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Jeff Bishop’s Total Alpha Review | The Market Is About To Crack

I’m going to make a bold call – the market tops out here in the next two weeks.

Early this week, I started seeing internal market indicators flashing warning signs. Even though the indexes kept closing higher—there were some key laggards.

I told my Total Alpha Members that it was time to put my money where my mouth is.

That’s why I began selling deep-in-the-money call spreads in some overextended names.

Currently, I’m sitting on 50 spreads— betting against TSLA.

If I’m right, I make $14,500. If I’m wrong, I lose $10,500.

By the way… I have 6 trades on 6 different stocks just like this in my Total Alpha Portfolio.

So why am I such a bear all of a sudden when I just pulled down a massive $42,455 Win on AMZN being a bull?

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What would make me give up on trades like these?

Because that’s what my analysis tells me.

Let me walk you through my thought process, and see if you agree.

Leaders Rolling Over

I first spotted the leaders slowing down. We’re talking Apple, Amazon, Tesla… all the heavy hitters didn’t continue to make new highs.

Here’s what I’m talking about. Let’s look at the hourly chart of AAPL.

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AAPL Hourly Chart

There’s two critical pieces of information here. First, I want you to see that the 13-period moving average is getting closer and closer to crossing over the 30-period moving average.

That’s what I call my ‘money pattern.’ This pattern isn’t just for trade setups. It highlights potential trend changes in a stock.

Second, look at the two arrows. The left arrow points to the last consolidation area. The bottom of this consolidation is support. Now, the second arrow points to the candle that closes below that level. That is a telling break of the hourly support.

At first, you’re like ‘Who cares… one stock means nothing.’ That’s true. Now, I want to draw your attention to the same phenomenon on several other leaders.

Amazon looks significantly worse. Take a look at its hourly chart.

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AMZN Hourly Chart

You can see how Amazon already had the crossover occur. It went back to test the underside of the 30-period moving average before heading lower.

This stock looks much weaker and likely headed for the gravitational line.

Do yourself a favor, take a look around and see if you can spot some of these. They’re most prominent in the tech sector at the moment.

VIX Holding Its Ground

Under normal circumstances, the VIX and markets have an inverse relationship. This means that as the VIX climbs, stocks fall. When stocks rally, the VIX falls.

Right now, that’s not the case. We’re seeing the same markets up 10-20 points every day on the S&P 500. But the VIX isn’t playing ball. While it hasn’t rallied hard, it’s not dropping either.

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VIX Hourly Chart

I know that the VIX can fall lower than $12. Heck, it spent most of 2017 below $11. But when I see stocks rallying every day, and the VIX not rolling over, it makes me wonder.

Not to be left behind, the VVIX – which measures option demand on the VIX – is also rising.

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VVIX Hourly Chart

This is my favorite leading indicator for the markets. You can see how the VVIX already jumped and is about ready to create a money pattern crossover to the upside. That signals more demand for VIX options (normally calls), which should indicate traders buying protection against a downturn.

Safety Rally

Let me take it a step further and discuss the gold trade. Gold continues to be on an absolute tear. You often see traders stash money here when the market goes down as a ‘safety trade.’

Right now, we’re seeing a lot of buying in gold.

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GLD Hourly Chart

Initially, it looked like gold might roll over… and it still might. But it’s rallying while the rest of the market is as well. If it gets any more steam, we’ll see a bullish money pattern crossover here as well.

Let me give you one last piece of evidence to support my thesis. Bonds tend to trade inverse the stock market. While this isn’t always true – and certainly hasn’t been the last few years because of the Fed – short-term, you will see money hide there.

Right now, bonds look really bullish.

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My Conclusion – Hide The Kids

With so many stocks overbought, and a run that’s virtually gone on for 90 days straight, we’re due for a correction. 2018 ripped higher in January only to get throttled in February. That’s precisely what I see happening here.

I’m working with my Total Alpha Traders to get a portfolio that profits from the next move. You can join us before the big money is made.

Join me for my upcoming options masterclass. You get a full week of live education hosted by me.

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Jeff Bishop’s Total Alpha System | Jump on the Week

We are almost to the main event you’ve been waiting for… earnings season.

This week we get a deluge of corporate reports starting with our financial institutions. Will the banks confirm the Fed’s rosy outlook or will they be a bunch of Debby Downers?

This week’s jump begins with our favorite banks from Citigroup to Goldman Sachs giving their annual reports.

Unlike the quarterly earnings reports— annual reports give us more insight into a company’s performance and outlook.

The question we all have to ask – will earnings results reflect a market that is near all-time highs?

With the surge in equities we’ve seen over the last two months, things had better be smelling like roses.

Otherwise, we’re in for a blistery winter.


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The Impact of Low Rates

Banks need to face the reality of lower interest margin spreads for probably the next few years. Given this is a major source of income, plus any of them that dropped trading commission revenues, we have to ask how they plan on making any money?

When you yank back on the normal sources of profits, good old greed tends to take over and push players to bad actions. We need to look no further than the financial crisis from ten years prior. In fact, we’ve already seen an uptick in interest for those esoteric financial products.

Analysts currently forecast 7.3% earnings growth for Q4 with revenues growing at 1.2%. Through 2019, the S&P 500 Financial Sector (XLF) largely kept pace with the S&P 500 itself (SPY).

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SPY (Purple) vs XLF (Orange) Daily Chart

I’ll be especially interested to hear commentary on lending towards oil and gas drillers in the U.S. With reports that projects aren’t turning the production originally forecasted, I want to know if this is both true, the expected contraction in lending, as well as any banks with excessive exposure.

