The $TED spread is the difference between the 3 month LIBOR rate and the 3 month T-Bill rate. The TED spread is a proxy for perceived inter-bank credit and liquidity risk. As you can see, in 2008-09 the TED spread ballooned as credit markets locked up and liquidity dried up.
Today, the $TED spread stands at its highest level since 2009. Additionally, the volatility in the spread is increasingly getting jiggy as the steepness of the ascent sharpens. The why's, what-fors, and how comes are way above my pay grade but I can say for sure it is not a data point that can be ignored.
Back in the day I used to think of myself as a big fish within the niche of my small South Florida pond. A successful business, a beautiful home, kids in private schools, and a sweet convertible sports car were the fruits of that labor. Striving for success and acquiring the trappings thereof consumed much of my waking hours early in my career. Maybe it’s the same for you.
Anyhow when I used to visit George, my counselor, up in Coconut Grove, I often took the back way up Old Cutler Road. It’s a winding 2 – laner which works its way along Biscayne Bay from Homestead up toward Miami. Old Cutler’s path sweeps the entire the American economic spectrum. It begins in a neighborhood described by of abject poverty, drug dealing and hopelessness. I used to feel like such a big shot beginning that drive. When the air was cool, I’d put the top down on the convertible. The feeling of power under the pedal and success would fill me. As you drive north, the scenery dramatically changes. In less than 10 miles, you go from “the projects” to gorgeous neighborhoods built during Miami’s golden age from 1905 through the 1920’s. Mansions on manicured estates worth 10’s of millions of Dollars. Driving through that wealth deflated my balloon. It made me feel like a piece of garbage. All the education, all the hard work on my business and here I was, probably making less than the Gardener on these Estates. I was a piss ant in my own mind. It was painful.
This property at 8525 Old Cutler Road just sold for $16 million
After explaining my discontentment to George he used to tell me, “All you have to do is decide to step off the hamster’s wheel”. Running on the hamster’s wheel gets you awfully tired and you go nowhere. Once you step off by skipping the desire, the reaching, and the constant comparisons to focus on your own contentment, life begins to unfold in different and better ways. You can admire a beautiful waterfront home for its architecture and elegance without becoming pissed off in the knowledge that you’ll never own it.
I see Traders everyday creating their personal prisons brick by brick as they compare their trading results with those on social media or with trader’s they know in “real life”. Why aren’t my results better than theirs? What am I doing wrong? I have been trading for 5 years and I don’t seem to be very far along. This guy has only been trading for 3 years and is killin’ it. I suck! It’s that constant comparison that leads you down the path of self-doubt and unhappiness. Teddy Roosevelt captured the essence of it over 100 years ago when he said "Comparison is the thief of joy"
A More Productive Path
Stop Comparing. Step off the hamster’s wheel. Maintain a laser-like focus on YOUR process. ( not your trading results ) . Benchmark yourself against yourself and no one else. Ask questions and monitor your responses. Am I executing my process better than I was last month? Am I controlling my impulses to over trade? Am I being more selective by taking only the very best set ups? Am I quickly dumping losers? Am I carving away the wasted, unproductive hours within my week so I can devote more time doing trade preparation? As emotions tug at me during the trading day, am I improving at documenting them in my journal? Am I adhering to responsible and prudent position sizes or am I still being a putz by trading out-sized positions that will hurt me? Identify important areas to work on that you feel are holding you back.
Trust me. If you keep the focus on your own improvement, ( rather than comparing your results to others ) you’ll experience a well-spring of new-found sense of accomplishment and progress. Over time you will notice your new attention to detail in your trading process. The impulsive trades will dissolve and fade away. Your trade selection criteria will become narrow and crisp. You can’t help but notice your trading results gradually improve as you hone your craft. Most importantly, you’ll be able to congratulate your fellow traders on their huge wins without your own feelings becoming diminished. That will be possible because you’ll understand that what they do does not hold one iota of meaning for your life or your work. That realization is real power. It cuts away the thick branches and clears the debris from your path toward making progress in your own trading.
Give it a try and let me know how it goes. Good Luck!
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In football, when a team wants to take a shot down the field, they often have their top receiver run a “double move” route. The receiver blows off the line, hesitates and goes sideways a few steps to get the defender to “bite”, then turns up field quickly before the defender can recover leaving himself wide open for the bomb. Explosive stocks do the same thing.
Simply put, the "Double Move" set up is when a stock shows a strong move ( gap up or strong igniting candle ) on high volume followed by an orderly pull back on low volume as profit taking occurs. The pull back usually takes a little time to either find the bottom of the gap up candle or the 20ema. At this point the stock is poised to rip higher. Here are 3 examples of the "Double Move"
MELI: The stock explodes in early August ( first move ) then has a 3 week sideways pull back on low volume to the 20ema, then explodes again ( second move). That pull back to the 20ema is a perfect place to get long. MELI going higher.
$BABA showed basically the same thing. Gap up; pull back to the base of the igniting candle; then up again. Then it had a second gap up, followed by a pull back to the 20ema which closed the gap, then gone again.
$BREW Dubbed by me as the "King of the Double Move" after showing multiple repetitions of the same double move pattern over the past 6 months
The "Double Move" is an explosive pattern and one you should look for. Many platforms allow you to screen for gap ups. Use your screener to look for them. Rather than chase the igniting candle, load your bazooka and patiently wait for a gentle pull back on low volume. If price reaches either the 20ema or gap support at the bottom of the gap up candle, that is your cue to get long with a stop just below the 20ema or bottom of the gap.
