise rates this upcoming week, but I don’t think that’s going to happen. Neither does the market—as you can see from the CME FedWatch Tool:
There is actually a 98.9% chance he's cutting by 0.25%. It seems the bond market is suddenly concerned about the federal deficit and spending as a new president is elected.
If you're already in TLT, practice your holding muscle. If you don't have a position in TLT, why not start a pyramid to begin picking up some shares? I drew some lines on the chart above.
This is a great way to add some diversification to your account if you're only in equities. I encouraged two coaching students to consider adding some TLT to their portfolios. Of course, we could see a pullback on Tuesday-Friday, but what if TLT bounces and you didn’t start your position yet?
I had a busy week of coaching students every day! What I’ve noticed is that regardless of experience level, so many of us have the same limiting beliefs, fears, and dreams for our stock portfolios (perhaps our personal lives too).
If you want to be a successful trader/investor, stop comparing your account to other people’s. Comparison is the quickest way to feel like you aren’t enough. If you're going to look at other people’s progress or success, use it as fuel to improve.
The cool thing about my Inner Circle is that I can extract some of the key lessons from my 1:1 coaching and apply them to everyone. Here's a sneak peek at the members only page:
If you haven’t checked out the blog I posted earlier this week, I’d encourage you to read it so you don’t let the daily P/L of short puts or covered calls impact your trading.
I tell people to hide their account's P/L and instead follow their plan, but I'm not naïve enough to think most of them watch it daily. Inner Circle members received a video this week showing how I make put sales even more passive. I don’t even have to look at my broker unless I get a notification that the GTC hit or an alert that it’s time to adjust.
Trading isn’t that much different than most tasks; it’s important to build a routine and a plan so you are successful. Once we get into a routine and have a plan, we’re almost guaranteed success. So start thinking about how you can build a routine around trading the same way you have routines for your kids, your job, and even your hobbies.
The more structure and logic you add to trading, the more natural it will feel. Inner Circle members, check out the 40-minute YouTube video I posted. Although it’s not as tailored as 1:1 coaching, you get insights and takeaways that some of my coaching students had this week—all for the price of a cheap cup of gas station coffee!
Have a great week. Get out there and vote, even if you think your vote doesn’t matter. Keep calm, keep trading, and try to see the good in others regardless of the things that divide us. We can all agree that making money in the stock market by clicking buttons on a screen is pretty freaking cool!
Happy Trading, Good Kids!
-$Maxwell
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