The other area of interest will be trading revenues. This helps me understand the shape of the trader’s market and the scale of passive investments.

The more money tossed into these follow-the-market ETFs, the more exposure I see to the downside.

How Bad Are The Transports

Normally, transportation stocks accelerate in a booming economy (or at least Dow Theory says so). Yet, this sector barely topped half the gains achieved by the S&P 500 in 2019.

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SPY (purple) vs IYT (orange)

Maybe it’s the hangover from the Amazon effect. But everything from rail to airlines fails to make headway, even when their oil input costs are at historic lows.

Something seems amiss here for me. We certainly haven’t become less of a consumer nation. Yet, the policy failed to help the manufacturing decline in the country, and I haven’t seen anything other than bustling airports.

I know of the driver shortage that’s plagued trucking for the last decade. But, either the transports are plagued by similarly inept management, there is some structural change affecting completely different areas all at the same time… or as I suspect, it’s the only sector telling us the truth.

Inflationary Data

Markets will retain their bullish tone until the Fed decides that their two-year experiment that’s grown into a decade long project needs to come to an end. Every piece of possible inflation brings us a look at how close we are getting.

With Consumer and Producer Price Indexes delivering data this week, I want to see how high they go, as well as how high the Fed is willing to take it. The 2% target now seems to be a suggestion, as Powell noted his willingness to let inflation push beyond the red-line.

And Lest We Forget…

There is always an opportunity for politicians home and abroad to screw up the markets with a tweet or a grand feat. While impeachment shouldn’t bring any surprises, everyone was caught off guard by the U.S.-Iranian conflict to start the year.

I don’t expect that we see any major kerfuffles from Brexit to Congress. But, that’s the thing about unknown events…you don’t see them coming!

Stocks on watch

Call spreads

NFLX, AMZN, AAPL, TEAM, FB, AMD, CRM, SWKS

Put spreads

TWTR, FANG, EXAS, TPX, BIIB, COST, ULTA, ZS, CMG, IWM, AMZN, HUBS, DIS, MJ, AYX, TLT, CVNA, PLNT, UVX

Want even more trade ideas?

Check out how I generate weekly income with Total Alpha.

Click here to learn more.

Week’s Calendar

Monday, January 13th 

  • Nothing to see here..

Tuesday, January 14th  

  • 7:45 AM EST – ICSC Weekly Retail Sales
  • 8:30 AM EST – Consumer Price Index December
  • 4:30 PM EST – API Weekly Inventory Data
  • Major earnings: Citigroup (C), Delta Airlines (DAL), JP Morgan (JPM), Wells Fargo (WFC), First Republic Bank (FRC)

Wednesday, January 15th

  • 7:00 AM EST – MBA Mortgage Applications Data
  • 8:30 AM EST – Empire Manufacturing Index for January
  • 8:30 AM EST – Producer Price Index for December
  • 10:30 AM EST – Weekly DOE Inventory
  • Major earnings: Bank of America (BAC), Goldman Sachs (GS), PNC Bank (PNC), United Healthcare (UNH), US Bankcorp (USB), Alcoa (AA), Blackrock (BLK),

Thursday, January 16th 

  • 8:30 AM EST – Weekly Jobless & Continuing Claims
  • 8:30 AM EST – Import Prices, Retail Sales for December
  • 10:00 AM EST – Business Inventories November
  • 10:30 AM EST – EIA Natural Gas Inventory Data
  • Major earnings: Bank of New York Mellon Corp (BK),
  • Home Bancshares (HOMB), Morgan Stanley (MS), PPG Industries (PPG), CSX (CSX), Ozark Bank (OZK), People’s United Financial (PBCT)

Friday, January 17th

  • 8:30 AM EST – Housing Starts & Building Permits for December
  • 9:15 AM EST – Industrial Production and Capacity Utilization for December
  • 10:00 AM EST – U. of Michigan Confidence
  • 1:00 PM EST – Baker Hughes Weekly Rig Count
  • Major earnings: Citizens Financial Group (CFG), Fastenal (FAST), J.B. Hunt Transport (JBHT), Kansas Southern Rail (KSU), Regions Financial (RF), Schlumberger (SLB), State Street (STT)

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Jeff Bishop’s Total Alpha System | Midweek Market Update

Tired?

That’s what many traders thought when describing this 11-year bull market run. And with geopolitical tensions rising, it felt on Friday we might see it breakdown.

Not only have stocks been able to shake-off the headlines—we’re back to all-time highs.

And you know what?

I positioned myself to capture gains no matter which way the market went. It just so happened this recent push higher helped me capture a gain of over $32,000 this past week in Total Alpha.

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Although the trade was doing quite nicely beforehand!

But now we have to ask – where does that leave us?

A look back in time

From the end of December 2017, markets ran four straight weeks higher, closing each week near the highs, and finishing up 7.5%, and 20 points on the SPY. The SPY then nosedived as much as 11.76% over two weeks before closing down 8.77%

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SPY weekly chart

Right now we’re only up 0.62% and about 2 points on the SPY. Using the closing print of $322.41 on January 3rd, a 7.5% run would put us up at $346.59. If we saw the same decline from that point, the SPY would fall to a low of $305.83 before closing at $316.19.

That doesn’t seem that bad from where we are now. But trust me, it feels like the end of the world at the time.

