The $SPX is 1000 points off the terrifying 666 low set in March of 2009.

Stop fighting it.

The post The Market is Rigged!!!!! appeared first on The Minimalist Trader.

Twitter CEO Dick Costello gave the Spring Commencement speech at University of Michigan yesterday afternoon in Ann Arbor, Michigan (in the BIG HOUSE!). Little did I know he and I have so much in common.

He and I are both Graduates of Chicago’s Second City Improv Training Center.

In the above speech, Mr. Costello goes into detail about how his time spent at Second City greatly shaped his outlook on life and the framework from which he makes decisions. One of his greatest takeaways from the experience was to “make bigger choices.” I couldn’t agree more.

He also reminded me of one the other basic tenants of Improv: “There is no script. Be in THIS moment.” Please set aside 17 minutes and watch the above speech. It is fantastic.

Meanwhile, while watching this speech I couldn’t help draw the parallels between what I (and other Improvisors) would attempt to do on stage, to what Trader Seany does in the daily grind of market participation.

In the markets, there is no script.

Yes, patterns repeat themselves (I hear you, Chartists!). But as much as we Traders often attempt to create a narrative in our heads and then try to project our plot upon the markets, we’re often reminded the Market doesn’t give a damn what we think and it just exists in this moment. And then the next moment.

We as Traders will be most successful when we plan for certain contingencies, but allow ourselves to exist in the moment – whatever the markets are offering us. Like the bamboo tree, bending with the shifting winds instead of rigidly resisting (sticking with our narrative) and then having our limbs snapped in the next fierce blow.

Now I really miss my old Second City Group. Some of the best friends I’ve ever made…

The post There is no script. Be in this moment. Trading is Improvising. appeared first on The Minimalist Trader.

“…But I couldn’t think of selling that stock.” said Mr. Patridge

“You couldn’t?” asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers.

“No, I couldn’t”

“Why not?” And Elmer drew nearer.

“Why, this is a bull market!” The old fellow said it as though he had given a long and detailed explanation.

The above is an excerpt of a tale told of Mr. Patridge (“Old Turkey”) in Reminiscences of a Stock Operator. If you’re reading this blog, you’ve likely read the book. Every Trader serious about this business has. Multiple times.

I bring this up because as some of you may have noticed, I’ve begun every trading day during the past 6 weeks or so with the following message on StockTwits:

I’ve been doing this as neither a celebration when futures are pointing to a bullish open, nor as a taunt to bears caught leaning in the wrong direction. It is simply a selfish reminder to myself to stick with the trend. And the trend – undeniably – is up. And it remains up until proven otherwise. As my friend Brian Shannon (@alphatrends) loves to repeat: “Only Price Pays.”

Believe me… I’m as shocked as everyone else that the Stock Market continues full steam ahead to new highs. Regardless, my opinions or fears hold no sway. I’ve given in to price action.

This doesn’t mean I’m recklessly positioned to the bull side. I’m currently in 35 positions – most of which I’ve been holding for many weeks now (some months). My positions are all various interpretations of calendar spreads, diagonal spreads, vertical spreads, or straight long call positions. (You may recall I no longer trade straight stock shares anymore – too dangerous). All of these positions have a bullish slant (positive delta). Meanwhile, my entire portfolio has a bit of a volatility hedge in the form of a long $SPY strangle that I adjust each day.

I rest comfortably each night knowing that my risk is defined. In the absolute worst-case scenario, I know precisely what my portfolio stands to lose. Needless to say, it’s a prudent amount I’m comfortable with.

This trend will inevitably end. I know that. You know that. And when it does, my positions will clearly tell me so. As Jon Boorman (@JBoorman) reminds us in a must-bookmark recent blog post, trying to be a Hero is a dangerous business. There aren’t many Heroes in the Stock Market. It’s highly unlikely you or I will ever be one.

If you’re fighting the market, Stop.

