Jeff Bishop’s Total Alpha Trading Program | 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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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.

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Jeff Bishop’s Total Alpha Trading Program | 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:

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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?

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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

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Source: TotalAlphaTrading.com | Original Link