2018 isn’t that different from what we should see this year. That was another election cycle, albeit a smaller one. Plus, economic data improved markedly, which follows current expectations. The only downside was the market reaction to the Fed raising rates in December which created a panic.

A potential reversal in gold

For the past few weeks, we’ve seen gold march higher, even as stocks kept making new highs. Overnight gold futures spiked hard on the news of the Iranian attack. However, gold took the opposite road as the markets, doing a faceplant into the dirt.

What caught my eye was the weekly candle forming on gold futures.

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Gold Futures Weekly Chart

This is a pretty significant development. If gold closes out the week down at this level, it could mark a stark reversal in the yellow metal. That’s in contrast to the obvious bull-run that led the last few weeks.

Crude got the smackdown

The slow grind higher in crude futures hit a brick wall in a similar manner to gold. However, a correction in the commodity was long overdue…and I don’t think the bull run is over.

Here’s what I’m looking at.

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USO daily chart

First, I saw crude oil run down to and bounce off the 30-period moving average. That’s a positive sign for crude oil. I like to see charts hold the moving average. In this case, the 30-period moving average has held for several months.

However, even if that were to fail, there’s a nice trendline underneath that connects the lows of the candles. That comes right in near the 200-period moving average, which also provides support.

That’s why I like the oil and gas drilling sector (XOP).

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XOP daily chart

I do want to see a pullback, possibly all the way to the 30-period moving average. That would set this up nicely to make a run back up to the 200-period moving average and possibly beyond.

Bonds don’t look as bad as you might expect

Normally, bonds sell off when stocks rise. That certainly was the case yesterday. However, it wasn’t the tragedy that we typically see.

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TLT daily chart

The upper trendline that connects the highs of the swing points held once again, leading to a multi-day selloff in bonds. It certainly looks like they will head lower to at least the 200-period moving average.

Right now I’m eying the $130 area. It’s a nice round number that also lines up with an area of consolidation. That would be the ideal spot where I would expect to see support.

An interesting end to the VIX

At the end of the day markets gave up a bit of their gains. That happens from time to time. What I thought more important was how that translated to the VIX and VVIX.

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VIX Hourly Chart

The VIX itself made a double bottom and then took off back to the northside. That’s a bit more aggressive than the move we saw from stocks at the end of the day.

Similarly, the VVIX made a double bottom and made a stark reversal to finish down less than 1%.

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VVIX Hourly Chart

This could just be an anomaly. However, I think this plays out in the next couple of days. While we got a relief rally, these indicate that markets might want to pull back off this recent run.

So where does that leave us?

Still at the mercy of the Federal Reserve. As long as they keep expanding their balance sheet, stocks are free to move higher. That doesn’t mean we won’t see pullbacks along the way…and I’m certainly bulletproofing my portfolio.

I want to create a consistent stream of income from my Total Alpha Portfolio. That’s why I’m incorporating new trade ideas and strategies that let me ride the run and manage my risk.

You can learn these exact same tactics and trade today.

Click here to join Total Alpha.

With a market filled with so many twists and turns, I don’t think you can ever have a shortage of good trade ideas. My highest conviction trade idea is coming out in a few days, and if I’m right on this one, it could return a fast triple-digit return. Click here for the details.

Jeff Bishop’s Total Alpha Strategy | Managing a series of long and short positions

Volatility is BACK.

All you had to do is look at the Dow futures last night, which were down 400 points—only to see them trading flat this morning.

While most of the talking heads spent the first week of 2020 comparing it to 2018, and how this market was destined to go higher—politicians had another agenda.

So when the news of a potential conflict with Iran hit the news wire, I was prepared.

No… I don’t have any connections in Washington tipping me off.

I didn’t need to.

Instead, I maintained a balanced portfolio consisting of long and short positions.

Sure, I have a bias but I let my indicators and favorite patterns dictate where I put my money in.

But being balanced is just one way to navigate through a volatile market.

Being selective and finding low risk and high-reward setups is another recipe for success in this market.

As well as, taking advantage of opportunities specific to the current turmoil.

Why?

Because the market hasn’t priced in the real possibility of war.

If that happens, investors could find their portfolios upside down.

I don’t want that to be you. That’s why sharing my gameplan for trading a choppy, news-driven, and politically intensified market.

Managing a series of long and short positions

This year I plan to maintain a more neutral portfolio, where I carry long positions in some stocks, and short positions in others. Traders refer to this as ‘Delta’ neutral, where delta refers to the amount an option’s price will change per $1 movement in the underlying stock.

You can read more about delta and delta neutrality in my free article here.

The question I got after writing this article was which stocks do I choose to go short and which do I go long?

I select the stocks based on their individual charts and other qualitative information. For example, I’m usually bearish on Netflix ever since they reported poor earnings. Traders continue to sell into every resistance.

NFLX daily

The orange arrows note where the stock ran into resistance in several spots along the way. Each of these areas ran into resistance for different reasons. Here’s a few different ways that you can look for resistance areas:

  • Previous swing highs and lows
  • Fibonacci retracements
  • Moving averages (especially the 200-period simple moving average)
  • Consolidation areas
  • Gaps

These also work for finding support areas.

However, the most important component – trend. I always look at the longer-term trend for the chart. Most of the time, this dictates whether I’m short or long a stock.

Now, I also use a set of secondary factors to select the stock. These includes:

  • Liquidity (trade volume)
  • Sector
  • Options available
  • Relative strength

Ideally, I want a balance of trades across different sectors and stocks, unless I have a specific reason not to. That creates diversity in the trades and minimizes volatility in your returns.

