Monthly Digest | October 2020

Analyzing the key trends, events, and factors that drove market behavior in October 2020. Let's explore the pages of November 2020's trading chronicle together, unlocking the secrets that unfolded in the realm of stocks and investments.

01 October 2020

Take a guess whos about to break higher?

OJ has a ton of commercial buying coming in to this market

Spread trade... Short the long end. Long the short end

And old turkey said “it’s a bull market you know”

Lumber finally came in to the zone today

“So you think that money is the root of all evil? . . . Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?”

Coffee stopped again.

First days of the month are usually bullish except for August and October. Statistically. Watch for a gap and crap or a gap and go. Which with the way oil and copper are acting today.. a fall after the open wouldn’t be surprising

Currencies all hitting resistance. Once again I’ll say when I’m changing positions. I think it’s important to always know what’s going on statistically

The move is a bit extended off the lows I wouldnt be surprised if we come down to that high volume node.

Lumber. Looking for a close above the 10 EMA today

BPNYA buy signal

If you are bullish on China, you are bullish on copper

Trade weighted dollar. If you are bullish on copper you are bullish on growth ticking up... somewhere

If you are bullish on copper you are bullish on inflation

Copper has one major issue right now though. The commercials are net short. However, there are times where this happens at the begining of a trend.

02 October 2020

Short term things to take note of

Miners hit pivot. Rejected.

Primary pivot on the dollar. 93.42

I love the way this is building

Talk about overnight stops...

When you have that one trade that you can’t cut...

03 October 2020

Choppy way to end the week but the PMO model gave a buy signal on thursday.

Bull bear model bottomed

Want to see something weird

conflicting signals on the vix model

The curve is looking very different than it was

Still divergence even after a nasty sell off on friday. A break below that zone and its a sell. A break above and it is a buy...

Major divergence on Natty. Sit out for now

SPX breadth

BTC mechanical system is still in a sell but it is very close to a buy!

Just saw this - China’s mealtime appeal amid food supply worries: Don’t take more than you can eat

04 October 2020

Gasoline demand is at the highest level in 2020. Higher than Labor day weekend.

What we will be doing for this month in the futures account is focusing on selling volatility

There are times where markets don’t trend and long or short your systems will get chopped to death.

But if we look at the vix curve.

We are seeing that selling vol is the “over under” trade. VIX around 30 before an election. That’s abnormal.

But it puts us in a place to sell OTM spread or naked calls or puts. If we watch how vol has gone in the last few weeks. Huge pops in the morning. Selling off throughout the day

I wouldn’t get too fancy with it and I will still be taking my signals on my trend systems. But during a certain amount of chop my volatility selling systems kick in. Go for November options. Selling OTM

In my opinion this is so apparent.

Will be looking to buy a break out in rice this week. The model for rough rice has a filter signal but it’s also based on a 50 day closing high. It’s close to getting hit as China goes in to another famine. Similar to a trade in the German currency by druckenmiller on the theory that Germans were terrified of hyperinflation. If you saw the history of China and maos great famine you know what I’m talking about.

Rice, corn, soybeans, hogs, wheat are the easy plays.

Cruise ships dismantled for scrap after pandemic sinks industry

One addition I’d add to the weekend report. We are really close to a completely defensive shift it’s either a time to do nothing or be very cautious.

05 October 2020

Coffee weekly. Watch it this week.

I am adding to the position on a break out of this pattern. Buy stop order placed above the red zone

Dead

06 October 2020

Gold back in the bullish part of the structure.

NYAD getting close to new highs

Rice broke out today

XBI risk on coming in to the market still

SLV strong volume candle today

Gold showing volume rising faster than price.

GDX also working on a new trend model. Thats why the bands look odd

Market structure is very important. Understanding these 3 bar patterns and how they usually lead to a turning point

The widow maker trade has possibly changed trend

HAL gave a buy signal today.

December hogs buy stop hit today

Gold is up against resistance. But if it breaks it. It’s telling us something. Buy stops above resistance can be a great way to take advantage of break outs. If the move does not happen... o well

If it does. You’re in.

