We look at markets globally because that’s what they are, global markets. The weakness in stocks around the world throughout the first couple of quarters this year was a heads up that something was wrong. We did not see the rotation come in, like we had seen so consistently after any sector went through a period of underperformance. Rotation is the lifeblood of a bull market. Money did not flow back into foreign markets, and as it turns out, it was that the U.S. was the last man standing. 

Ok, I'm on an airplane on my way to San Francisco to present at a conference and to hang with our boy JC, so please forgive the liberties I took with the title of this trade plan. Clearly I'm showing my age...

But seriously, the materials sector is offering us some nice premium to put a fast income trade on into the holidays.

I learned a long time ago from one of my early mentors, "Don't Fight Papa Dow". In other words, this is the most important index in the world. When someone asks you what the market did today, they're wondering how the Dow Jones Industrial Average closed for the session. Some people would argue that the S&P500 is more important because it represents 500 stocks, rather than just 30 from in the Dow Industrials. But by that logic, the Russell3000 should be most important because it represents 98% of all investable assets in the U.S. equities market, and contains 3000 stocks. But most non-professionals don't even know the Russell3000 exists. Also, if you overlay the Dow Jones Industrial Average over the S&P500, they move together.

If you get the Dow right, you're likely to get the direction of S&Ps right as well:

So with the Dow Jones Industrial Average reaching its upside objective this year, this is a perfectly logical place for a correction to begin. It didn't mean it necessarily had to start from these levels, but it...

Until stock markets sound the "all clear" signal and we can get back to our regularly scheduled bull market, we have to operate with a different set of rules in order to protect our capital -- both money and mind. Corrective or Bear Markets require a different set of tools. And it's not just knowing that the odds more favor short direction plays versus long direction plays, it's knowing that you have to manage open risk differently. You have to structure trades differently. And you have to operate in shorter time frames.

Down markets can be incredibly profitable for nimble traders. In fact, in my 20-year career, my most profitable years ever were 2000 and 2001 when we were on the backside of the Spring 2000 "dot com" bubble where NASDAQ dropped a dramatic 78%!! 

Honestly, I never thought a uranium play was something that would ever come across my desk, but a week ago JC published a piece highlighting the uranium space as displaying bullish turnaround characteristics -- which offers a nice portfolio diversification to many of us who are mostly positioning for the downside in equities right now.

As I've let this idea marinate in my head over the last week while watching declining volatility make long options more attractive, I've really warmed up to the risk/reward profile in this space and have identified a great way to position for exponential gains in the Global Uranium ETF $URA.

It's been quite a bounce in the markets since the end of October. And we expect to see many more such bounces in the days and weeks ahead as market participants battle to find equilibrium in a tape that has definitely been thrown off balance since early October's swoon. The thing is, our bet is that we'll see even more impressive bounces -- but from lower levels.

Our new regime thesis hasn't changed (yet), and as such, we view any bounces as great opportunities to establish new short positions in the weakest names in the market. And one of those weak names that we've been stalking is JP Morgan $JPM.

I'm in Chicago this week trying to sit down and chat with the smartest people I know in this city. I love the town, but man is it cold!

This is a special episode for me. James Bartelloni, CMT was one of my early mentors in the field of Technical Analysis. It's a treat to be able to have him join us on the podcast. What I like about Bart is that every time we chat, he gets me thinking about something new. He looks at the market in a different way than most market participants. His risk management techniques include sacred geometry, musical notes and lunar cycles, among others. It's always an interesting conversation with Bart, the editor of the blog BartsCharts.com. If this episode gets you thinking differently and gets you a bit out of your comfort zone, mission accomplished!

Last Monday we discussed our thesis for a bounce in Indian stocks and by Friday we were talking about how to manage those trades so that we could avoid letting winners turn into losers.

Now that we've gotten a decent bounce, many are asking what the next directional move in the market is going to be. In this post we'll outline why we think that Financials and Smallcaps are the areas to watch for clues.

Well, here we are folks... Election Day.

Depending on who you talk to, today could be "the most important mid-term election of our lifetime." (aren't they all?)

All the hype. All the buildup. All the angst.

Regardless of the outcome, it's possible U.S. stocks can experience outsized and emotional moves. We all remember November 2016 when final voting tallies were coming in and overnight futures were signaling the end of times, all trading limit down. Every market participant was scared and likely had a sleepless night. And what happened when they rang the opening bell?

There are assets out there that have a lower or no correlation with the rest of the U.S. Stock Market. These investments are really helpful, but even more so when we're looking for stocks to buy in an environment where we think most stocks keep falling in price. One of these less correlated areas is the Uranium space.

Investors in Uranium stocks over the past 7 years have been some of the worst stock market investors in the world during that period. Think about this, Uranium investors have performed even worse since 2011 than gold and silver investors! That is saying a lot. We've already been buying precious metals stocks the past couple of months so it seems like rotation into the worst of the worst areas is happening in unison.