Profiting from the Middle East Conflict

We’ve already seen crude oil prices take off on the news of the U.S. strike. However, crude had already been building a nice uptrend for the past few months.

USO daily chart

Most professional traders trade crude oil futures. However, I prefer to work with liquid ETFs like the USO. These ETFs offer me the flexibility of options and require less capital than futures contracts.

I also like to play stocks that benefit directly from a rise in crude oil prices. This includes oil and gas exploration companies and drillers. The XOP ETF works really well as a trading vehicle here.

XOP daily chart

This ETF already ran 20% since the lows in December.  Picking individual companies can be tricky. With tightening lending from U.S. banks, we could see a wave of companies go under. That’s why I prefer to use the XOP as a basket trade.

The other beneficiary from global conflict is gold. Investors love to stash their cash in gold as a ‘safety trade.’ Additionally, gold tends to rise when traders expect future inflation since gold is priced in dollars. With the Fed flooding the markets with easy money, this is another tailwind.

GLD monthly chart

You can see how Gold (through the GLD ETF) is breaking out of its consolidation pattern. That leaves a lot of runway to make its way towards the all-time highs set back in the early part of the decade.

The last option I like is defense companies like Lockheed Martin (LMT), Raytheon (RTN), Honeywell (HON), and others. If we enter into a prolonged conflict, these companies stand to benefit from any increase in government defense spending.

LMT daily chart

You can see how Lockheed Martin already spiked on the first event. Large scale events certainly benefit the company’s bottom line.

Incorporating this into my 2020 plan

My goal for 2020 is to create more consistent, dependable payouts from my trades. That involves a lot more market neutral strategies.

I’ll be diving into this each week with Total Alpha Members, showing them strategies that backtested an over 90% win-rate.

You can join the action by becoming a member of Total Alpha.

Click Here to Join Total Alpha (watch this webinar – BEST OFFER HERE!!!)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | How To Time Market Turns

The best traders appear to turn profits in any type of market condition.

What is the essential element all of them have?

Are they better at timing the market than the rest of us?

Or is it something deeper that we just can’t put our finger on?

Despite being Mensa certified, nothing came easy to me when it came to mastering the stock market.

To improve my trading. I began relying on analytical tools and stopped trading on hunches and other people’s ideas.

This discovery felt like unearthing a hidden treasure lost to the ravages of time.


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Total Alpha Trading

FULL DETAILS HERE


However, traders treat these tools as a panacea for market tops.

That’s where they go awry. These tools only tell you where potential turns are likely. There’s no guarantee they will happen.

However, the more evidence we gather that a turn is due, the higher the chances of one occurring.

Take the Warren Buffett Approach for Longer-Term Trends

We’ve all heard the parable from Warren Buffett – Be fearful when others are greedy and greedy when others are fearful. No truer words were spoken that remain applicable to trading throughout the years.

Sentiment indicators help traders identify when general opinion has become too bullish or bearish. There are a few different ones out there, so I’ll just cover their basics.

Social media sentiment indicators look at mentions and trends on social media that indicate bias. They use algorithms to comb through data and label them to each category. A sentiment indicator is presented based on some calculations using the data.

The problem with these indicators is they don’t represent actual trades. They look at social media feeds, which may or may not correlate to actual market moves. I only consider these at the periphery.

Instead, I focus on the consumer sentiment index published by the University of Michigan. They conduct a rigorous survey to approximate consumer attitudes towards the economy. I like the history behind this, which gives a lot of context to the data. When sentiment hits overly bullish records, I start to question things

My favorite metric is the simple price to earnings ratio of the S&P 500. While this can stretch pretty far, it tends to trade within a range.

The last 20 years really changed the dynamic of what was acceptable. Prior to 2000, stocks generally traded in a range of 10x-20x earnings. Now we’re at an estimated 24.28x earnings.

Short-term Indicators

Not everyone wants to play the long game. That’s why we have some indicators I use intraday and daily to time my market approach.

The NYSE Tick chart helps me look at market breadth. It compares all the stocks declining to all those advancing. That gives me a sense of whether the market rallies or declines are broad-based or focused on a few stocks.

NYSE hourly TICK chart

This only really works intraday. It’s not something that works between days.

My other favorite indicator – because I’m an options trader – is the put/call ratio. The main one I look at focuses on the volume of calls to puts on a basket of stocks. You can also look at ones on the S&P 500 as well.

When I see the index rising, it’s an indication that we’re nearing a capitulation point. Traders are piling into protection, leaving a lot of risk for a snapback. Conversely, a low ratio indicates complacency among investors. They aren’t preparing themselves for a potential downdraft.

The #1 Indicator – The VIX

Up high on Mount Olympus sits the VIX. No other indicator tells me more about market turns than the VIX. Because of its mean-reversion tendencies, anytime the VIX hits extreme levels for too long peaks my interest.

Here’s the trick – you want relative extremes in the VIX. Back in 2017, we had excessively low levels in the VIX for the entire year.

VIX weekly chart

However, there were still opportunities to find turns when the VIX hit new lows or highs…places it hadn’t visited for quite a while. I couple that with the VVIX, which measures volatility on the VIX, to give me a sense of when the VIX will turn.

VVIX weekly chart

You can see how even though the VIX itself didn’t move much, the VVIX highlighted the changes loud and clear. That’s why I look at both of these, in tandem, to give me the clearest sense of the market turns.

The most money is made when the market crashes

Some of the wealthiest traders made money off market crashes. They timed their entries and pressed their advantage. I plan to do the same thing.

