In today’s trader tip video, Brian talks about why you should trade the SQQQ in the bearish market that we are in. The SQQQ is a triple leveraged inverse ETF, inverse to the QQQ. SQQQ has excellent liquidity in both the shares and the options.
One way to take advantage of that expensive option premium is a Call Diagonal Spread. In this volatile market, what we are looking to do, is roll this forward with a short call a couple of times. We can also collect some additional credits against that.
TO LEARN MORE ABOUT THE SQQQ – WATCH THE VIDEO
Subscribers: Please let us know what you would like to learn and we will add it to the roster of our weekly Technical Trader Tips!
Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!
TO EXPLORE THE Total ETF Portfolio, PLEASE VISIT US AT The technical traders. You’vE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!
Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-27 07:53:542022-05-27 07:53:56Why You Should Trade SQQQ – Trader Tip Video
Traders have access to an overwhelming amount of market indicators. But does a trader really need any of these indicators to be successful at trading? At the end of the day, the price determines our loss or profit. Therefore, we should focus our research on price action rather than time lagging indicators or market fundamentals.
Following and trading price simply means that the market tells the trader what to do and not the other way around. Being one with price deposits money into a trader’s account. Whereas fighting price withdraws money out of a trader’s account. The price action is “Always” right as it does not care what a trader’s opinion or bias is.
Bull markets can go on for many years, but bear markets happen unexpectedly and can quickly destroy a trader’s profits or even their account. Bear markets move with a greater velocity than bull markets and they are accompanied by high volatility due to investor emotions (Fear, Greed, & Hope).
The simple definition of a bear market is a drop in price of -20% or greater from its recent maximum peak. Therefore, once a market drops -by 20% or greater, it is a bear market.
SUDDEN BIG price action UP DAYS CAUSE “FOMO”
Bear markets behave differently than bull markets in that bear markets are known for having sharp rallies. These rallies may last from 1-2 days to a few weeks. When these rallies occur, they tend to be an irresistible trap for many investors who are experiencing the fear of missing out “FOMO” syndrome. Institutions and professionals use “FOMO” to liquidate existing holdings and/or short the market.
History has shown that some of the greatest stock market percentage gain days have occurred during bear market periods. The following table is from Wikipedia and shows us that most if not all the extreme daily percentage gains or losses occurred within bear market time periods.
LIST OF LARGEST DAILY CHANGES IN THE S&P 500 INDEX
“SUCCESSFUL INVESTING IS A BATTLE FOR FINANCIAL SURVIVAL” – G.M. LOEB
Volatility generally has ruined many investors and traders. It’s one thing to trade a stock that experiences a 1-3% daily move. Trading in a stock, however, that is swinging 5-10% or has a sudden earnings surprise gap down of -20% is dangerous as it has the potential and high probability of eventually bankrupting most trading accounts.
Gerald Martin Loeb (July 24, 1899 – April 13, 1974) was a founding partner of the E.F. Hutton & Co. brokerage firm, acquired by Shearson Lehman Brothers in 1987 for almost $1 billion. He was a renowned wall street trader and the author of The Battle for Investment Survival (www.Amazon.com).
Loeb stated: “When I started investing about 1921, it seemed a peaceful enough occupation. By 1943, I started calling it a “Battle”, though a lot of people might have used the term much earlier from 1929 to 1932. But now in 1957, it seems to be a “War”.
Here are some relevant quotes for our current market environment from Loeb’s book:
“I favor doing one’s major forecasting from the tape or, to put it another way, from the price movement.” “This to me is elemental and necessary to success.”
“The preservation of capital should be looked upon as something that normally costs a price.”
“It is far better to let cash lie idle than to buy just to “keep invested” or for “income”.”
“Losses must always be cut. They must be cut quickly, long before they become of any financial consequence.”
“The lessons of the 1923 stock market break taught me what I had to know to not get caught in the crash of 1929 to 1932.”
“There have been at least 8 periods since the turn of the century (1000) when the stock market, as measured by the Dow Jones Industrial Average, has dropped as much as 40%.” “It has happened before and of course will happen again.”
Let’s review and study some current markets that are now in a bear market.
