Fibonacci For Traders, Truth Or Fib?


by Steven Sarnoff

Since today is Pi Day, and we were honored by our math major nephew dropping by the office during his break from university, I decided this was as good a day as any to get back to blogging with a post about how a trader should regard the influence of a famous Italian mathematician from the Middle Ages on today’s markets. Continue reading

Don’t Suffer Paralysis From Over-Analysis In Your Trading


by Steven Sarnoff

                    “If you spend too much time thinking about a thing, you’ll never get it done.” — Bruce Lee

This week, with more earnings and big mergers on parade, there is plenty for traders to digest.  Add to that, the myriad of technical tools available at your mouse-clicking fingertips and you can see how traders can easily be bogged down and confused by conflicting indicators and information overload.

As a technical analyst, aka a “chartist,” you have the ability to overlay a veritable smorgasbord of studies on your chart.  That can quickly clutter the picture and cause indecision.

So Sarnoff, what is your solution?

The answer is to study the technical indicators, pick a handful you like best, and use them.

I want my chart to paint a vivid picture, depicting  the human behavior (buying and selling) that drives the direction of market price movement.  I prefer to look at a clean and clear chart, one that readily reveals which side (buyers or sellers) has the advantage.  I can then go about determining when and where the balance of power is likely to shift. Continue reading

Are Bears Ready To Get Fat Quick?


Bear getting into “get fat quick” phase, h/t natgeotravel

by Steven Sarnoff

When temperatures start to fall, bears are known to move into a “get fat quick” phase.  They gorge on anything edible to fatten up and survive their lengthy winter slumber.

When asked why the market was up or down on a particular day, my dad would reply in his Brooklynese, “Sometimes the bulls gotta get fed and sometimes the bears gotta get fed.” One of the lengthiest bull markets on record has left beleaguered bears hungry for a turn.

Are they ready to feast? Continue reading

Surfing Silver With The Superleverage Power Of Options Hotline


by Steven Sarnoff

My Options Hotline subscribers doubled their money in just one day, today!  Here’s how they did it.

Option buyers are the only ones who have the Superleverage power to use OPM (other people’s money) to profit from changing prices, with an always known and strictly limited risk at all times.  Options also allow sensible speculators the opportunity to profit from stock moves both up and down.

Such has been our experience this year, using shares of silver streaming company Silver Wheaton (SLW) as our proxy for the precious metal. Continue reading

Are Central Banks About To Open The Monetary Spigots Even More?


by Steven Sarnoff

In response to the 2007-2009 financial crisis, central banks opened up the monetary spigots.  They employed a creative strategy of QE (quantitative easing), the purchasing of financial assets as a way of creating new money in hopes of stimulating economic recovery and keeping the demon of deflation at bay, when their usual monetary policy tools were rendered ineffective.

The overall effectiveness of several rounds of QE as an economic stimulus is debatable.  What is clear is that ballooning central bank balance sheets have been a boost to asset prices. Since 2013, Japan has taken it to a new level. Continue reading

The Role Of Luck


by Steven Sarnoff

When people find out what I do for a living, they invariably ask what I think the market is going to do.  I politely tell them that if I knew what the market was going to do, I wouldn’t have to work.  If you ever encounter someone who claims to know what the market is going to do, zip your wallet.

In option trading and in life, luck plays a featured role.  We are practitioners of uncertainty. Somewhere back in the mid-1990’s I recall seeing Alec Baldwin interviewed on the show, Inside the Actor’s Studio. He was asked to describe what acting was like to him.  Baldwin answered that it was like repeatedly banging your head against a door and then, it’s all up to luck. Continue reading

Is The “Buy the Dip” Crowd Facing A Rough Road Ahead?


by Steven Sarnoff

Those who drive down the gritty paradise that is the Baja may recognize this stretch of road found south of Margaritaville San Felipe.  Drivers are warned as they approach a “zona de vados” to moderate their speed, because hitting a dip with velocity can end up being fatal.   So to, a trader must see the signs to know when conditions are clear and when to proceed with caution.  Blindly taking up positions may wreck your portfolio. Continue reading

Never Be Surprised And Always Be Surprised


by Steven Sarnoff

“We have 2 classes of forecasters: Those who don’t know . . . and those who don’t know they don’t know.” — John Kenneth Galbraith

Looking at today’s markets, the forces of deflation and inflation continue to slug it out in a titanic struggle for dominance. Options traders face ever-changing wind conditions as they attempt to pilot their portfolios to profit. Over the years, we’ve managed to navigate the stormy seas with a steady hand on the tiller. One of the keys to our success is keeping a sense of perspective. As our service sails along toward its 28th year of advocating sensible speculation, I’d like to share some seemingly impracticable musings you may find useful. Continue reading

Volatility Returns And Is Percolating


by Steven Sarnoff

While contemplating the current condition of the stock market this morning, I glanced at my coffee cup and the idea for this blog post came to mind.  The CBOE (Chicago Board Options Exchange) Volatility Index (VIX) measures market expectations of the implied volatility of S&P 500 index options.  In plain terms, the VIX measures volatility (fear).  Having a good read on investor fear, or lack thereof, can be a valuable tool for traders.

There is a correlation between a lower VIX and higher stock prices and a higher VIX and lower stock prices.  Options Hotline subscribers know I’m fond of saying, “Smart traders use the absence of volatility to prepare for its return.” Continue reading

Bonds, T-Bonds — Shaken, Not Stirred


by Steven Sarnoff

No, not that Bond.  I’m talking US Treasury bonds! In today’s session staid T-bonds sold off a little over 1%, as investors fret over future central bank monetary largesse.  Interest rates move inverse to bond prices, so falling bond prices mean higher yields.

Our Options Hotline subscribers were positioned beautifully for this scenario and saw their money multiply in just over two weeks! Continue reading