Junk bonds are really strong. Good risk on sign for the market

Dow Sheds 375 Points After Stimulus Setback

Time to start getting defensive.

Major curve ball thrown at us. If the Russell opens lower tomorrow we have a 2B sell. If the long bonds move up the curve is going to get flatter. Money supply can get tight really fast. That was not the same as the president has the flu news.

07 October 2020

Didn’t change up any trades today even with the smash. I don’t like changing strategies on news driven breaks

Still on the cusp here of a change and looking to follow the models and sell OTM vol.

Ag is trending hard this week. No one is talking about why yet which leads me to believe that we are early

Trend funds will get a short signal in bonds if they break down a little more. Major funds have 100-200-300 day systems. That would be a long term low and flip the trend models for the first time since 2018

Yields rising on the long end. Good for copper

08 October 2020

Full buy signal still

COP one of my top picks in energy. Looking to buy the break

And old turkey said

I can say one thing about female traders. They never seem to feel the need to put on the macho trades. Males, we have a tendency of blowing up accounts. Having large draw downs and so on

Females really seem to understand the risk control aspect of trading. Everyone thinks of the part in interviews where druckenmiller talks about being brave. About being a pig

“It takes courage to be a pig”

But they forget when he says that he tries to grind his way to a good year first and then bet big

I still use Trader Vic’s model. In pursuit of superior returns. Because if you don’t have large draw downs you are positioned to make big returns when the market is in your favor.

The creation of a system that lets you take advantage of luck by putting yourself in the right place at the right time is important

I don’t dine on swine but damn.

Small caps in a new zone. Can’t get bearish yet

09 October 2020

Very good video on why understanding your system and your plan is important

2 over 80% upside days in breadth. Bullish sign.

Bitcoin trend model in a buy signal

If you click your heals 3 times and say there is no inflation... you might be right

I know that very few trade these because of the account size you need to do so.  But... it’s incredibly important to watch them.

Nat gas is close to a one year high. That would absolutely be a buy signal for long term trend funds

Covering a possibly 5-10 year short

This is from Mark Minervini. 1995

Market wizard. I always find it interesting that when you see what most of these guys do. It’s volatility squeeze break outs or new highs. When you look at new traders. They talk about how amazing they were when they bought a dip.

So I mentioned that I was working on a new model. 2 STD band up and 1 STD band down. Bitcoin is so volatile that finding anything that has a win rate above 50% is nearly impossible. On the shallow time frame 2017-2020 the win rate is over 70%. Very interesting easy to follow system.

IWM small caps

EEM. You want to see these leading the moves.

Gold got above the break out zone today

Got knocked out of my rice position. Check this stop fishing program out lol

SPX AD line

Very close to closing at and all time closing high for the week

One of our long term holdings

October 10 2020

Another breadth thrust signal today - Chart of the Day – Friday, October 9th, 2020

2000 election volatility

VIX Nov vs Oct futs spread

A lot of good stuff in here. Also he talks about the permanent portfolio being a great allocation idea here which is something that I have talked about and agree with. - Jeffrey Gundlach -- Waiting for the Next Big Trade

October 11 2020

Still one of the best buy and sell signals to date.

Put call ratio in the danger zone. VVIX elevated but the VIX is headed to bed. Mixed signals still

Bull bear indicator full bull

NDX Volume AD line

RSP (equal weight SPX) should lead to the downside in a weak market and to the upside in a strong market.

BTC Buy stops were hit last week and both systems have buy signals

Biotechs still leading. Risk on for the stock market

Soybeans COT positioning bearish but dont fight the tape.

 Silver to gold ration first green bar.

Thats new

Nat gas in a new bull market... still

sectors one month

10 days

October 12 2020

China devalued the yuan this weekend which should give the USD some extra strength this week. Something to keep an eye on

Keep in mind when China leads. Tech leads

Sugar is making one hell of a move. 1970s here we come?

