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I have friends all the time say the market is going down are you short?
Maybe maybe not- what's your conviction level ...?
How much are they willing to risk on a move against their opinion?
As a trader my question is: When ...... How Far and ..............How Long .............?
It's easy to guess the next pitch from the stands.
But it's the batter at the plate who has to start swinging if he thinks it's going to be a fast ball...
If March 2020 has taught us anything ... I think it would be:
No matter how blatantly obviously bad it all seems- sooner or later ...
you'll run out of sellers ........
3500-3600 Zone. Is a distribution/floor, a POC of not 1, but 2 of macro swings.
Who knows exactly whats happened long term or exactly why. AND who knows what will happen for this macro view.
We all have our analyzing ways.
For me, using the story of auctions, distributions, POCs, liquidity and also looking at Bond prices, I came up with the above.
Im really keen to see how bonds (and others) go IF price gets to 3500 zone. It may simply smash up from here (buyers have made a full auction technically) who knows. BUT Id be a little surprised though as Im guessing we go through liquidity to market POC BEFORE All time highs again.
I think 3500-3600 is a great discount for long term holders. But we'll see.
Always interesting to see how things/guesses turn out.
Which is the cart and which is the horse? From a purist point of view (if there is such a thing) rates are manipulated by central banks for economic expansion or contraction, whereas equities are not ((ahem.....) we know they are, plunge protection, balance sheet purchases and sales, operation twist blah blah blah), but we can't monitor that till after the fact, where rates are actually broadcast by central banks.
Should we be curious as to what happens to bonds if stocks go lower .............?
Should we be curious as to what happens to stocks if CB's raise (or mention raising) rates .............?
Should we balance and weigh both competing scenarios .............?
My system trades the market in front of me- without any regard to what causes (or the cause of the cause) the movement, but it is an interesting thought exercise none the less ......
Agree. I trade using volume/delta/liquidit only. Understanding why market is going up or down can be somewhat overkill / misleading. Especially when trading. Fun to look back on though for me.
Also with whatever value using, Im not just looking at divergence/trend but also asking is this value at its own discount? is this value reversing (withdrawing/accumulating/profit taking) or is it continuing with demand/supply to its own liquidity zone.
Well, indeed IF the markets crash, or let's say go down 35-50% from ATH, that would be a good moment to buy.
I was just looking how to benefit from the drop down. I understand, as always, timing is key, when to enter and when to get out. Then it doesn't matter much what you trade.
It depends on how you define a market crash . 20 % sell of , yes we have had that . how do you make money ? Buy American corporations that have sold of that print money , that have tons of cash on had . stay away from energy , consumer staples , dividend darlings . the ships have sailed on those , there way over bought . 1929 type crash with a depression that last years or 2008 to 2009 type of crash where it takes 5 years to recover . how do you make money ? buy short term T Bonds until the dust settles . go to cash if you think that is on the way . I would not start shorting stuff , it is very very difficult to make make money doing that . ask the hedge funds that shorted Tesla and game stop . over 90 of the market participants make money buying things .
The large traders and institutions will slowly move their money into hedge instruments from stocks if they think a crash is coming. Gold, treasury bonds, currencies that are being used to hedge. Usually if their is going to be a crash in the future, treasury bonds will take go up over the long term, and spike right before the crash. Sometimes, they can get a little volatile though. Why do you think there's going to be a crash? It seems like Jeremy Grantham thinks there is going to be a crash every month. Sooner or later, I'm sure he's right, and then, he says, he predicted the crash like a prophet. What an idiot. Usually, when they start to raise interest rates, the economy is strong. Historically, over the time period the market has always gone up. Once, the 1987 crash was in between, and the market still hit a new high during the interest rate increase period. Once, the interest rate period is over, it means that the federal reserve has slowed the economy. Corporate and individual debt has now become expensive as interest rates are much higher. Earnings start to suffer. Mortgage rates are high, slowing the housing market. Historically, that's when one probably ought to worry about crashes. However, also historically, that's usually when people in general seem to be the most upbeat about stocks. So, when people are fearful, go long. When people are greedy, push money into hedges. This particular market has seemed to be me to be a market based on major fake fear. It's trying to shake out the weak hands, and see how many people it can get to go out of stocks in their 401k. Then, the big boys can absorb all their stocks at low prices.
Some traders buy put options as insurance to their portfolios on a consistent basis. I believe that's really what Michael Burry usually does. However, the publicize it like he's shorting, and make movies about it. He's always shorting, all the time. And, he owns a large stock portfolio. Let's think about that. Does that look like he's trading for a crash. But, he like all these other, something or anothers, enjoy creating fear, and trying to shake out the weak hands. So, they publicize it as something that it's not to try to scare people. Buying put options as insurance is not a bad idea. Or if you're concerned the market might crash, start to consistently buy put options. When market volatility rises or spikes, option values increase, a lot. They sometimes, triple. So, you make the dollar value of the option plus the increased value that all the volatility of the market gives them. Timing crashes is really not something that people are very good at though. It seems like crashes like to change their patterns in order to throw everyone off. They never run through the same predictable things. They seem to happen when no one is expecting them. The last one was cooled because the US government stopped everyone in the US from being kicked out of houses and apartments. That stopped a housing market crash that probably would have caused it to last a year, and instead it lasted a month. So, now, they have a tool that will help them make it so that things never really so much crash.
PM with any questions about Cannon Trading (800) 454-9572 (310) 859-9572. Trading commodity futures, forex and options involves substantial risk of loss. The recommendations contained in this post are of opinion only and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performance is not necessarily indicative of future results.
ATR (Average True Range) has always worked for me, it's in the title. Buy the dip as they say. Average True Range covers volatility and over bought & over sold and it shows what the real trend is doing.