You can see exactly how I do this by joining Total Alpha.

All my trades will be streamed live for you to see.

Click Here to Join Total Alpha (watch this webinar – BEST OFFER HERE!!!)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Jump On The Week

A strong November jobs report surprised the market on Friday and sent stocks surging higher. The surprise report showed payrolls adding 266,000 jobs in November, dropping the unemployment rate to its historic low of 3.5%. The Dow gained 300 points on the number, and Apple hit an all-time high ($270.71).

The stage is now set for the upcoming Federal Reserve meeting which is scheduled for the 12th.  While they are not expected to touch the key interest rate level—their comments are sure to drive the market in one direction or another.

Now, that doesn’t mean I’ve been sitting around and waiting for this Fed event.

No…No…No

In fact, it’s been business as usual for the TA portfolio:

Total Alpha is the only service where you can find me utilize all my options knowledge and strategies I’ve acquired over the last twenty years. Not a subscriber and would like to join? Click here to get started.

That said, there is plenty to go over in this issue of The Jump—  I cover the economic calendar, corporate events, IPOs. As well as, my thoughts on the trade deal,  current positions, and trades I’m looking to get into.

The Looming Trade Deadline

While there’s no shortage of rumors surrounding trade talks, we have yet to hear anything concrete. So far it’s one political posture after another. Yet, that all stops dead on December 15th.

Without a deal, the administration is set to raise tariffs on Chinese imports right in the middle of the Christmas season. To add insult to injury, these will directly target many of the consumer gifts purchased. While it will take a while for the pricing to roll through, it smacks of bad taste to come across as Ebenezer Scrooge.

Agricultural purchases appear to be the biggest hangup at the moment. China refuses to be tied to a specific purchase amount, something the Trump administration is dead set on. There could be other underlying problems, but it remains largely unknown.

What we do know is the closer we get to the deadline, the more rumor will be treated as fact. That means every tweet could drive the market haywire in seconds.

Impeachment Showdown

The U.S. House of Representatives plans to draw up and vote on articles of impeachment before the holiday recess. Complaints on process and procedure are largely being ignored. The narrative has become extremely partisan, with neither side backing down.

However, the Senate appears rather serious about the entire matter. Neither side wishes things to devolve into the circus that’s hung over the House. Republicans and Democrats largely agree they want a civil trial, regardless of their personal feelings.

Still, the pressure and presence of the showdown could push the president into rash decisions. That could make a budget deal difficult. But neither the administration nor congress wants a shutdown this time. If anything, they will pass a continuing resolution to fund the government at current levels.

Don’t Forget British Politics

December 12th also marks a special day for the UK to go back to the polls to see if they can break a deadlock in parliament. Polls currently show little change, which makes continuing in action all the more likely.

World’s Largest IPO

And don’t forget about the world’s largest IPO that you can’t invest in. Aramco set its public offering on December 11th. With an estimated value of $1.7 trillion. That also comes on the back of news OPEC and some non-members working to hammer out an agreement to keep oil production in check in a bid to raise prices.

On watch…

Call spreads

NFLX, AMZN, TEAM, FB, CVNA, AMD, PTON

Put spreads

TWTR, WYNN, FANG, EXAS, TPX, BIIB, COST, NKE, TSLA, ULTA, ZS, CMG, SMG, IWM, GOGO, AMZN, HUBS

Want even more trade ideas?

Click here to learn more about Total Alpha

Next Week’s Calendar

Monday, December 9th 

  • Major earnings: MDB (Mongo Database), TOL (Toll Brothers), SFIX (Stich Fix)

Tuesday, December 10th 

  • 4:30 PM EST – API Weekly Inventory Data
  • Major Earnings: AZO (Autozone), HDS (Home Depot Supply), PLAY (Dave & Busters), GME (Gamestop)

Wednesday, December 11th 

  • 7:00 AM EST – MBA Mortgage Applications
  • 8:30 AM EST – Consumer Price Index – Looking at any signs of inflation
  • 10:30 AM EST – Weekly DOE Inventory Data
  • 2:00 PM EST – Fed Decision – It’s not what they do, but what they say
  • Major earnings: AEO (American Eagle), PLCE (Children’s Place), UNFI (United Natural Foods), VRA (Vera Bradley), TLRD (Tailored Brands)

Thursday, December 12th 

  • 8:30 AM EST – Weekly jobless claims and continuing claims
  • 8:30 AM EST – Producer Price Index
  • 10:30 AM EST – Weekly EIA Natural Gas Inventories
  • Major earnings: CIEN (Ciena Corp), ADBE (Adobe), AVGO (Broadcom), COST (Costco), ORCL (Oracle)

Friday, December 13th 

  • 8:30 AM EST – Import & Export prices for November
  • 8:30 AM EST – November Retail Sales – Good look at how we did to start the shopping season
  • 1:00 PM EST – Baker Hughes Weekly Rig Count

Major IPOs This Week

  • Bill.com Holdings (BILL) 8.8M shares expected to price between $16-$18
  • OncConnect Financial (OCFT) 36M shares expected to price between $12-$14
  • Sprout Social (SPT) 8.823M shares expected to price between $16-$18
  • XP Inc. (XP) 72.5M shares expected to price between $22-$25

Click Here to Join Total Alpha (watch this webinar – BEST OFFER HERE!!!)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | Navigating the Tariff Trade

Make no mistake about it, there has been a lot of talk about tariffs this year—learning more about them will only make you a better trader. After all, it never hurts to understand the headlines driving the market.