Nick Radge had an interesting back test

31 ten days

When something breaks out over a moving average the win rate goes up if you wait for it to close above it after 5 days. I have adapted this for break outs with similar results. So lets see if we close this week over 1933 in spot

Number 31 from the weekend report might have been missing yesterday so I reposted it

They all heard me

That was a phenomenal gap above the yearly pivot

13 October 2020

$ZC_F hit the primary target and bounced off of it. Strong resistance at yearly pivots.

I can’t believe this is free - Top Traders unplugged: 109 The Systematic Investor Series ft Perry Kaufman

Short term traders: Watch closely for a turnaround Tuesday situation today. A big gap open to fade.

Also oil keeps getting rejected from the lows. How the price reacts to smack downs is very important

Sugar is also up again today

What if the banks all have blow out earnings?

Cycles have two buying opportunities this month

The begining of october as we talked about. The other is October 16-20. These are just times to look for signals

Dollar update

Puts on gold have an extreme premium this morning. Good time to sell a bull put spread.

“It dawned on me this weekend that the dollar should fall soon and hard: The Fed has fixed rates at zero for at least 3 years, by their pledge. Therefore, as stimulus flows by the hundreds of billions into the economy in the form of direct deposits, payroll substitutes loans and grants, the burden of financial adjustment for the increase in the supply of script falls 100% on the shoulders of FX values.”

- J.J.

Biotechs new all time high

One thing that changed my mind on cycles and trend trading was the simple idea of buying a 100 day high. It’s so counterintuitive compared to what you think you should do. But what I found was, every market had a number that seemed to work. A number for bull moves and bear moves.

Golds number was 100 but it takes a certain mindset to buy that high and ride out that volatility.

Miners turned up hard today and will most likely drag metals with it

14 October 2020

still in full buy signal

NZD looks ready to run 3 bar triangle above the primary pivot.

Time to sell naked puts yet on MES?

Check out "Danger Zone (From "Top Gun" Original Soundtrack)" by Kenny Loggins on Amazon Music.

15 October 2020

One thing that I’ll add - SMH XHB XME RAGING BULL

“If it ends the day up use this”. Down “demand worries”. What a joke!

Looking to take advantage of the vol this Nothing by selling puts on the SPX. I want to see some strength at the open first and not a free fall

Entered puts sold on MES

Bitcoin and copper are extremely strong today which tells us that there is liquidity somewhere.

That’s a major fucking reversal candle on oil today

Perfect time to short the shit out of bonds.

16 October 2020

Fed injected 77 billion. Very close to new highs in the fed balance sheet

Look at the top 5 sectors on an ROC basis

New highs are much broader

I dont think people go through market history enough to really understand things. That is why it is important to know it.

In a late cycle environment the major index's outperform as people look for strong ballance sheet names that wont disapear.

In a healthy growth rising environment the small caps outperform and usually do so for years.

Another interesting one to make a note of - EEM can also decimate the returns of the broad market for many years. This should also change in the next year or two

My sector watch list

Cocoa no signal still. Still waiting

All the bears are calling for a BLACK MONDAY next week. Despite October 1987. Expiration week on October is known for market bottoms

The entire week has an extreme bullish leaning. Up 72% of the time. Election years are known for late October bottoms as well. Volatility will remain high. But try not to get shook.

17 October 2020

Gold miners buy signal

BP SPX full buy

yield spread

CPI new highs...

Yield. Is it the fucking end of the cycle yet?

The winners? NZD CAD AUD... if I have to pick something that burns?

Oil consolidation with 2 green weekly bars.

Utes to SPX

cocoa buy stop at S2

18 October 2020

A lot of people are saying... “this is a ton of fraud companies wanting PPP loans” I think a lot of us had to reinvent ourselves this year.

If you think it’s been easy to junk an entire profitable company to move on with my life and move in a new direction. You’re crazy,

But I still think a lot of us decided to get up and move on

Guys that’s the biggest thing that I’ve read in years - They cant offer unrestricted deposits to retail without destroying the banks

👋 dollar

This isn’t exactly news because we know that this will be a slow decline in the value of the dollar. That’s just how it goes. Rome, Greece and so on... speaking of that.