SPY S&P 500 -20.58%
SPY S&P 500 ETF – The SPY has experienced a sharp -18.04% sell-off during the last 51-days. Even though the SPY has not closed below the dreaded -20% peak-to-trough level, price action has violated this level intraday.
If or when we are fortunate enough to get a sharp multi-day rally back up, we should be looking to liquidate any stocks that we are still holding. Depending upon the rally magnitude a trader may want to consider buying an inverse ETF of the SPY such as SH ProShares Short S&P 500 Inverse ETF (-1x).
Market volatility remains high, and history has shown it may expand considerably. For most traders, the best advice is to go to cash and ride out this storm from the sideline. In case you think this statement seems extreme please review the accompanying stock charts.
SPDR S&P 500 ETF TRUST • SPY • ARCA • 4-HOUR
DEERE & COMPANY -29.01%
Deere (NYSE: DE), is a major American multinational manufacturer of farm machinery and industrial equipment.
Deere’s price action, after taking out a 10-month triple top and making a new all-time high, plunged by -29.19% in just 30+ days. This is the worst drop in 14-years as Deere cited supply chain snags, rising inflation, and unfavorable currency translation headwinds.
DEERE & COMPANY • DE • NYSE • 4-HOUR
TARGET CORPORATION -43.42%
Target (NYSE: TGT), is an American department store chain and the eighth largest retailer in the United States.
Target’s price action has dropped about -40% in the last 30-days including a whopping -25% a single day. Target had missed its earnings forecast by -$1.50 citing inflation, and supply chain factors. This was the biggest loss in Target’s stock price since 1987.
TARGET CORPORATION • TGT • NYSE • 4-HOUR
ROSS STORES INC -47.23%
Ross (NYSE: ROST), is an American chain of discount department stores.
Ross price action has dropped more than -35% in the last 30-days including an opening price plunge of just shy of -25%. Ross’s massive opening price drop was precipitated by the company’s first-quarter 2022 earnings update where they reported comparable-store sales declined -by 7% due to inflation pressures impacting the retail consumer.
ROSS STORES INC • ROST • NASDAQ • 4-HOUR
TESLA INC -48.95%
Tesla (NASDAQ: TSLA), is an American automotive and clean energy company that designs and manufactures electric vehicles, battery energy storage from home to grid-scale, solar panels and solar roof tiles, related products, and services.
Tesla’s price action has dropped more than -44% in the last 45-days. Only a few months ago Tesla’s market cap was over $1 trillion. At its current level, Tesla’s market cap is now $687 billion which represents approximately a $400 billion loss in value from its early January 2022 high.
TESLA INC • TSLA • NASDAQ • 4-HOUR
LEARN more about price action FROM OUR TEAM OF SEASONED Traders
In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.
Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.
Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:
A loss of 10% requires an 11% gain to recover
A 50% loss requires a 100% gain to recover
A 60% loss requires an even more daunting 150% gain to simply return to break even.
Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover.
Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.
HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY
At TheTechnicalTraders.com, my team and I can do these things:
Reduce your FOMO and manage your emotions.
Have proven trading strategies for bull and bear markets.
Provide quality trades for investing conservatively.
Tell you when to take profits and exit trades.
Save you time with our research.
Provide above-average returns/growth over the long run.
Have consistent growth with low volatility/risks.
Make trading and investing safer, more profitable, and educational.
We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies which include a real estate ETF. We can help you protect and grow your wealth in any type of market condition. Click the following link to learn more: www.TheTechnicalTraders.com
Chris Vermeulen Chief Market Strategist Founder of TheTechnicalTraders.com
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-27 07:49:492022-05-27 07:49:52Let Price Action Show You What To Do In An Approaching Bear Market
You bet there is, and I will touch on what real estate investors need to know shortly, but first, let us review the following.
We follow the US and Canadian real estate markets closely. Real estate is a very slow-moving asset, and it’s not always that exciting. When we receive our monthly rental property checks each month, it’s almost as boring as watching paint dry.