Why?

Because trading off the wrong headline can cost you money.

For example, stocks came off all-time highs last week but fizzled after it appeared that we wouldn’t be close to reaching a trade deal with China.

So when the sell-off hit Monday, I stepped in to buy the market for a quick trade.

This was the view of my Total Alpha account midweek

But before I get ahead of myself, and explain how you can profit off the tariff news. It’s important that we go over the basics first, understand what tariffs are on what their impact on the global economy is.

Tariff 101

Chances are you haven’t heard the term tariff thrown around this much since you studied American History in high school.

Remember the Boston Tea Party? A little tariff imposed on America was one of the few triggers that started the American Revolution…3 pennies per pound.

Well, brace your yourself. It’s the end of the decade and the future in front of us seems to hold new tariffs as well as a war of the trading variety.

A tariff is a government tax on imported goods. The result is the price of foreign goods gets higher.

The usual reasoning behind tariffs is that countries use them to either limit imported goods or to even out the pricing between foreign and domestic products. Sometimes both.

Why Is Tariffs News Now?

The U.S President made plans to hike tariffs billions of dollars’ worth of China’s imports, steel imports from Japan, Eastern Europe, and several other countries, as well as threatened tariffs on German autos. He delivered these under the authority granted to him under the heading of national security risks. This even extended to American dairy.

Chinese imports undercut two major industries in the U.S. The result is the U.S. margins are getting driven down constantly and the U.S. market is flooded with China’s goods. There’s also been an ongoing issue with intellectual property theft that’s been a headache for decades.

The belief behind the tariffs is two-fold. First, it evens the playing field for subsidized industries in other countries, including Chinese businesses. Second, it provides leverage for the administration to demand controls on intellectual property theft.

Deep In Bed With China

Last year the U.S. imported $540 billion worth of goods from China. A majority of what we imported were cellphones, computers, and what’s on your body and feet. In return, China imported only $120 billion of U.S. goods. Putting a spotlight on how far from a 2-way street we are. And this has been happening for years!

To top it off, China OWNS 28% of the U.S. debt it owes to foreign countries, making it one of the largest foreign investors in U.S. treasuries.

But wait, there’s more! As of this spring, China owned $1.1 trillion of the U.S. debt.

The Tariff Effect

So, what do these tariffs mean for us, billions of dollars on Chinese goods?

Initially, it raised prices on most consumer goods. I expect retail prices to climb, causing sales to drop. Low wage growth makes exacerbates this dilemma.

But American companies can’t keep up with the low prices of Chinese products. Labor costs make China more competitive for resource-intensive goods. They are forced to choose between lower margins or finding cost offsets.

Yet we may not be able to handle the demand. U.S. steel production has declined over the last 50+ years. That reduced overall production capacity. It’s not a simple matter to turn on production that offsets the imports.

Brace Yourself

For years and a couple of presidents, Americans were told more jobs are coming. But with higher tariffs looming, many companies would rather cut costs at home than pass that cost on to the consumer. This means fewer jobs which adds fuel to speculation of a possible recession.

In the meantime, everyone is waiting to see if December tariffs get signed. There is a very real chance they won’t be, at least this year, mainly due to the impending election year on our heels. These tariffs could hurt our president’s reelection odds if things take a turn for the worst.

There is no deadline set for the trade deal, just that it will be completed when the president is good and ready.

China isn’t the only country in the cross-hairs of tariffs of the future. Brazil and Argentina are potential targets. Just this month our president tweeted “Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.

How to Navigate

Steel companies leveraged to U.S. production benefit from protectionist measures. Make sure you understand which ones manufacture in the U.S. versus outside. Those with greater global exposure are more unpredictable.

Chinese American Depository Receipt (ADR) trade directly with the hopes of a deal. Companies like Alibaba and JD.com move higher on lower tariffs. Lower tariffs increase U.S. consumption of Chinese goods. This leads to higher GDP outputs, which in turn drives growth in these Chinese companies.

It remains unclear if the U.S. economy will sustain long-term damage from the tariffs. So far, it’s shown solid growth in the face of global stagnation. For now, I focus only on news that states a deal is or is not done, and nothing in between.

Catch the trades in real-time

Total Alpha members get to watch how I play these minute by minute. They saw me crush a $71,000 trade just the other week.

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Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | Midweek Market Update (12/5/2019)

Congratulations, you’ve almost made it through the trading week…and what a roller coaster ride it’s been! Let’s get you squared away with where things stand after some wild market action with the midweek market update.

The SPY managed to fill the gap today left open from Monday’s massive decline. That comes after a sharp reversal Tuesday that took most of the day to play out.

SPY hourly chart

Earlier this week, I said I expected the market to make its way to the hourly 200-period moving average…which is exactly where it stopped. And I will put my money where my mouth is.

Total Alpha Portfolio midday yesterday.

That’s why I look at the other markets, including Bonds, Gold, and the Dollar, for additional information.

Equity winners – Small caps, energy, utilities, and consumer staples

As I outlined at the beginning of this week, I expected small caps to outperform the broader market. The weekly close above the trading range that bound it all year told me it wants to move higher.

IWM weekly chart

We’re already seeing the IWM outperform the SPY by 0.15% in the last three days. That’s come at the expense of the QQQ, which underperformed by 0.32%.

The real high flyer comes from the least likely of places. Energy stocks (XLE) are down a paltry 0.36% compared to the SPY 1.02%. Much of that comes on the back of rallies in both natural gas and crude oil.