First of all, here is the Uranium Futures chart breaking out from the downtrend it has been in since the Fukushima nuclear disaster in 2011 that marked the top in the space:

Click On Charts To Zoom In

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05/01/2019 UPDATE:

As a result of the labor intensive process needed to maintain the Chartbook Notes and their lack of use by the majority of members, we have decided to discontinue this feature. We will be adding new tools and functionality to replace it by the end of the quarter. In the meantime if any of the charts in the Chartbook are unclear and you need further clarification, please feel free to contact us and we'll get back to you within 24 hours. Thank you in advance for your patience as we make these improvements to the site.

In June we made some major changes to the format of our Chartbooks based on your feedback and today we're happy to introduce some new changes that we think are going to be very helpful for us as we maintain them and for you all as you use them in your analysis.

One of the beauties of options trading is even when we don't have the highest conviction in a trade, we can still participate by lowering or shifting our risks.  I come from the school that says spread your bets out across the market -- small -- because the constant pursuit of edges will yield results over the long run as long as no bad individual trades are too big to take us out.

In our most recent monthly All Star Options Conference call, we highlighted a desire to play for a bounce in bonds. In the days since, the market gods are either taunting us, or smiling on us -- offering better entry levels.

It's easy to say. You hear it all the time. That word, "Patience".

How many of us actual put this into practice? It isn't easy. We're an instant gratification society. How happy does it make you feel when someone 'likes' a picture of your kid, or the beach selfie you took over the weekend. Traders get similar dopamine kicks when we enter a trade, and that soothing bling sound on the computer goes off, almost as a reward for entering the trade. You notice how those post trade sounds are never something ugly and nasty like the sound of a car accident or something horrible. It probably should be, because that trade you just put on is most likely going to lose you money. That's not blingy like the default audio settings on your trading platform are suggesting.

The point is that in both markets and in life, I think we need to recognize what is just making us happy today vs what will make us happy in the future. Temporal Discounting is what the behavioral finance people call it. Who are you trying to make happy - the JC now or the future JC? I think it's important to approach both life and the markets by proposing this question.

From the desk of Tom Bruni @BruniCharting

The TSX Composite is down roughly 6.75% year-to-date, with stocks getting hit hard since their July 13th, 2018 high. Only one sector is positive over that time period, but I think its recent action gives us a really good perspective on the type of market environment we're in.

Counter-trend trades are lower probability by nature, which means risk management is vital both when they work and when they don't. Taking the loss and reevaluating when the trade thesis is invalidated is something most traders think about, but managing risk on a trade that begins to work right away is just as important and not discussed as often.

Today I want to look at the importance of managing positions that begin working right away, so that we can avoid winning trades turning into losers.

This is the video recording of the November 2018 Conference Call for Members of All Star Options

It is not often that we fade stocks here at All Star Options. Mostly, we like to identify emerging trends or smart entry points in long established trends and hop along opportunistically for the ride. But given the market environment we're in, we believe it is only a matter of time before everyone gets touched. And we've identified a possible "home run" opportunity to get short a stock that -- gasp! -- printed new all time highs twice this week! It might truly be the last man standing.

Small-caps have been lagging for most of the year with that trend really accelerating in May, posing a major headwind for the broader market. One thing we were looking for before putting cash to work on the long side was a sign(s) of risk appetite for stocks, which we're seeing for the first time in a while. The question now is will it last and how does it affect our portfolios?

Rates are at multi-year highs and bond prices are at multi-year lows. This has been the trend. We've been in the camp that rates would break out above 3% and that 4% was next. This has been logical target for a variety of reasons, but today that is not necessarily the point. I just don't think it will be quite so simple for rates to continue higher, and a break back below 3% would make rates incredibly vulnerable to fall quickly. 

There's something fishy going on in Interest Rates and the U.S. Bond market right now. We've been bearish bonds and constructive about higher interest rates for as long as I can remember. This has worked out well. It was a big part of the bullish stocks thesis and it's played out. Bonds are at lows and rates are at highs. I just don't think it will be as easy for this to continue, particularly with what we're seeing from both a sentiment and intermarket perspective.

Here's what's got me thinking differently:

I've just updated the Monthly Chartbook, and although October was a rough month for the equity market, our opinions really haven't changed all that much from last month in terms of trend and risk management levels. With that being said, I want to use this post to highlight a few things that stuck out to me.

I am really enjoying these conversations with Phil Pearlman. This is the 3rd episode we do where we're discussing important topics about our feelings and emotions. Today's topic is Grit, and the advantages that someone with grit has these days over those who don't. Taking a loss and moving on is not just part of investing, it's part of life. In this conversation we discuss the Bond Market and the implications of U.S. 10-year yields losing 3% and why Phil is Bullish Grit going into 2019.

Here is the second episode in full:

In corrective and bear markets, bounces and false rallies are powerful and swift. They should not be feared, but they should be respected. And the patient among us will use these rallies for better entry points on our short ideas.

Tuesday's stock market bounce affords us a great chance to get a better entry in a name that is high on our list to be short -- Boeing $BA