But, any wise investor knows that consistent and sustainable wealth is built over time and pays huge dividends down the road. This means that in 10 – 20 years, the rental properties will be paid off by the renters. The home values will be 1-4x more valuable, and it provides cash/income for life.
I invest in real estate and think it’s one of the best long-term investments, beating out the stock market if you were to factor in risk/volatility. But there are times when buying real estate is not so good, and 2022 is one of those years.
In one month, real estate fell 14.7% in parts of Canada and the USA. In fact, the IYR real estate ETF fell 15% as well which helps confirm this during the same time window.
Here is some proof from the town where Technical Traders Ltd. is based.
My question to you is if you think it is wise to pay al time highs for a property or wait for another 15-25% correction before investing in a new home or rental property?
The US stock market contracted sharply in early 2022 while traders attempted to identify the risks associated with the US Fed rate increase. Behind the scenes, real estate investors and homeowners are under pressure due to higher costs on nearly everything. Gas, food, everyday items, credit card interest payments – almost everything costs more due to inflation and increasing fuel costs.
I remember in 2007-08 when Oil reached levels above $140ppb and the seemingly high costs of everything just before inflation peaked and the markets turned bearish. Back then, much like today, a period of extreme speculation seemed to permeate buyers and investors throughout the US.
What broke this trend was the Global Financial Crisis. When the economy started to unravel, excessive credit/debt levels suddenly became unmanageable for nearly everyone. What seemed like a reasonable and manageable amount of debt suddenly became excessive as the US Fed raised the Fed Funds rate from 1.0% to 5.5% – a 450% increase.
Recently, we’ve seen the US Federal Reserve raise rates from 0.25% to 1.0%. The Fed may raise rates again soon, trying to tame inflation. I don’t have a crystal ball, but it is not difficult to understand how inflation, higher consumer costs, and increased debt servicing costs are going to panic many real estate investors, especially after many years of ZIRP and low inflation.
real estate investors and homeowners Burdened By Higher Costs & Dwindling Incomes
US investors are struggling to manage their finances as inflation and higher cost of living expenses continue to eat away their extra cash. Remember, what happens on a consumer/retail level is often the “canary in the coal mine” type of scenario related to broader economic trends. As consumers shift their spending habits, news travels quickly to other consumers about how the economic conditions are threatening their future.
The extreme measures taken when COVID-19 hit in February 2020 helped many real estate investors and homeowners, and consumers survive the extreme economic contraction that took place. Now that we are beyond extreme measures, prices have risen more than 25% over the past 24+ months for almost everything. Investors are struggling to manage their monthly expenses while still trying to enjoy their lifestyles.
A recent article highlighting former Federal Reserve Chairman Ben Bernanke suggests the current US Fed waited too long to address inflation issues. The steps now necessary to tame inflation could be very painful going forward. I see this as a very clear warning for traders/investors to keep their assets very liquid and to reduce their exposure to risk factors.
New Mortgage Demand Collapses As most real estate investors Are Priced Out Of Buying Homes
Sharp declines in mortgage demand is indicative of a collapse in consumer confidence and willingness to believe the economy is going to continue to grow. The warnings from the US Fed, as well as signs that international market conditions are deteriorating quickly, have US consumers and property owners on edge – watching for the next shoe to drop for real estate and home prices (again).
US Fed On Target For An 1100%+ Rate Increase Over 4+ months – Fastest In Recent History
The US Federal Reserve has continued to suggest further rate increases are necessary to help tame current inflation trends. By many conservative estimates, the US Fed is targeting levels at or above 2.0%. These extremely aggressive targets would represent the fastest and potentially largest rate increase in recent history on a percentage basis.
If the US Fed next raises interest rates by 0.50%, that would represent a 1100%+ rate increase in just 90 days. Rates moving to 2.0% or higher soon, will represent a 1500%+ increase over 4 to 5+ months.
Extreme Post-COVID Speculative Wave May Have Extreme Consequences
Inflation and many other economic issues are suddenly front-n-center for central banks and property investors across the globe. News that China’s real estate price levels continue to decline may be a very clear sign that China/Asia has peaked ahead of the US and other global markets. We’ve never seen anything like the sharp rally in global real estate price levels except for a brief period from 2004 to 2008 (see chart below).
