Continuing coverage of the short taken at 2940 SP and 2800 SP..
Yes, were in profit. No, we're not in profit.
What? How could this be???
Trade management, explained.
Here is our 90% Bayesian probability study in simple terms:
This would be a place capital leaks out of the SP.
I did leave 10% of an upside possibility (see: Bulls can rip your face off with this short)
The 10% UPSIDE is: That reasoning: TRUMP. HIS MARKETING MAGIC. HIS ABILITY TO PROMOTE IDEAS OF FREE MONEY, STIMULUS AND "RE-OPENING".
The 90% DOWNSIDE is:
technicals history (every bear market bounce since 1929 usually goes 50-62%) Weekly 12 EMA at resistance Former resistance in April 2019 6 weeks of the steepest slope EVER in the SP Fragile hands speculating on "cheap stocks" Algos selling off, and then...REALLY SELLING OFF (see March 8-15) No revenue CEOs "withdrawing guidance" fro future profits (how do you value stocks?-- INCOME...EPS) 2T in stimulus Me being home You being home...
Great video. Always nice to see an analysis from someone with their feet on the ground.
If there was another Trump stimulus do you think that would just postpone that last leg down or would it save S&P from retesting the bottom?
MIAM1
⋅
@ryannisbet1, Great question...
The guy is good...but hes cried wolf a few times already.
"We have the best team, we have this under control"
"Easter Reopening"
"Checks will be in people's hands in 2 weeks"
"Oil companies will be saved"
"The great people of ... can reopen...no, actually they wont be, but maybe.."
"Bleach"
The market does not respond to dopamine as much as it did the first 8-9 times...
It's typical human psychology.
First time is the best time.
Everytime after that...you get the law of diminishing returns...when Americans start looking at their bank balance and see "days until $0"
Anything starting with a B...wont get anyone lined up to be: "the first bull towards the 3400 SP party"
To answer your question DIRECTLY...What gets me out:
1. Fed directly or indirectly BUYING EQUITIES (Corp bonds are already moral hazard..but stocks....oh lord...we're talking China-style prop-up)
2. Vaccine
3. Cure
4. Biden dying
Other than that...the stop losses are there for safety.
Way to ask the tough question :)
jpreal1
⋅
Good Video.
Jorji
⋅
Hey Miami, great analysis. I think your strategy and risk management are really interesting, and would love a video in the future detailing how you determine your position sizes based on those Bayesian probabilities you began the video with.
I disagree with the idea that Joe Schmoe will run out of money mid May because of the unemployment checks that have provided even more money than he would have made while working. However, I think the first week data for the economy will be very dire due to people not paying their rents, specifically companies and small businesses. Small businesses have been completely closed for an entire month with 0-10% of their income than usual. There is no way that landlords will be collecting rent this month from them, and the PPP hasn't provided funds to the marjority of the economy. I believe that we survived april because most people and companies had the savings from the first couple of weeks of March, but that money has likely dried up by now. Very dire.
I also believe with people's refusal to wear masks and insistence on not practicing social distancing will likely lead to a ballooning in the daily cases in the United States. If you take a look at the daily cases in the US, the number has not gone down that much despite the lock down. Increasing the amount of social contact will increase the daily cases to a huge number mid may, likely resulting in a second wave.
1. Six Pack Joe has gotten relief to stay alive with $1200 checks. But we all know Six Pack Joe is low middle income because of his spending habits. Usually money in/money out.
2. Yes, personal + corporate cash is running low with 80% of the economy closed for 6 weeks. I think that is a default issue that has to be put on paper (Real estate and most loans are 90 day periods before "it becomes a data point"
3. My position sizes are:
Sure: 2% (60/40)
Very Sure: 4% (70/30)
Extremely Sure: 10% (80/20 or greater)
And yes, my 3 short positions on SDOW, SDS, TWM are "correlated" for "EQUITIES DOWN"
However, my hedge is out-of-the money SP calls for 3500 SP. (Cheap insurance)
I agree with Case count being a big issue when "things reopen".
Ive fundamentally held the belief that this is a mental debate of "alary vs Grandma Dying"
(Do i go to work to expose myself to networks that will surely have COVID19...and then visit grandma assymptomatically...just to get a check"
Hmmm...tough one to process.
Volatility for sure. (Maybe thats why Im long as hell on the VIX) :)
Great points, though. Wish more people poked like you...
jasonwaynelee
⋅
GREAT VIDEO!! I'm going short IF the macd crosses on Monday daily. Why do you use inverse geared calls to short? Why not just buy puts or SDS itself?
MIAM1
⋅
@jasonwaynelee, I wish I had a cool answer on why I use the geared ETFs...but I just have been using them for years and I like the way they are structured and Im familiar with the charts.
Nothing "magical" except "I likes them"
MO
knightmind
⋅
Great video. One thing I don't understand is SDS is inverse (-2x) of the daily performance of the S&P 500, not -3x. SPXS is -3x inverse ETF.
Also, I see only call expirations dates for SDS in June but I don't see July and November expiration dates.
MIAM1
⋅
@knightmind, Yes, you are correct...I made a mistake.
If there was another Trump stimulus do you think that would just postpone that last leg down or would it save S&P from retesting the bottom?