A New Bretton Woods Moment - Also the IMF is talking about a new Bretton woods. Leading us to the FINAL step. The only person able to bail out something as big as the Fed would be the IMF.

Distillers usually bottom in late october or early november and rally through March.

we only have one in this market. BF.B

A lot of people are getting hyped on Bud and all the others being so cheap. I am not

This wouldnt be an odd pattern to form before an election. Seems to happen a lot

In election years we seem to pop after the election.

19 October 2020

Probabilities matter. Why does value investing work?

Security analysis says if you look for these things you usually make money. Trend following works because you catch a lot of chop then some massive trends. Quant works because it puts the probabilities on your side

Seasonality works... probabilities

This is very apparent. While everyone bickers about what method works best... keep your head and find your own style. It’s all a system.

Wheat has been on a freight train ever since. I have my beliefs in when it should stop... months ago. But following a system and my models helped me stay long. This is where a system and a belief in it really comes in to play.

Copper getting ready for another move higher

Total deflation. Short it all. Joking

Cocoa buy stop hit this morning.

Use closes only today.

FCX... don’t be afraid to buy strength

XHB XME very interesting sectors at the moment. Crazy to see XME so strong today

SPX down and globally, we are up

EEM

FL -8.8%

CA -3.5%

TX -2.8%

Gasoline demand in the states that I pay attention to the most last week.

Selling premium... now

Stop a bit under last Thursday’s low

Still waiting for this drop to stop

Let’s see how the SPX reacts here

Started

4 down days for the naz today.

Selling puts is a high probability trade. It’s hard to look at the noise around the market right now and be confident in a trade. Which is why I try to focus on what I can and stay away from pointless anxieties, keep risk tight and move on from losers

20 October 2020

China warns of winter tightness in natural gas supplies - "A new bull market”

Copper break out

CURLF ready for a move

30 year bonds on the brink

What a contraian headline

TECH added to portfolios this morning

Yup... No use for oil

21 October 2020

A lot of trend traders in the top ten.

Buffett at 54 years. Wild

I really think that bonds are very close to a break down. That’s a thought. Not a prediction

Slightly above ATH

Builders, metals and mining and communications leading today

Prepare for a boost higher to the close

Structure

We talked about the possibility of this pattern playing out on sunday. So far its diving right in to the bowl. But we are getting oversold

This week the trends seem to be moving in our direction again. Frustrating market for a bit but patience seems to be paying off. Hit equity highs in both portfolios for a second today and then reversed but we should hit them soon. I am throughly excited for whats next/

The dollar is interesting right here. Gold, silver and all of our commodity plays are moving up nicely.

coppers at new highs.

Bitcoin!

But the equity market is choppy. If this was hinting anything to me it is saying that some deal of some type is around the corner. This is why we look at the real markets where real money is buying and selling.

Bonds, copper, gold, silver, currencies. Governments and large funds trade these. Some have a lot of insider info. More than us at least.

So why are they selling the living shit out of the dollar and selling bonds?

If Tesla has a gap and go it’s most likely buyable

22 October 2020

Bitcoin

Sugar and cocoa are moving but they should really get going as we move in to the winter holidays. Coffee has been kicking me in the 🥜 for a month. But the fundamentals are ripe for a rally.

A rejection from this new low and a trend line break is a buy signal

Biotech leading today. Industrials second. XME still hanging in

“According to Pay with GasBuddy data, gasoline demand yesterday rose 5.6% from the Wednesday prior. Week to date, demand is up 0.86% from the same period last week.”

Coffee trying to put in a reversal candle

This was posted on the weekend

This is why I said it wouldn’t be uncommon

Quite a shift. XLE

We want to see bitcoin close the week over 12800

23 October 2020

The same signal that I used for this gave a good oversold signal in stocks today.

The last 4 trading days of October and the first 3 trading days of November. This has an 85% win rate

“We think there is no need to change anything now,” Putin said Thursday in his address to the Kremlin-backed Valdai Club. Yet “we don’t rule out that we may keep the current restrictions on output, that we don’t lift them as soon as we had planned earlier.”