XLE hourly chart

Crude oil itself is up 5.17% this week. However, it finished down 4.75% last week when the SPY gained 0.75%…so it’s really just playing catchup and adding a bit to the top.

Natural gas looks more like an oversold bounce. The commodity fell a whopping 17.09% last week, creating a pop this week of 3.97%. It’s got a very long way to go before it shows any semblance of strength.

Utilities continue to perform well alongside bonds. The cheap yields in treasuries force safety investors to search for return, which often drives them into high dividend stocks.

XLU hourly chart

Those with a little more risk tolerance tend to stick with consumer staples. They may have smaller dividends, but offer more exposure to growth.

XLP hourly chart.

Safety Trade Outperformance

Bond ETFs also performed exceptionally well off the back of equity declines, up 1.2% for the week.

TLT hourly chart

This is a crucial hint. For the majority of the year, bonds and stocks traded together. We only saw them decouple and trade opposite one another this week (historically normal behavior).

Following a close second are the gold ETFs. GLD climbed 1.17% this week so far.

GLD hourly chart

Poor performers – The Dow, transports, and the dollar

The biggest loser this week so far has been the Dow Industrials (DIA). Though a small index, it’s down 1.58% on the week.

DIA hourly chart

The real loser this week has been transports. They’ve been just obliterated. The IYT ETF is down 2.88%, nearly double the Dow’s performance.

IYT hourly chart

This could be a harbinger of doom for any Dow theorists.

The real head-scratcher is the dollar. No matter when you looked, the dollar had been the strongest performing area week after week, month after month. So it’s a bit shocking to see it down 0.68% on the week.

UUP hourly chart

That may not seem like much to you. But it’s almost a third of the monthly range.

Go no-where – Healthcare 

Here’s an oddball for you. Healthcare stocks are flat on the week. It’s impressive given all the political drag this sector has.

XLV hourly chart.

Most volatile – The VIX

Last week, the VIX printed prices under $12. That’s extraordinarily cheap…and it indicated complacency among investors. It’s not a surprise that the VIX shot up nearly 41.77% at its peak this week, while still settling up 16.63%.

VIX hourly chart

My analysis – we’re heading lower before we head higher

Let’s look at the facts:

  • Equities haven’t seen a selloff since…well it’s been a while
  • Investors didn’t buy enough protection
  • Stocks rose on little volume
  • Now, the VIX shoots through the roof, and all the safety trades outperform
  • But the dollar is noticeably weaker

It’s pretty clear that we’re seeing money move into the safety trades after a monster run. However, even though the volume on the downside was much higher than the upside, it’s still pretty light.

Outside of a news event, we’ll likely float sideways to higher through the end of the week. From there, I expect we’ll see one last push lower before we get our Santa Clause Rally.

How I plan to profit these next two weeks

That’s for me to know and Total Alpha members to find out. There’s plenty of egg nog…so pull up a chair.

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Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | The Best Ways to Short Volatility

I wasn’t surprised to see volatility return after the signals the market was throwing last Friday – the VIX spiked over 7%, the markets had a mini-selloff, and a few stocks ran into liquidity issues on Wednesday.

Traders must have realized their mistakes, as they pushed the VIX up nearly 20% at one point yesterday.

A quick look at stock futures this morning, and it looks like we’re in for a potential bloodbath.

Yesterday’s VIX hourly chart

While the financial media might try to strike fear in you if the selling pressure continues. I want you to know one thing—this is the time experienced traders clean up.

I want to show you how I structure and enter my trades to short volatility at the highs.

My weapons of choice?

Volatility ETNs like VVIX, and UVXY.

And you know what else?

Today’s environment sets the table for a potential trade.

I use VVIX to time my entries into the market and play option trades on leveraged ETFs like the UVXY.

Most people don’t realize the VVIX’s forecasting power. I’ve used it over and over to time market lows and ride the strong bounces.

Combine this with options trading, and you’ve got a winning strategy.

Let’s get to it, shall we?

Why this trade works

I want to quickly explain the reasoning behind this strategy. It will help you understand how to put things together.

The VIX measures the annualized volatility expectations for the S&P 500. Its dollar value represents the expected percentage change. So, a $15 value equals a 15% change in the market. The CBOE derives the value from all of the put in call options on the S&P 500.

This doesn’t mean it expects a 15% move within 30 days. Rather, it says if you annualized the expected move over the next 30 days, it would equal 15%.

There is always an underlying assumption of volatility in the market. That’s why it always reverts back to its mean around $15.

You can see it on a quarterly chart below.

VIX quarterly chart

Timing the trade

The key to timing this trade is using the VVIX. This index measures the volatility of the VIX. Simply put, it measures option demand on the VIX.

Just like the VIX, the VVIX is mean reverting. You can see how this works on the monthly chart below.

VVIX monthly chart

Note: The VVIX isn’t as old as the VIX. Hence why there’s less data.

I look for the VVIX to enter a zone above $115.00. That is the signal that volatility is overbought, and I want to go short. This trade doesn’t set up all that often, maybe a few times a year if you are lucky. But it has an extremely high probability of success when you play it right.

Structuring the trade

I like to use leveraged ETF’s for my trade. They have a natural decay working against them on top of mean reversion. The UVXY works great for this strategy. It tracks 1.5x the movement of short-term volatility.

My trade of choice is to sell call spreads. This puts me in the driver’s seat for the entire trade. I control my risk, as well as put myself at a statistical advantage from the outset.