That rally ended with the Global Financial Crisis. Home prices declined nearly -20% from the peak in Q1:2007 to the bottom in Q1:2009. If history repeats, US home prices will fall more than -20% to -25% for real estate investors as history has a way of repeating.
US Equity Market May Not Follow Asset Prices Downward As Economy Shifts
I want to urge you to consider how capital works in a shifting global market environment. Capital is always seeking out the best, most opportunistic, instruments for future gains and protection again risks. Even when the markets were turning downward in 2009, a bottom set up in the US stock market long before other assets found their bottom in price. This same type of scenario may play out over the next 12 to 24+ months.
If my interpretation of market conditions is correct and the US Fed attempts to raise rates further to mitigate inflationary trends, it is likely that various asset classes, including real estate, ETFs, and individual sectors will unwind risks (as we are now seeing) and will possibly turn into future opportunities. What was overvalued in the past may turn into an incredible opportunity as capital shifts towards sectors/trends showing opportunities for future ROI.
The current market trends will present incredible opportunities for traders/investors that are able to protect capital, see and understand the risks and opportunities unfolding, and time their investments/trades properly in the markets.
LEARN FROM OUR TEAM OF SEASONED real estate Investors
In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.
Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.
Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:
A loss of 10% requires an 11% gain to recover
A 50% loss requires a 100% gain to recover
A 60% loss requires an even more daunting 150% gain to simply return to break even.
Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover.
Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.
HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY
At TheTechnicalTraders.com, my team and I can do these things:
Reduce your FOMO and manage your emotions.
Have proven trading strategies for bull and bear markets.
Provide quality trades for investing conservatively.
Tell you when to take profits and exit trades.
Save you time with our research.
Provide above-average returns/growth over the long run.
Have consistent growth with low volatility/risks.
Make trading and investing safer, more profitable, and educational.
We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies which include a real estate ETF. We can help you protect and grow your wealth in any type of market condition. Click the following link to learn more: www.TheTechnicalTraders.com
Chris Vermeulen Chief Market Strategist Founder of TheTechnicalTraders.com
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-25 15:43:162022-05-25 15:43:20Real estate investors – Is There An End In Sight?
In today’s trader tip video, Chris talks about the 9% rally in SVXY over the next 3-9 days. The stock market has been falling for quite some time, and the S&P 500 is down about 16% on the year. The VIXhas been spiking and rallying up which means there’s a lot of fear in the markets. When the stock market continues to dive and if the VIX does go any higher, that’s a sign we are getting close to a short-term bottom in this market.
TO LEARN MORE ABOUT THE SVXY RALLY – WATCH THE VIDEO
Subscribers: Please let us know what you would like to learn and we will add it to the roster of our weekly Technical Trader Tips!
Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!
TO EXPLORE THE Total ETF Portfolio, PLEASE VISIT US AT The technical traders. You’vE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!
Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-18 09:11:242022-05-18 09:11:259% Rally In SVXY Over Next 3-9 Days – Trader Tip Video
Following and trading on price can be compared to the reading of a good book. As we read each page, we acquire additional information that may give us a better understanding of the unfolding story.
The same is true of the market, as each day is like the reading of another page. The pages of a book make up chapters. These chapters in trading represent bull markets, bear markets, distribution and accumulation, and time frames of high and low volatility.
Unfortunately, in trading, we cannot skip to the end of the book to learn how everything turns out. However, as traders, we have learned that studying and remembering the past can pay great dividends.
Trading price in its rawest form is simply plotting and studying price without the use of moving averages, stochastics, RSI, or other technical indicators. This simplified but often overlooked methodology can offer everything a trader needs to be successful.
NASDAQ 100 LOWER LOWS & LOWER HIGH
QQQ – The Nasdaq 100 ETF has been making lower lows and lower highs. A longer-term analysis of price is showing us that the 2022 low is lower than the lowest price that the QQQ had traded in 2021. The QQQ in 2021 had a peak to trough range of 26.03%. So far in 2022, the QQQ has had a peak to trough range of 28.71%.