~

The post Why I’ve Been Repeating Myself Every Morning… It’s a Bull Market, You Know! appeared first on The Minimalist Trader.

A little after 1pm Eastern, the Associated Press (AP) twitter account was hacked and published a message announcing that two bombs had just exploded at the White House and President Barack Obama had been injured. As this twitter message was quickly retweeted, commented upon, and reacted against, the stock market as measured by the S&P 500 ($SPY) did this…

Meanwhile, in simultaneous action, the high frequency algo bots who so proudly proclaim their utility to markets in the form of “added liquidity” did this in America’s “deepest most liquid market” the S&P 500 futures contract…

courtesy nanex, via @zerohedge

The red oval shows you where liquidity (bids and offers) used to be, gone in a nanosecond.

Bottom line, friends: Retail traders with timeframes shorter than a week have no reasonable shot in this marketplace if you trade any product or manage any position that requires you to leave open stop orders with your broker to protect your capital. Forget about it. You’re toast. Maybe not today, maybe not tomorrow. But the game is stacked against you, and the house edge always wins.

As these shenanigans continue to happen and the exchanges quietly count their ever-rising trading fees from HFT firms – while our elected and nominated government officials quietly collect campaign donations to keep the status quo (cash cow) – what can the little guy (you and me) do to limit our chances of getting whipsawed by yet another algo gone wild, fraudulent/mis-reported news item, hacked twitter account, or blatant market structure abuse (it will happen)?

Well, I don’t have the complete answer, but my hunch has me leaning exclusively towards options.

With options, a trader or investor can structure a trade that properly expresses his opinion of market direction, yet do so with explicitly defined risk. The simplest strategy is to simply purchase options. You can be long call options in stock XYZ which trades at $75.00. If you size your position properly (meaning, the max risk to your portfolio is well within reasonable limits), then XYZ can flash crash all the way down to $00.01, but it won’t matter to you in the least. You will have only lost what you planned to risk, nothing more. Trade simply didn’t work out… on to the next one. Or, perhaps you’ve deemed that if XYZ trades below $74.00, then your reason for being in the trade is invalidated? Well, what if XYZ was hit with one of those mini-flashes that now seem to happen every day (see Google just yesterday!) and it traded down to $71 only to quickly (before you can bat an eyelid) return right back to its previously trending price around $75? If you were holding stock, your stop-loss would’ve been triggered and you’d be out (at your price in the event of a stop-limit order, or worse – at the very bottom of the fake move in the case of a stop-market order). Meanwhile, the lonely option trader in the same position holding long XYZ calls just sits back on his hands and watches the drama unfold. Unfazed and unharmed, and still in his valid position.

Is this the perfect solution? No. It comes with costs in the form of premium. Consider that your insurance. Can’t afford insurance? In today’s marketplace, an independent retail Trader simply cannot afford not to have insurance.

/end rant

If you don’t consider yourself well-versed in the field of options, please view these trusted sources for all kinds of free options education. The time is now:

CBOE Learning Center

The Options Industry Council 

The post Living in a High Frequency World appeared first on The Minimalist Trader.

An April/May market correction from these levels seems it would be too easy and would make a lot of pundits “right.” When has a market ever been so accommodating to the predictions of the masses?

Call me a skeptic, but the most important (and constructive) corrections come when very few are prepared for them.

 UPDATE:

As if attempting to prove my point, here is the most recent Market Sentiment chart as measured on StockTwits. This level of bearishness simply doesn’t exist in a market that is nearing its peak. At it’s peak – EVERYone wants in.

~

The post A Correction From Here Would Be Too Obvious appeared first on The Minimalist Trader.

Look, shares of $AAPL are getting smacked. This is no secret.

When the world’s largest stock holding – held by EVERY mutual fund, hedge fund, pension fund, and etrade account in existence – begins to unwind, it won’t be a one week, one month, or even one quarter event. The stock had a MONSTER near decade-long run of being accumulated and added to in every portfolio everywhere. It’s gonna take time to unwind a decades’ worth of buying.

