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Thursday, February 13, 2020

Market Update Thursday 1/13/2020 - Which Came First The Chicken Or The Egg

This morning I could go on and on how I was right 4 - 5 more times going into today's trading session, and lately it's hard to keep track....

I used to think being right once a day was the goal, but it's better to have several oars in the water. I think this, in part, is why day traders have such a hard time... because they're putting all their eggs in one basket, trading the $SPX, or the $DAX, or Gold, or whatever, and that means you're not diversified, but you're also only looking at one part of the market. Once you can handle 3, or more trades at once, the chance of winning are in your favor.
For instance: If you're Oil chart points to a breakout, or Natural Gas.... and the the Russia chart, or Dubai confirms it, that adds a lot of weight to your prediction. Here's another example: A breakout in Deutsche Bank would point to a recovery in the European banking sector, right? Everyone knows $DB presents a huge risk to the global banking sector, who charts it? One of my mantras is to "Chart everything".

 If I don't toot my own horn, nobody else is going to.... so let's document yesterday's calls:

  1. Yesterday's Oil target (see yesterday's blog).
  2. The $VIX was seen already trying to take out my target ("")

          4. The reversal in Chinese markets.

The begs the question:

Which Came First The Chicken Or The Egg? 

"Chicken-and-egg" is a metaphoric adjective describing situations where it is not clear which of two events should be considered the cause and which should be considered the effect..."  Wikipedia

In this case of which came first...: 

Do the charts predict the future, or is news released at certain times in order to drive markets, wherever the, "power's that be", (the corporate banking interests who also own every news outlet) like? See: These 6 Corporations Control 90% Of The Media In America businessinsider 

The catalyst for this pullback was the new Coronavirus numbers, and I was watching in real time, as futures went from the $SPX being up 2 handles - precisely at my red line, to blood red, in only a matter of seconds. See the tweets above with chart attached.  

It's impossible for me to know China is going to release bad news, at a certain time, but insiders knew those numbers were coming, and sold into it, going into yesterday's close. Why would they do that? In order to force market participants to buy protection ahead of Weekly OPEX, tomorrow, and monthly OPEX next Friday. As I mentioned in yesterday's blog, every market move revolves around Options Expiration dates, and market sentiment going into (ahead of) those dates. Yesterday we saw the market become overly bullish, and this morning we're seeing a little give back.

The first cluster of highly contagious Coronavirus cases were being reported as early as Dec 8th, 2019, and it wasn't until it became viral (no pun intended) on social media, and the main steam media started reporting on it, that we saw bearish market sentiment peak out around 2 weeks ago, when we saw futures down 350 DOW points. Ever since then the market has continued straight up, and those who trust the news for their information, can't believe it, but this was very predictable, based on the sentiment reversal.... in the face of bearish news. This why I'll trust my sentiment indicators, over whatever is being reported, any day of the week.

If the Chicken (the charts) came first, and the news reports (the egg) come second, then you could say "the charts predict the future", but if the egg/ News was already being hatched, then the charts only predict the news, and more importantly the emotional reaction to that news, because in theory, this is more important than the news itself.

It's impossible for me to convince investors/traders, who are scared out of their wits, over this coronavirus outbreak, to ignore their fear, and "don't fight the trend". They'll have to learn to get past their emotional barriers, at their own pace.

The best example I can give of this chicken and egg theory is the irrational fear that was created by the main stream media, of a Trump win, in the 2016 election. They claimed the market would "crash". I predicted that Trump win, and the charts pointed to a crash in market futures on election night, and I called that panic, "a gift",
 and the market rallied the very next morning, like nothing had happened. I can't tell you exactly what percentage the market is up since Trump took office, but it's up a lot!

Don't let irrational fear get the best of you.


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