Therefore: Price is showing that QQQ is breaking down and volatility is expanding as it is greater than last year.
QQQ • INVESCO QQQ TRUST ETF • NASDAQ • 4-HOUR
S&P 500 LOWER LOWS & LOWER HIGHS
SPY – The S&P 500 ETF has been making lower lows and lower highs. The SPY in 2022 has had a peak to trough range of 18.74%.
Therefore: Price is showing us SPY is breaking down and it appears to have put in a major top with confirmation being a new swing low.
SPY • SPDR S&P 500 ETR TRUST • ARCA • 4-HOUR
DOW 30 LOWER LOWS & LOWER HIGHS
DIA – The Dow Jones Industrials 30 ETF has been making lower lows and lower highs. The DIA in 2022 has had a peak to trough range of 15.02%.
Therefore: Price is showing us DIA is breaking down and appears to have put in a major top with confirmation being a new swing low.
Note: the DIA is doing better than the QQQ or SPY as money flow is rotating out of previously high-performing stocks and seeking safety in blue-chip lower performing stocks.
DIA • SPDR DOW JONES INDUSTRIAL AVERAGE ETF •ARCA • 4-HOUR
US DOLLAR HIGHER HIGHS & HIGHER LOWS
UUP – The US Dollar ETF has been making higher highs and higher lows. The UUP in 2022 has had a peak to trough range of 10.43%. UUP has also taken out the highest high that it made in 2021.
Therefore: The price is showing us UUP has broken out to the upside and is in a bull market with confirmation being a new swing high.
According to the 2019 Triennial Central Bank Survey conducted every three years by the Bank of International Settlements: trading in FX markets reached $6.6 trillion per day in April 2019. The BIS report further noted the USD is associated with 88% of all trades, which is $5.8+ trillion in USD daily transactional volume.
The US Dollar continues to attract capital from investors all over the world. But this may prove to be a double-edged sword for US stocks. As capital flocks to the USD, this, in turn, hurts US multinationals as they need to convert their weak foreign currency profits back into USD.
The USD safe-haven trade may eventually trigger a broad and deep selloff in US stocks. As the USD continues to strengthen, corporate profits for US multinationals will shrink or disappear.
UUP • INVESCO DB USD INDEX BULLISH FUND ETF • ARCA • 4-HOUR
LEARN FROM OUR TEAM OF SEASONED TRADERS
In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.
Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:
A loss of 10% requires an 11% gain to recover
A 50% loss requires a 100% gain to recover
A 60% loss requires an even more daunting 150% gain to simply return to break even.
Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months, while a 50% drawdown may take several years to recover.
Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason, as most of them learned this principle the hard way.
HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY
At TheTechnicalTraders.com, my team and I can do these things:
Reduce your FOMO and manage your emotions.
Have proven trading strategies for bull and bear markets.
Provide quality trades for investing conservatively.
Tell you when to take profits and exit trades.
Save you time with our research.
Provide above-average returns/growth over the long run.
Have consistent growth with low volatility/risks.
Make trading and investing safer, more profitable, and educational.
We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com
Chris Vermeulen Chief Market Strategist Founder of TheTechnicalTraders.com
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-18 09:06:022022-05-18 09:06:05Following Price One Page At A Time to Understand The Full Story
Crude oil, like most commodities, is not priced as a single data point like a stock. Instead, commodities, like oil, trade via futures contracts. A futures contract is an agreement to buy or sell a particular commodity or security at a predetermined price at a specified time in the future. Futures contracts are standardized for quantity and quality specifications to facilitate trading on a futures exchange.
Unlike options, futures contracts do not have a time value component in their pricing. Each futures contract is a standalone contract with its own ending date, supply and demand, and market-determined price for the underlying product. Another key difference between options and futures is that while an option gives the holder a right to buy or sell at a specific price, exercising that right is optional. A futures contract is a legal contract for delivering an underlying physical product or, in some cases, a cash equivalent. Futures contract performance is a legally binding agreement and is not optional.