While the passing of Steve Jobs was terrible, it simply is unfair to heap the stock price slide of Apple on the head of Tim Cook. A company of Apples’ size and scale simply cannot grow at it’s rate of growth forever. And neither can it’s share price. If Mr. Jobs were still with us, it is highly doubtful this stock slide would’ve fared any differently.

Mr. Cook had the unfortunate luck of his ascendancy to the CEO position being timed near the top.

This goes the same for people that like to heap credit on Barack Obama for saving the stock market. That the 100% rally off the March 2009 low was due to some grand political policy originated from Obama and his team. Poppycock. Mr. Obama had the good fortune of beginning his Presidency at a time when the Stock Market simply could not get much worse. Massive leverage in the financial system was in the final stages of its great unwind. Once that was all cleared out, then the road was clear for the Stock Market to catch its breath and start focusing on what’s important (and fed stimulus).

The good news for Apple shareholders: If you still don’t believe me and instead view Tim Cook as the Devil incarnate, you can sell your stock and move on. Unfortunately, the same can’t be said if you share the same views of Obama. Good luck renouncing your citizenships ;)

~

The post Yeah, I said it… appeared first on The Minimalist Trader.

If you are looking for an investment edge, here it is.  Most people analyze portfolios based upon the calendar.  World events march to a different drummer!

This year is a great example.  The annual forecasts were done at a point when everyone was worried about the fiscal cliff, a downgrade of US debt, an imminent recession, and a hard landing for China.  When this did not happen, (an eleventh hour result that I predicted), the market rallied about 6%.

Suppose that you missed that rally.  Should you pretend that the facts did not change?  Should you remain anchored to your December, 2012 forecast?

Or should you adjust your thinking to reflect new evidence?

Read on for some more amazing perspective on why perhaps you should move your targets.

Bad Reasons For Owning Stocks

~

The post Annual Targets Have Been Hit, Take The Rest of the Year Off. Or Not… appeared first on The Minimalist Trader.

This is what makes Trading great, and why there’s always profits to be made by somebody.

The post THIS Is What Makes A Market appeared first on The Minimalist Trader.

I watch the tickers streams at StockTwits. Far too closely, for sure. But SOMEone has to ;)

On a daily basis, I witness intelligent people offer smart (but less than popular) opinions and ideas. Whether they are right or wrong isn’t known at the present and will only be validated by price action at some future, yet undetermined date.

We all know investing and trading can be emotional, especially at extremes. Unfortunately in social media, these emotions often rear their ugly heads when people encounter such opinions that run counter to their current positions.

There are typically two ways a responder reacts:

1. Bash, insult, or otherwise obnoxiously troll the author of the offending opinion. Or,
2. Offer smart, reasoned, and value-added rebuttal that benefits all readers who come across the exchange.

Each time we interact on the social web, we make deposits or withdrawals from the social currency we’re all building (whether consciously or not). Which side of your ledger are you focused on building?

Dissenting opinions should be encouraged. As Traders, you should be excited when you see people disagree with you. Otherwise, who’s going to take the other side of your trade so that you can make a profit?

Think about that next time you’re considering bashing another person who’s bearish on a stock you’re bullish on.

~

The post Dissenting Opinions Form the Basis For Your Opportunity to Profit appeared first on The Minimalist Trader.

My friend @Zenpenny1 has some sage advice for you…

I can’t think of a time in nearly 20 years of playing this game that I have looked back on a macro inspired gap and wished I would have reacted FASTER. It has nearly always been the case that observing would have paid better dividends than simply reacting.

Now, please, act like you’ve been here before. Thanks Ali.

Read the rest here: Cyprus Hill

P.S. In other news, Europe sucks. Duh.

~

The post Attention Cypriotic Panic Peddlers… appeared first on The Minimalist Trader.