November 23 Premarket Recap – “If the Fed Does Pause, and We Get a Rally Back to the Highs….”

This website has consistently constantly given out quality information WAY AHEAD OF THE CROWD. I am bowing out soon, so I hope you have been taking notes. If you do not know how to trade, you will not make it going forward. For over one year I have been warning that once we get back to 3.10% on the 2 year note yield (the recent high was 2.994%) the Fed will be going on a long pause. I have repeated that numerous times, again in May. And sure enough today now the world is SURPRISED as Chairman Powell is seriously hinting at pausing. I also said LAST WEEK that the stock market will likely be rallying into mid-Dec Fed meeting, I did a FREE PUBLIC post about that here discussing SPY calls. Anyone who read that could have bought the 270 calls for this week right where I bought them. They were sitting there for you. Those calls are up 5x in two days and yes you must take out some profits. Discussed again yesterday

And with that trading topic, I discussed my SPY option trade, in that link above, held a 1/4 position from .68, a new day today, will give that position a 10% loss exit.”

Those calls traded down to .64 on Tuesday – anyone reading that could have bought those calls literally below where I bought them:

From May:

We are closing back into the gap, not a short setup, for me, but a resistance area. And during this rally in TLT, the all-important 2 year note yield has hardly budged. Very telling, as it has been the “runner stock” since Oct 2011. Keep in mind, you usually get a knee jerk rally in yields, and then the drop, after the Fed meetings. I still believe we are headed to around 3.10% on the two year, so 2-3 more Fed hikes, before the bond market really begins to “fight back” on more rate increases.

 

And from last week:

There should be a rally attempt into mid-December, possibly coinciding with a very interesting Fed meeting. Stats from Bespoke already given to you beginning of the week, a bullish period:

On a day to day basis, for both all years since WWII and in years where the S&P 500 was up less than 5% heading into Thanksgiving week, Monday has been the worst trading day as it is the only day of the week with negative average returns and positive returns less than half of the time. Tuesdays and Friday (73%), however, have been positive days, though, with average gains of 0.10% and 0.29%, respectively. Additionally, for those years where the S&P 500 was up YTD but up less than 5%, Tuesdays and Fridays have been even stronger with average gains of 0.26% and 0.35%, respectively.”

Also, historically December is the best month of the year especially with “corrections” in October, and then historically late November on is another good period. As for this year as we stand – “as we move past Thanksgiving, though, seasonal trends for the market based on this year’s performance so far improve. In those years where the S&P 500 was up less than 5% YTD heading into Thanksgiving week, the average gains the week after Thanksgiving was 0.41% with positive returns 55% of the time. For the remainder of the year, average returns were even stronger at +2.83%. Not bad for a period of just over five weeks!”

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My 11/23 Premarket comments:

Another very good post here. Are you studying these posts about trading? Hopefully for your sake you have listened to me and have done that. I’m moving on at some point, my wish has always been for you guys to learn how to rely on yourselves. If you have not learned trading skills, you won’t make it in the markets we have from here forward.

If the Fed does pause, and we get a rally back to the highs….but in the meantime:

2015 stock market top:

From a couple weeks ago:

Sort of intermediate-term, the way this bigger area sets up to me in SPY is we have got to have a big rally out of here, up to the 281 big bko area, and then another big selloff, maybe another spike lower low spring, then we should have set up a lot more stocks in the meantime.

So bit bigger picture, plus near term, we have the total bickering fighting investigating power grabbing for the next 2 years and beyond actually with the new crop of clowns into the Congress, that setting the stage for consistent volatility in markets, along with the higher yields, tariffs, and then oil getting clobbered. A traders stock market. None of this will kill the secular bull, I discussed a lot of this stuff over the years, have expected the general tone and trend of where we are headed, was aware of these types of things when I did this post many years ago as to my extreme bullishness for the long-term stock market. That belief takes into account a USD losing at least “unofficial” reserve status.

And for the incompetent permabears, here is what they should be worried about – JNK CS DB.”

For several years I have been bearish on of course bonds, LQD, JNK, plus DB, CS, plus GS, C, BAC, MS. They held longer than I thought they would, but I always believe in my work, ALWAYS. When I identify a TREND, (know your timeframes of that trend) then my belief in and respect for it, and am stubborn as heck about that. It serves me very very well – on net. People who want to bounce around guess jump from one thing to another will NEVER make it. After all this time with me, if you have not relentlessly studied how to identify A TREND, why not? All of those stocks plus the bonds above, I have believed are in big or huge distr or redist areas or already downtrends. DB new all-time lows, the others multi-year lows. This all plays into my view of where we are at in the stock market. As discussed several times recently, Treasuries continuing to benefit from the current situation vs/relative to corporates.

So again, discussed this so many times, gave you guys plenty of warning to get out of the stock market:

Aug 17 I discussed why I was going to 100% cash in my account for bigger position-type trades, and discussed why only will be trading indexes and small stocks.

The summer doldrums trading has been, and, is going on in the stock market. The occurrence of tops in July/August was discussed previously. And the SPY charts from the previous 5 were discussed as models. I’m always looking for/trying to recognize stocks which are – setting up for breakouts, turning the corner to the upside of accum or reaccum, setting up for bounces (smaller stocks), or setting up for springs. I’m not finding many setups in the bigger-type stocks. Small and intermediate ones, there are always opportunities there (and the daytrade stuff), but there are less opportunities. Speaking of daytrades, I totally screwed up a MOSY trade yesterday, losing trade, missed the low and chased it.