ETF vs. Futures Contracts
Many products that have futures contracts also have Exchange Traded Funds (ETFs) that attempt to approximate the performance of the underlying product. In the case of West Texas Intermediate (WTI) oil, the ETF with the ticker symbol USO is a popular product. Shares of USO trade on a stock exchange rather than a futures exchange.
Owning shares of USO is not the same as owning oil futures contracts.
USO invests primarily in crude oil futures and other oil-related contracts and may invest in swap contracts. These investments are collateralized by cash, cash equivalents, and US government debt with two years or less maturities.
The objective for USO is for the average daily percentage change in USO’s net asset value (NAV) for any period of 30 successive valuation days to be within plus/minus 10% of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.
While the intent of an ETF like USO is to track the price of oil, there will be tracking variation that could be substantial at times.
An ETF like USO trades continuously, whereas the futures contracts the fund may hold have expiration dates. To facilitate continuity, a fund like USO will sell futures contracts close to their end date and replace those contracts with new contracts that are longer-dated. The futures contracts that USO owns spread out over a range of contract dates.
Why Trade an ETF?
ETFs like USO trade like shares of stock. That structure carries less risk than trading futures contracts directly. And you don’t need a futures account to trade an ETF like USO. You can even trade USO in retirement accounts like IRAs.
Contango and Backwardation
We can visualize the futures term structure or the forward curve by plotting the prices of a series of futures contracts over time.
When longer-dated contracts are trading at a higher price than the front-month contract, that forward curve is in “contango.” Alternately, when longer-dated contracts are trading at a lower price than the front-month contract, the forward curve is in “backwardation.”
The front-month price and the longer-dated price will meet in the middle somewhere as time goes by. But that does not necessarily mean that oil prices will go down. Over time, the oil price can go up or down, and the forward curve will adjust.
Physical products like oil are often in contango because of the costs associated with storage and transportation. These costs are assumed to make oil for future delivery more expensive. But when near-term supply is constrained, the front-month contracts for sooner delivery can be more expensive, and the forward curve will be in backwardation.
Roll Yield
An ETF like USO is maintained by rolling contracts forward over a 10-day period. The closer in contracts are sold, and farther dated contacts are purchased to replace them.
The gain or loss from completing those rolls creates a roll yield that can be either positive or negative.
Positive roll yield exists when a futures market is in backwardation when short-term contracts trade at a higher price than longer-dated contracts. When the market is in contango, the longer-term contracts are more expensive than short-term contracts, and roll yield will be negative.
Currently, the oil futures curve is in backwardation. The contract for one year away is trading nearly $25 lower than the front-month contract. That implies that supply is tighter now than expected in the future.
Backwardation can provide a bit of a tail-wind to an ETF like USO when the fund managers are selling relatively expensive short-dated contracts and replacing them with lower-price contracts dated further out.
Conclusion
After many years of buying and selling options using a wide variety of strategies ranging from the simple to complex, I find that a simple strategy like selling puts can be one of the easiest to manage and most reliable for generating regular profits. Don’t make it more complicated than it needs to be!
Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.
Our Options Specialist, Brian Benson, continues to bring in the money. During the last month, of the 20 trades he has made, 17 of them have been winners!
If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to subscribe, click here: TheTechnicalTraders.com.
Enjoy your day!
Chris Vermeulen Founder & Chief Market Strategist TheTechnicalTraders.com
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-15 21:52:152022-05-15 21:52:18Futures Contract – Trading Oil With USO
In today’s trader tip video, Chris explains how to navigate the S&P 500 in a bear market. He takes you through the US Dollar ETF UUP and the natural gas ETF UNG both of which have been holding up well and look ready for a potential breakout run.
Volatility draws people in who are looking for big plays. However, the markets being so good at pulling money out of your pocket generally means that volatility can hurt you more than it can help.
The S&P 500 has been in a strong uptrend but flipped to red (risk-off) about two months ago. By following our strategy, we have been able to sit back and watch the markets decline without taking us along for the ride. Now, we sit in cash and protect our capital. Though this is not a position that a lot of traders like, once you embrace a cash position your stress levels go down and you end up saving money that can then be put to use once the markets stabilize.