Have you noticed that everyone is a specialist these days? It's gotten so bad in the medical profession that finding a good general practice / family doctor is a tough ask. Go down the list of almost any profession and you'll find specialists and then super - specialists within one narrow sub-sector of a specialty. The reason? Specialists, especially good ones, are more highly paid than generalists. They "own the space" they work in. I found that out first hand a few years ago when i faced jaw surgery. I searched a radius of 300 miles and kept getting the same name; Dr. Steven Holmes. He owned the space, was Best in Class, and charged accordingly. When you are getting your face operated on, the "jack of all trades, value guy" probably isn't a smart option.
Is it a coincidence that a trader who only trades oil is better at it than when you or I put on our one oil trade for the year? I don't think so; he loves taking our money. What about the guy who only trades precious metals? Probably the same thing. When we try to do too much, our bandwidth gets stretched thin. When bandwidth is thin, focus is diminished. When focus is diminished, unforced errors increase and trade results suffer.
Check this out. I know a very good trader that addressed his bandwidth issue in the following manner. He only tracks and trades 45 stocks / instruments. He doesn't worry about the other 12,000 stocks; he has narrowed his universe to 45 stocks. And guess what? He owns those 45 stocks. He knows them like the back of his hand and he wins. Coincidence? His bandwidth is narrow and his focus is intense. He doesn't miss a beat.
Here is an overview of his stock selection Criteria.
So if you often find your self jumping all over the map and having that "Jack of all trades; Master of None " feeling, try dramatically narrowing your bandwidth and jacking your focus to the moon. I am willing to bet right now that your trading results will improve with that laser-like focus. Over time you can gradually increase your bandwidth to your own personal sweet spot.
Happy Hunting and Good Trading!
Our friends over at PureFunds have added 2 new ETFs to their family of funds. $IMED covers the health tech space while $FINQ covers the emerging Fin Tech space.
Below is a summary of the Pure Fund ETF family. Their cyber security ETF $HACK has gained wide popularity and is closing on the $1B AUM mark. These highly focused ETF's seem to be a good way to gain exposure to a given space, especially when name-specific risk is not wanted.
Disclosure: No compensation has been received from Pure Funds for passing their info along.
One technique that has really helped me improve my trading psychology and consequently my trading results is to carefully examine where my head is at BEFORE I close a trade. I do that by incorporating a "closing trade checklist" into my process.
CLOSING TRADE CHECKLIST - Why do I want to close the trade?
Knowledge is real power. Creating the checklist and really working it will be very revealing to you. It will give you the information necessary to begin the process to effect change and move toward a place of more robust decision making that will improve your trading performance.
Happy Hunting and Good Trading!
My good friends over at Steady Options posted an article entitled "10 Signs of a Fake Guru ". In my opinion, its a worthwhile read.
OK....its should not be a big surprise that there are scammers out there. Steer clear of them. Let's turn the page. What characteristics does a good mentor possess?
CHARACTERISTICS of a GOOD MENTOR
Finding a good mentor isn't easy, but when you do, its pure gold. Hopefully these ideas will help you separate the wheat from the chaff.
Double Top Bearish Reversal patterns, if identified properly, offer nice opportunities to get short a particular instrument to take advantage of an impending downside move. Here are the keys to identifying the pattern.
First Peak: The stock is in a nice uptrend, preferably for at least a couple of months, and puts in a top for the current run up. Note the positioning of RSI and MACD at this peak. It should be at the highest point for the current trend.
Initial Pull Back: The stock pulls back and bases for at least a month or so, but sometimes longer. I usually like to see at least 4 weeks of basing action, otherwise I have found the pullback is usually just part of the trend continuation.
Second Peak: The stock makes a move higher out of the basing pattern and finds resistance at approximately the same price level as the first peak. The key thing to look for at this point is bearish divergences on both the RSI and MACD. If both the RSI and MACD are at LOWER levels than they were at Peak 1 you have bearish divergences.
Confirmation: Within a day or two of the prior price level being tagged, you will often see a sharp pull back off the high with expanding volume. This is the signal to get short. A stop should be placed just above the price level of the Double Top. If price is able to recover and make new highs, the trade failed. Take the trade off.
Measured Move Price Target: Measure the distance from the top to the lowest point of the basing action. The Price target is found by subtracting that amount from the lowest point on the base. Example: Double Top at $90. Bottom of Base = $75 Difference = $15 Measured Move Target = $75 - $15 = $60.
Applied Materials had 2 textbook Double Tops in 2014 and early 2015. The second one in early 2015 resulted in a real rug pull as the stock was essentially cut in half over the next 8 months.
Pioneer Natural Resources showed a double top in the summer of 2014 when it showed 2 peaks a month apart with significant bearish divergences on both RSI and MACD given as clues. The stock went on to fall apart following oil down into the bear market for energy.
Disasters come in all shapes and sizes but they all have one thing in common, no one sees them coming.
Let's confine our discussion of Contingency Planning to our Trading lives. Here are a few disasters that quickly came to my mind:
Actionable Contingency Ideas for Major Disasters
Anyhow, the point of the exercise is to make you aware that disaster is likely to eventually find you in one form or another. Sleep well at night knowing that you and your family have done the prep work and have plans in place to address those events.
Scott's had an epic run off the June lows and topped out in the low $80's. The swift run up has left the stock vulnerable to a sharp pull back. Notice the volume / price air pocket from $79 to $74 where little support exists. Price currently sits on its daily pivot point and on gap support. Should price fall from here, I'd expect a swift rug pull to the mid $70's. Alarm $79 for a head's up that support has failed. Target October expiration with October 80 Puts . The October chain is thinly traded so use limit orders. Aim to take profits in the $75 to $74 area for a quick hit n run. This has been a strong stock and a fan favorite so this is purely a technical short set up if support does fail.