Rig count is at 1pm today. Should be below expectations.

Something that you all might find entertaining. My bank shorts that’s I’ve had... forever on a few names. Covered earlier this week

Short term inducator number 1

Tech is dragging today

VXN has a lot of choppy up and down signals as compared to the VIX. But for what its worth the vix gave a bottom signal today for the NDX

Gasoline one way or the other.

Intel. No position anymore

Apple insider trades. That’s a lot of fucking sells

JBLU has a break out. Worth a shot if you’re looking at the airline industry

Good close on BTC

Holding short 30 year bonds. The gap between 2 and 10 year bonds as at its widest point in 2 years.

24 October 2020

Vix last week and second is this week. This is quite a difference. Sticking to the same strategy. Don’t forget the plan!

"There are no facts about the future, just opinions. Anyone who asserts with conviction what he thinks will happen in the macro future is overstating his foresight, whether out of ignorance, hubris or dishonesty."

-Howard Marks

2 Halloween strat. Market up 85% of the time.

BTC system

Heading in to the best 6 months. In the last 9 years November has closed up 100% of the time

In the last 21 years November and April have been the strongest months.

Candle structure

SPX long term structure. Bullish candle to end the week.

Gold master chart

Bouncing off oversold in a squeeze

Gold 4 hour

Gold seasonality. I have mentioned it before. Jan is a hell of a time to buy gold.

Looking for monthly bar to close here and range expansion to start

GDXJ:GDX and GLD in elders bars

 Wheat at 5 year highs. Still long

 Highest weekly close in years in soybeans

corn

The inside of the market

Extreme changes in the inside of the market

Mexico, Japan improving

stocks above 200 new short term high

Set ups for next week

Live Cattle

Nat gas oversold looking for a bounce

Cocoa buyable on a pull back

Important resistance but a strong trend. If we pull back we can look for a new entry.

25 October 2020

China Corn Imports Hit 15-Year High With Months to Go

Charts by Larry Williams

SPX AD line is certainly saying new highs

Sugar is on a run still

HYG:TLT ratio. Still saying higher

JNK:TLT looks even better

Copper starting the move

Copper to gold ratio, really trying to turn around here

Long rates are making a major move away from short rates

Gold miners bullish percent. Still in a buy signal

S&P 500 Banks have posted a robust 23% earnings beat thus far in 3Q reporting season (50% of S&P 500 Banks have reported), a clear inflection higher from prior quarters. This jump in EPS surprise is even more robust among small caps – the beat rate for the Russell 2000 Banks cohort is 48%, up from an impressive 34% last quarter. Should Banks continue to post sizeable beats through the remainder of the quarter, one would expect relative revisions and growth expectations to continue to rise. This should be bullish for the relative performance of an industry group that is currently trading in just the 1st and 0 percentile of historical relative P/E and P/B levels, respectively (back 20 years) MS

200 day resistance has turned in to support

Still bullish. Until this rolls over... I would not count oil out.

This is why you should learn to love chop and consolidation

A large move is coming

ECB Goes Its Own Way in Mission to Revive Inflation

Late 70s early 80s era Voelker (fed chair) said “I will break the back of inflation”. No one believed him

Now the fed and the rest of the central bank world are saying. “We are going to let inflation rise”. No one believed them either time.

“nearly half of all price moves change direction on the first day; 25% continue in the same direction for 2 days; 12.5% for 3 days.” So what’s that mean? Sometimes patience is required to capture big moves.

More bullish data for the last week of October. Last week was the buy signal for my cycle work. This week we should see follow through.

26 October 2020

The pound has a lot of negative news around it. But the chart looks amazing.

Keep an eye on coffee

 “We’re right 50.75 percent of the time… but we’re 100 percent right 50.75 percent of the time. You can make billions that way.”  

– ‘The Man Who Solved the Market

Jim Simmons models did not need a high winning percentage to make money. If you have a 1:2 or 1:3 risk/reward ratio you can make large returns as long as you don’t have any big losses. 