I am out of all position trades,100% cash in my bigger-type stock account.  My focus will now be on my account used for the small and intermediate stocks, as discussed previously. That discussion below.

In the last week or so, I sold INTC, long-time 10 month holding IMMU, VNOM from the 4/2 stock list. And yesterday – I sold AMD from the recent bko (when it had broken out) in the 17s, used the rally in the SPY into the top of the gap. That SPY gap resistance was drawn in with Wednesday’s SPY chart. Also, I lost 5% on AMAT sold in after hours, it came out with earnings.”

Still have not done any bigger stocks, there are more setups, but just not nearly enough, some working some not. So to me it is still a market to take quick profits, which I always do anyway, but that strategy in a strong market makes me look like, and am a, fool. Remember back in Feb with those lows, I did not put out my list until 4/2, the very low day of the retest as the indexes went to all-time highs in September, that list was two months after the 2/9 low. That long before I started doing actual position trading in earnest.

Discussed several times – not enough individual stock setups. I judge the “breaking out” of the indexes themselves much more by how the overall individual stock situation looks to me. The stock indexes are much more prone to “false” bkos, up or down, above or below the range. Not false at all actually, but what are “false bkos”? If you do not know that, I have been over this from day one. Think about it, the thought process to come up with the answer will help you a lot.

The selloffs in the main stocks are deeper and wider than earlier in the year. Many of the leaders are done. Yes new leaders are being formed, setting up a very vibrant uptrend to come. But my belief still is that no matter what, there will be a 25% selloff at some point in the next 2 years. I have given my “laundry list” of factors. Currently, pure market factors only, oil, GS, AAPL, NVDA, FB, LQD, JNK If the Fed does pause, and we get a rally back to the highs without a solid core of quality stock setups in a multitude of big stocks, I do not short stocks very often, but will consider getting short on a bigger basis for the first time since correctly “calling” the top in Dec 2015. I had been discussing shorting stocks in a few posts before then. That rally into the Dec 2015 highs was the final SECONDARY RALLY – the selloff and the rally back to the highs:

From 12/9/15:

My last update 5 weeks ago, my intermediate outlook changed to bearish on stocks, for the first time in over 4 years. Since then, I’m even more bearish. While still very bullish long term, stocks need a large selloff to reset the bull market and build a solid foundation for Dow 100,000 well down the road. A 25% selloff is a decent possibility. Both stocks and gold will eventually rise together, courtesy of the upcoming bond market demolition.”

Back then, the S&P sold off 15%, Russell 27% top-bottom. Those shorts, like my standard approach, would be in former leaders failing RS stocks, on secondary rallies, entering on the backside of that secondary rally. What have I said about the FAANGs several times over the last few months, discussed again? – I generally do not like the faangs overall, a fad to me, they will not be the “faangs’ in a few years, there will be something else to replace them in a secular bull.”

But in the meantime, Friday intraday drew in my LHBL res in IWM, I did not believe we had yet bottomed, poor quality bko. Also the big LHBL. There should be a rally attempt into mid-December, possibly coinciding with a very interesting Fed meeting. Stats from Bespoke already given to you beginning of the week, a bullish period:

On a day to day basis, for both all years since WWII and in years where the S&P 500 was up less than 5% heading into Thanksgiving week, Monday has been the worst trading day as it is the only day of the week with negative average returns and positive returns less than half of the time. Tuesdays and Friday (73%), however, have been positive days, though, with average gains of 0.10% and 0.29%, respectively. Additionally, for those years where the S&P 500 was up YTD but up less than 5%, Tuesdays and Fridays have been even stronger with average gains of 0.26% and 0.35%, respectively.”

Also, historically December is the best month of the year especially with “corrections” in October, and then historically late November on is another good period. As for this year as we stand – “as we move past Thanksgiving, though, seasonal trends for the market based on this year’s performance so far improve. In those years where the S&P 500 was up less than 5% YTD heading into Thanksgiving week, the average gains the week after Thanksgiving was 0.41% with positive returns 55% of the time. For the remainder of the year, average returns were even stronger at +2.83%. Not bad for a period of just over five weeks!”

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About traderscott 1110 Articles
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.

3 Comments

  1. “Discussed several times – not enough individual stock setups. I judge the “breaking out” of the indexes themselves much more by how the overall individual stock situation looks to me. The stock indexes are much more prone to “false” bkos, up or down, above or below the range. Not false at all actually, but what are “false bkos”? If you do not know that, I have been over this from day one. Think about it, the thought process to come up with the answer will help you a lot.”

    My brain hurts enough, tell us what are the upthrusts and springs in the indexes.. shorting/ buying opportunities? Dealers stop hunting for liquidity? consensus of the algos?

    • The markets and how they operate are generally exactly the same as when I started in the 90s. Back then people blamed program trading and on-line day traders for messing up markets, today well you know what people are saying. But the indexes themselves are much more prone to “false bkos” – yes springs and upthrusts. And yes I use those for options opportunities. Individual stocks, when someone really works hard and hones their ability to analyze the POTENTIAL PRE-BKO technical situations, then there will be less false bkos – FOR THEIR TRADING. More trending moves. The RIGHT stocks trend much better than the indexes. Since I started in this business as not believing in bkos, either way, and using those to enter positions on the other side, I have always struggled with individual stock bkos, but have vastly improved over the years. Also, springs – the probabilities vastly improve when the trend is up already. Again, nothing more important than the ability to recognize the trend.