Today, we’re opening up the mailbag and seeing what’s on readers’ minds…
I normally only respond to feedback questions on Friday. But it’s been a few weeks since I’ve answered emails. And, since I was stuck in meetings for most of the day yesterday, I figured I’d avoid commenting on the stock market today and instead respond to a few recent emails.
So, here goes…
Jeff, Thanks for your great work this year. You help me stay sane and keep from selling through these recent months of market turbulence. Thanks for your spot-on, real-time analysis – absolutely excellent!
You recently mentioned that you trade futures overnight. I am interested in learning about the S&P futures market, what it is, and how it impacts the regular stock market. It’s difficult to find this information online. Any resources you can recommend?
Hey Justin. Thanks for writing in.
One of the things I’ve noticed over the past few months is that wherever the S&P 500 futures are at 2:30 a.m. my time (Pacific Coast), that’s often about where they open at 6:30 a.m. So any fluctuations in the meantime often provide a chance for insomniacs to profit.
You don’t have to trade futures contracts. SPY starts trading in the pre-market at about 2:30 a.m. If your brokerage firm allows for extended hours trading (most do) then there’s a pretty good chance to trade the pre-market moves.
Wherever the S&P is at 2:30 a.m., I look for a 10 to 15-point move away from that level and then bet on a move back towards it.
It won’t be that way all of the time. And, since I just mentioned it, maybe I just eliminated the future of that trend continuing. Who knows?
It has been my experience, however, that the computer trading programs really don’t kick into gear until the stock market officially opens. Insomniac traders still have a slight edge in the pre-market action.
It seems that you have a bullish bias, therefore you are inciting people to add to their stock positions. As you know, the average investor is easily inclined to buy and never uses a stop to control his risk. This is the reason the average investor is losing money in the market when the main trend changes from bull to bear.
I suggest you read the book by Harry Dent called Zero Hour that unveils the power of cycles from big to small and Elliott Waves that shows how we are just at the point of turning into a long-term bear market. That could help?
Hi Marcel. Please be assured I carry no bias towards the market – neither bullish nor bearish. I merely look for opportunities where the proverbial rubber band has stretched too far in one direction or the other and then look to capitalize as it snaps back.
My longer-term view of the markets is similar to Harry Dent’s. Eventually the debt burdens and the need for retirement capital will take its toll on stock prices. But, with all due respect to Mr. Dent, he has held that view for over 20 years.
I am a short-term trader. I select trades based on where I view the market over the next few days/weeks.
Mr. Dent may ultimately be proven correct. Indeed, I think he will be. But, in the very short term… I recommend trades based on where I think folks can make enough money to pay to fund their short-term needs.
Remember… I was cautious/bearish as the stock market ramped higher in late January. It’s only recently that I’ve adopted a bullish bias. And, if the market rallies back up towards the January high, then I’ll likely turn bearish as well.
Jeff, I’ve been reading your words since 2005, and only recently started trading with you. So into my brain pops this thought, why is it you seem unworried about all the craziness going on throughout the world?
There are problems all over the world. We have new leadership who seem to like to whack the beehive quite frequently, and we have talking heads (the media) who would rather the market crash than lend credibility to the good things going on in our country. So, despite there being large and not-so-large risks worldwide, you continue to study and correctly define how far the U.S. market will stretch, and then snap back again. Even you must know that we (your readers) find your calls uncanny.
In some ways I almost get the feeling that you don’t give much value to politics and the media. Went back recently and read some older issues, and you never bring up what I would call the “macro” of what is going on in the world, but rather you stick to what you have learned about the behavior of the markets, when and what the best setups are, and then calculate the best risk-reward recommendations. Your thoughts might help me become both a better trader and investor.
Hi Bill. Thanks for your question. I don’t comment much on the “macro” view of things because the market seems to do a pretty good job of discounting the macro circumstances. In other words… whatever worries you have about the craziness going on throughout the world is already priced into the market.
As a trader, my job is to gauge the level of fear or complacency and try to determine whether things will become more or less crazy.
Remember, for a good part of 2017, the world had many of the crazy conditions that exist today. But the market was not particularly concerned about them.
Today, the market seems to be concerned about everything. That says more about the emotional stability (or instability) of market participants than it says about the macro environment. So, rather than trying to trade the macro conditions, I prefer to trade off of the market’s emotions.
After all, in the short term, stocks move up or down in response to investors’ emotions.
Best regards and good trading,
Today, a few more letters from Delta Report readers…
I like your recent naked put trades. All in green. Most people don’t understand that when volatility increases one should take advantage of increased premiums and sell expensive puts. Make market selloffs work for you. I appreciate your conservative advice peppered with ideas for those “aggressive traders.” Keep up the great work. Thank you.
Hi Jeff, I have been trading for a year now and have lost about half of my trading allowance (ouch!). I have been looking for a mentor for the past year, someone who could truly explain why I needed to enter a trade and how they were looking at the market. No one does it like you. No one that I have encountered has bothered to explain what support and resistance levels they were looking at or what pattern was forming and the various ways it could play out. I just wanted to say thank you. I have been unofficially retired and unable to find work in my industry, so this is my new career, and so far I haven’t done very well, but I see a bright future ahead because I’m actually learning from you!
I am currently in a horrendous trade with Amazon, I purchased 2 calls strike 1565 exp Apr 27. I purchased these on fantastic news and almost immediately the stock tanked so fast that I lost so much on the trade that I’m hanging on until expiration hoping a miracle happens (the typical tale of a newbie, right?) I don’t know why I didn’t put a stop loss on this trade…but I realized, I’m not paying attention to something and I’m not putting my trade on correctly and frankly, I’m gambling. Then I came across your education and have been watching it over and over. I shouldn’t even be trading Amazon, it moves too fast for me as a newbie. Sure, it can make some home runs for someone, but not me, not yet.
So, to keep this from getting too long, I just want to let you know that I am grateful that you chose to provide this service to give people like me hope for their future.
Jeff, I need to tell you: Insomnia or not, you seem to be the hardest working guy in the industry. I’ve followed your advice and teaching since 2012, when Short Report/Short Report Pro were my favorite newsletters of your previous publisher. As well as you, I live in California and often try to catch up with emails backlog after midnight – only to be surprised with a just-published Delta Direct message, knowing that in few hours I will receive a fresh Morning Update.
How do you do that? When do you sleep? Even though I greatly benefit from your “work-ohol-ism” I start to worry about you. Consider slowing down a bit (and/or hiring some help) so you will be able to provide your priceless advise and wisdom for years to come, without jeopardizing your health and well-being. To not to sound hypocritical – keep your hard work (but not too hard!)
Thank you, as always, for your thoughtful insights. Keep them coming right here.
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