Example of a 1:2 risk/reward with a 50% win rate:

$100+$100+$100+$100+$100-$50-$50-$50-$50-$50=$250 profit

Example of a 1:3 risk/reward with a 50% win rate:

$150+$150+$150+$150+$150-$50-$50-$50-$50-$50=$500 profit

It is the magnitude and frequency of both wins and losses that determine profitability not just win rate. A small edge can make a lot of money over the long term as long as you keep the losses small. 

There are universal principles of profitable trading.

“The things we are doing will not go away. We may have bad years, we may have a terrible year sometimes. But the principles we’ve discovered are valid.”

– Jim Simons

No trading system works all time in every market but the principles of profitable trading stay valid. Profitable trading comes down to math, the math of risk management, the math of position sizing to avoid the risk of ruin, modeling of a trading system with a positive expectancy, along with cutting losses short and letting winners run. 

The biggest lesson from Jim Simmons is that profitable trading is built on the foundation of math but a human has to have the discipline to follow the math without allowing bad emotions to unplug a good system. 

That’s the worlds best hedge fund

Gotta have faith in your system and your plan

SAP crashed overnight. 20% of DAX German index. This should put some pressure on equities. If it’s a gap down and reverse today I’d say all clear

Gold holding its own this morning

Chopping around zone A

Sold bull put spread on spx

Low rates hurting life insurance business

Rejected from the old all time high line. We will see where we end up

Nvm the last post data on stock charts didn’t update correctly.

27 October 2020

High probability bottom for this second move down today.

Put call closed outside of the Bband. vix vvix same. Usually this leads to a bounce the next day

Flat week last week?

Crazy volatility this week?

There must be election coming up. Choppy up trend

Equal weight still strong

Japan has a crazy implied premiums this morning on EWJ. Usually a great time to buy

3M Posts Earnings Beat on Surging Medical Equipment Sales

We are sitting on support, fibs, bottom of the implied move and trend lines. The reaction here is very important

28 October 2020

Entered another short on the 30 year bond tonight.

ITB home construction up. Highest rating for the housing sector. “Raging bull”

With bonds already down I would be very surprised to see a big move down in to the close today. At this point with all this chop. Nothing would surprise me. No trends. No real moves. Oil is the best example of it

Currencies were extremely strong today for this move down. Bonds were really weak. No commodities took out any major lows while a few stocks did. Very mixed signals but the same thing remains. Choppy trend

29 October 2020

Got a lot of downside exhaustion signals today. 99 out of the 100 NDX stocks were down today. Usually that’s a sign of a bottom. Very rare for that to happen. Stay open to volatility

“Ludwig von Mises explained it very well. He said there are only two ways to end a credit filled room. One is you withdraw the credit. The Fed tried that with QT, but there was not the stomach or the tenacity to hold. He said the other is the full-fledged and utter debasement of currency. We have the combination of highest debt levels in history. America's debt to GDP this year, by the end of the year, certainly will be highest in history, exceeding that of World War II. Of course, it is going to get worse and worse, these deficits are not going to go away. There is no other way to deal with the problem other than inflating it away.”

-Kiril Sokoloff

Miners, metals, bitcoin

GDP number 830

Something that no one was thinking of. Bitcoin holding up while the entire market and commodities got decimated. In my opinion this could be a turning point. Bitcoins bounced up here a lot and then got smacked down quickly but this looks like a run to 20k is coming. Similar conditions to 2017.

30 October 2020

Structure

31 October 2020

Stock market indicator pushing the direction of a Biden victory.

Since 1936 when the S&P 500 is up from the July 31 close to the October 31 close in election years the incumbent party wins 85% of the time. When the S&P is down over this three-month span the party in control of the White House has changed 88% of the time.

Two misses were likely due to significant third-party candidates derailing reelections in 1968 (Wallace) and 1980 (Anderson). Eisenhower was reelected in 1956 despite the bear market caused by the Suez Crisis/Sinai War in October-November 1956 and Soviet tanks rolling into Hungary to quell the revolution in October 1956

Stock traders almanac presidential indicator.