A call spread is easy to execute. You start by selling a call option at or above the current stock price. Then, you buy the same number of option contracts at a call strike that is higher than the first call strike. Both of these must have the same expiration date.

Here’s a quick example:

  • The UVXY trades at $35.
  • I want to sell 10 contracts of the UVXY for an expiration 30 days from now at the $36 strike price.
  • Then I buy 10 contracts of the UVXY for an expiration 30 days from now at the $37 strike price.

When you execute this trade, you receive a credit (payment) to open the trade. The goal is to have the UVXY trading below the lower strike price at expiration. You can also close the trade early for a portion of the total profit.

Let’s use the previous example to break down payments.

  • I sell 10 contracts of the UVXY for an expiration going out 30 days at the $36 strike price.
    I receive $2.00 for the sale.
  • Then I buy 10 contracts of the UVXY for an expiration 30 days from now at the $37 strike price.
    I pay $1.50 for the purchase.
  • My maximum possible profit is the difference between what I sold and what I paid.
    Max profit = $2.00 – $1.75 = $0.25 per contract
    This comes out to $0.25 x 10 contracts x 100 shares per contract = $250
  • My maximum possible loss is the difference between the strike prices less the amount I received.
    Max loss = $137 – $136 – $0.25 = $0.75
    This comes out to $0.75 x 10 contracts x 100 shares per contract = $750

So my maximum profit potential is $250 and my maximum possible loss is $750.

In this trade I like to have a risk to reward of 1 to 1. That means I want to set up the trade so that my maximum profit and maximum loss are equal.

I go for expirations that go out at least a month or more. That gives me time to take off the trade early at a portion of the maximum profit. Remember, you don’t have to wait for the maximum profit to close the trade. Getting 50% of your possible profit is great!

Want to see it in action?

Then check out Total Alpha. You get to watch my streamed trades live. This lets you follow along and learn in real-time.

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Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Program | How to Make $71,000 in One Trade

I love it when other traders leave early on Friday. The less competition, the better…that leaves more for me! They don’t know what they’re missing.

My highest profit trades often come when no one is looking—and last Friday was no exception.

Despite the anemic trading volume and the slow grind we were experiencing—my money pattern pointed me to an interesting opportunity in Biogen Inc (BIIB).

A setup that doesn’t come across too often… but one I pounce on whenever I see it.

Total Alpha members got to trade alongside me in real-time!

These trades happen all the time…most people just don’t know how to take advantage.

And while it takes discipline, patience, and practice to make them work. They become a lot easier to pull off—once you know what to look for.

But I’m here to tell you that anyone can flip trades like these. Let me walk you through how I analyzed and executed this trade and how you can harvest profits.

Watch for unusual price action

Friday’s trade came off atypical volume for Biogen (BIIB). While the rest of the market went to sleep for the remainder of the day, Biogen saw colossal interest in trading midday.

Shares rallied over 2% in a matter of minutes. That’s pretty unusual given the light volume and size of this stock.

BIIB 5-minute chart

Check out how shares jumped up on a tremendous amount of volume. There are some notable pieces here.

  • Shares spiked and retraced back from $300. Large numbers will often act as support and resistance. It’s no more complicated than people find it easy to place orders there.
  • Before the move, the stock had a strong uptrend. This is important as I wanted to trade with the stock and the broader market, not against them.
  • On the 5-minute time frame, price retraced back into the 13-period simple moving average. This was very close to the 30-period moving average, which should act as support.

I expected price to come off its high and retrace part of the move – then float higher into the end of the day. Ideally, that sucks out a lot of potential orders, leaving those that would mainly shove it higher.

So now that you’ve got the basic outline of the trade, let’s talk about how I set it up.

Scaling made this possible

I’ve said it before, and they’ll write it on my gravestone – risk management is the key to success!

Scaling into this trade is the only reason it worked. While my profits hit $71,000, my drawdown took me down $25,000 at one point.

If the numbers dazzle you think of it this way – I had a total risk to reward of 1 to 2.84. That’s a pretty standard trade. You don’t have to put big money into a trade like this. However, with multiple factors working in my favor, I felt that it had an extremely high probability of success.

Note, I didn’t plan to lose much more than the $25K drawdown in this case.

First, it’s important to note that I never want to do worse than a 1 to 1 risk to reward. Anything worse doesn’t mesh with my trading style and strategies. Scaling the trade lets me improve those odds.

For argument’s sake, let’s say the swing high was $302, and the breakout area was $294. That means I don’t want to enter the trade before the midpoint at $297. From there, I want to scale in all the way down to $294.

However, you don’t always want to stop out at the low point. Oftentimes (as happened here), the stock will pierce through the low before resuming its trend. So, I prefer to use one or two closes below the low on whatever time frame I’m trading.

In this case, you can see how I scaled both into and out of the trade:

My initial entry started at 80 contracts at $2.20. I added 100 contracts at $1.45. My final purchase of almost 100 contracts was about half the capital of the previous two trade sizes.

From there, I did the exact opposite scaling out at $3.20, $4.00, and $4.50. That allowed me to capture more of the move than if I simply sold at $3.20.

Scaling works because none of us know precisely where the stock will stop on the upside or downside. Instead, we assume we’ll get it wrong and adjust our trading accordingly.

Stuff your pockets with cash

It doesn’t matter whether you’re a new trader or have years of experience. Total Alpha will help you become a better trader and find big scores like these.

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Source: TotalAlphaTrading.com | Original Link