Wednesday’s Recap & Commentary

Good evening.  It was a nasty day for the stock market, especially for those positioned for higher prices, and you can include me in that company.   The last few weeks have been tremendous, almost too tremendous.  It seemed  every trade was working to perfection.

Sitting back this evening I realize that yesterday at this same time I was rather confident that the market was going to trade higher today.  Instead the market reaffirmed the notion that I am not the Perfect Trader.   It Collapsed and took the value of some of my Call Options with it.   The Perfect Traders are found recapping today's  market action on some business news network, or posting to  80k+ followers on Twitter how perfectly they nailed the Biotech Top.  And good for them.  They've earned it.

For me, it's about getting back up, dusting myself off, and getting back to work.

I didn't enter today loaded to the gills with Call Options.   I owned a modest sum of $SCTY, $DDD, and $Z calls.  The pull back in the market wasn't devastating, actually my $DDD and $SCTY calls hung tough.  But my $Z $110 calls were taken to the woodshed, beaten, and returned worth virtually nothing.  It is the risk you take buying short dated options on high beta names.  I was able to sell some of my $SCTY this morning, but held the rest.  $DDD I still think does very well this week and I will remain patience with it as well as $SCTY.  It's not the pull back in my Call options that has me bothered, it's that I was wrong on today's move.

If you read last nights recap, I was looking for higher prices.  There was "more gas" left in this rally off 2015 lows.  We were going to hit new record highs before any meaningful pull back.  One day does not make a meaningful pull back, but after three days of declines it is tough to ignore the possibility of one.  I do not want to walk around with a blindfold over my eyes and ignore the chance that this market may indeed correct here.

Here I am some 6 years removed from a time when I was a bear like no other.  It took a few years to get the negativity out of me.  To believe in this market.  To believe in this rally.  I am now bullish almost to a fault.  I do trade for downside occasionally, but 6 years of Central Bank's spiking stocks with ZIRP, NIRP, QE, Twist, PEGs, Bailouts, Tarps, TALFs, and everything else under the sun.  6 years of watching every morning dip get bought.  Watching every sharp pull back get swiftly reversed to the upside.  Am I now the Pavlov's Dog I talk about so frequently on the audio in the chat room?  Have I effectively been brainwashed?  Am I now one of them?  One of those believers in the infinite market rally.  A never ending road to higher stock prices?

Is my judgement clouded by the ever present threat of further Central Bank action?  A never ending bid?  The record breaking corporate buyback schemes?  If the only place to be is stocks, if corporations, central banks, investors... if everyone is buying stocks - who on a day like today is selling?  And if so... where are they putting their money?  Certainly the corporations aren't selling.  They've been decreasing their outstanding shares on a daily basis via billions upon billions of dollars worth of share buybacks.  Share supply is shrinking.

Revenue, P/E, Growth, I don't even care much about the numbers anymore.  How much stock are they buying back?  What percent are they raising their quarterly dividend?  Are yields is Europe dropping?  Where are they going to put their money?  Why buy a bond that pays next to nothing when you can buy a Dow Jones Industrial Component in a market where even the corporations themselves are fighting you for their own shares for a 3% yield?

I'm not sold on the selling here.  I'm not.  I do think a day of reckoning is coming, and perhaps the market is hinting at it today.  But today's weakness, just like every other weak day since the lows in March of 2009, is a great buy the dip opportunity.  Once bitten 182 times shy.

While the bears who have been short the market since 2009 claim its been an easy run for the bulls... a day like today proves otherwise.  The market has not gone straight up.  There have been dips and valleys along the way to record high prices.  However... and it remains this way today... the trend is up.  Prices have been heading higher.  And as long as the trend remains up, I remain Pavlov's Dog.  Ring that bell and  if there isn't a bowl of food there to eat, I'll buy that dip anyway.  It's what's worked the last 6 years, and I'll do what's worked rather than fight a market that doesn't need to be fought.

One day, three days, one week,  does not change the trend of the rally.  They say don't fight the FED.  I'd argue fighting the trend can be even more hazardous to your financial health.



Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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