Bear markets are traded a lot differently than bull markets. This is not a time to get fancy and try to put on a lot of trades, especially if you have not traded through a bear market before. It’s a time to protect your capital, educate yourself, and position yourself for good opportunities down the road.
TO LEARN MORE ABOUT HOW TO NAVIGATE THE S&P500 IN A BEAR MARKET WATCH THE VIDEO
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Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-15 21:50:382022-05-15 21:50:40Navigate The S&P 500 In a Bear Market Safely – Trader Tip Video
As professional traders, we spend a lot of resources determining whether we are in a bull-up market or a bear-down market. The follow-up to this is our additional efforts in finding the right places to buy or sell in either of these scenarios.
As traders, we also have different styles or time frames that we trade. For instance, longer-term trend traders may utilize the daily, weekly, or even monthly charts. In comparison, shorter-term swing traders may utilize the 4-hour or 1-hour charts.
Much emphasis and resources are committed to these efforts. However, we have learned that going to cash or having a cash position is just as important, if not more important, than having an actual position in the market.
The beautiful thing about trading is that the trader is in control. We do our research, and then after weighing the evidence, we have the edge in that we have complete flexibility in determining whether we buy, sell, or do nothing.
Cash position vs Invested in the Markets
Taking a position and making +20, +30, or +40% is great. But going to cash and avoiding a -20, -30, or -40% drawdown is just as important. We could even say that having the ability to go to cash is even more important as it protects our attitude and our health. There is nothing enjoyable about worrying about a position 24-hours a day, 7-days a week.
A trader should ask themselves: Is holding onto this position worth the stress and worry about whether the market is going to rally; or will the market give me back a small portion of my hard money losses; or will the bottom completely fall out of the market which will destroy my account?
Age is a defining factor in answering this question. Depending on our age, do we have the time or the energy to make back losses if the unthinkable happens? Successful traders have learned the hard way that retreating (going to cash) may be the best option as you live to fight another day.
CARVANA -91%
Carvana CVNA NYSE is the perfect example of the bottom falling out unexpectedly. The rallies were short-lived, ranging from 4-to 14 days. After CVNA had dropped about -25%, it only rallied back about 14-days before it started a steep but steady decline. CVNA is a textbook example of the importance of accepting a loss and going to cash.
As technical traders, we exclusively follow price. This too is an important concept to grasp. Following and trading price simply means that the market tells the trader what to do and not the other way around. Being one with price will deposit money into your trading account. Fighting price will withdraw money out of your trading account. The market (or price) does not care what a trader’s opinion or bias is.
Managing and protecting our hard-earned capital is our individual responsibility and should be the top priority.
CARVANA CO. • CVNA • NYSE • DAILY
US DOLLAR – A STRONG BUY
If a trader doesn’t trade currencies, why should they even care about what is happening to the USD?
Think about the world economy. Whether a stock, ETF, bond, or commodity, everything is affected by the currency it is traded in. Currency is part of the fundamental make-up of each market. Tracking and understanding global money flows provides us with the big picture. Armed with that information, a trader can make better decisions about the markets they trade or how they manage their cash position. In other terms: risk-on, risk-off, trade-on, trade-off, capital invested, capital not-invested, etc.
The US Dollar continues to attract capital from investors all over the world. But could this be a double-edged sword for US stocks? As capital flocks to the USD, this, in turn, hurts US multinationals as they need to convert their weak foreign currency profits back into USD.
The USD safe-haven trade may eventually trigger a broad and deep selloff in US stocks. As the USD continues to strengthen, corporate profits for US multinationals will shrink or disappear.
US Multinational $1 Billion Revenue Example:
$1 billion in revenue-generating a 15% net profit with a net neutral 0% currency translation equals a $150 million profit.
$1 billion in revenue-generating a 15% net profit with a negative -15% unfavorable currency translation expense equals a $0 profit!
In addition, the impact of inflation on the global consumer will lead to a pullback in consumer spending which will further reduce corporate revenues and profits. Combining the global currency dislocation and the economic cool off will bring on a global recession.
WISDOM TREE BLOOMBERG • U.S. DOLLAR BULLISH FUND ETF • USDU • ARCA • DAILY
RUSSELL 2000 SMALL CAPS -29.96%
The Russell 2000 stock index is considered the bellwether of the US economy. The index measures the performance of 2,000 smaller companies whose focus is on the US market. Tracking this index gives us a broad overview of the health of the overall stock market.
Since bottoming in March of 2020, the IWM has more than doubled. But in November 2021, the IWM put in its final top. Upon completing and then breaking out of a distribution wedge, the IWM is now solidly in a bear market.
Knowing this information tells us that we should seriously consider we are in a period of risk-off, no-trade, and cash as a position.
For experienced traders, they may consider buying non-leveraged inverse index ETFs on days when the market has a sharp spike rally up.
ISHARES • RUSSELL 2000 ETF • IWM • ARCA • DAILY
LEARN FROM OUR TEAM OF SEASONED TRADERS
In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.
Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:
A loss of 10% requires an 11% gain to recover
A 50% loss requires a 100% gain to recover
A 60% loss requires an even more daunting 150% gain to simply return to break even.
Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months, while a 50% drawdown may take several years to recover.
Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason, as most of them learned this principle the hard way!
HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY
At TheTechnicalTraders.com, my team and I can do these things:
Reduce your FOMO and manage your emotions.
Have proven trading strategies for bull and bear markets.
Provide quality trades for investing conservatively.
Tell you when to take profits and exit trades.
Save you time with our research.
Provide above-average returns/growth over the long run.
Have consistent growth with low volatility/risks.
Make trading and investing safer, more profitable, and educational.
We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com
Chris Vermeulen Chief Market Strategist Founder of TheTechnicalTraders.com
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-15 21:48:492022-05-15 21:48:51Sell And Go To Cash Position Or Hang On By Your Fingernails?
Get ready for a one-two punch! Brian Benson, the Options Trader at TheTechnicalTraders.com, shares his thoughts on the current market turmoil and trading futures in backwardation.
Market Turmoil
Brian sits down with Kerry Lutz, of The Financial Survival Network, to talk about how far he thinks the markets may drop. Is a relief rally on the horizon, or is this the lead-up to a bear market? Can options premium generate an income even during these volatile times?
How To Trade Futures in Backwardation
Next up, Brian offers an Options Trader Tip on Business First AM about how to trade futures in backwardation. Will the setup offer up a tailwind for a product like USO as the contracts are rolled forward?
TO EXPLORE THE STRATEGIES Brian uses, PLEASE VISIT US AT OptionsTradingsignals.com. YOU HAVE MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!
Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-15 21:46:372022-05-15 21:46:39Market Turmoil And How To Trade Futures In Backwardation – Videos
Chris sits down with Craig Hemke of Sprott Money to talk about their PM forecast and break down all the charts you need to navigate the coming bear market. Bear markets don’t happen very often and because of this (and due to lazy habits during bull markets) are very dangerous if you are over 40 for what it can do to your retirement accounts. As we never know how long it will last, the best place to be during times like this is in cash. It’s all about preserving your capital.
If a bear market is imminent and everything is falling, do you actually want to own anything? If bonds aren’t safe; if the stock market isn’t safe; if equities aren’t safe; why hold any of them? There are times when sitting in cash, especially the ‘safe-haven’ US dollar, is the best option. It’s a passive play for sure, but if you want to live to trade another day, it can be the choice to go with.
Based on a daily chart, silver, gold, and miners were on a tear earlier in the year. Though they can be very good defensive plays, they can reverse and sell down for weeks on end. Recent volatility, in general, has so many people dancing in the markets, trading back and forth, that it’s day trader’s heaven and swing trader’s nightmare. This is why position management is so important.
Overall, we are coming into a unique time. Though not confirmed yet, I believe that a bear market is only days or weeks away. Preparing for this is about managing your plays and cutting your losses. The first goal – avoid a bear market (aka protect your capital). The second goal – grow your wealth (aka retire sooner).
Click on the link below to watch the LATEST PM FORECAST & HOW TO TAKE ADVANTAGE of a bear market
Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2022-05-15 21:44:222022-05-15 21:44:24Taking Advantage Of A Bear Market – PM Projections – Video
