sport football: Market Musings on Turkey Day 🦃

Kamis, 28 November 2024

Market Musings on Turkey Day 🦃

November 28, 2024 | Read Online

Don Kaufman here.

Let me tell you something funny - I was just complaining about 56 degrees in Arizona the other day.

But hey, while I'm freezing my tail off, the markets are heating up in interesting ways.

As we sit here on Thanksgiving, digesting both turkey and market data, let's talk about what's cooking.

The SKEW Situation 📊

One of the most fascinating things I noticed this week was the SKEW hitting 167 - one of the highest prints we've ever seen.

What does this mean for your turkey-day contemplation?

Well, it doesn't necessarily mean we're going to tank, but it sure as heck tells us someone's doing some serious hedging out there.

The high SKEW index while the market appears healthy on the surface signals that institutional investors are paying a premium for "tail risk" protection - essentially insurance against a market crash - despite the positive price action and healthy breadth we're seeing.

Here's why this matters:

The SKEW measures the perceived risk of a "black swan" event in the next 30 days
High SKEW (above 135) suggests smart money is hedging against a potential large down move
This hedging activity comes despite strong market technicals, indicating institutional investors see risks that may not be obvious in traditional indicators

They're buying puts and financing it by selling calls.

That's a lot of risk protection for dessert!

FOMC Minutes & Market Mood 🎭

The market's reaction to the FOMC minutes was about as exciting as cold turkey - and that's actually telling us something important.

With the SPX barely reacting, it's clear the market's taking a "meh" approach to Fed speak right now. It's like the markets are in their post-Thanksgiving food coma already!

Trading Lessons to Chew On 🎓

Let's dig into a powerful market indicator that's as essential as the turkey at Thanksgiving - the Advance-Decline Line (A/D Line).

This market breadth indicator might sound fancy, but it's actually a straightforward tool that can give you a clearer picture of market health.

THE ADVANCE/DECLINE LINE: YOUR MARKET'S HIDDEN TRUTH DETECTOR 📈

Ever wonder how Wall Street pros know when a rally is real or fake? Here's their secret weapon - the Advance/Decline Line.

What Is It Really?

Think of it as the market's lie detector. While price action tells you what the market did, the A/D Line tells you HOW it did it.

Here's a perfect example:

Earlier this week, the S&P 500 was up 0.5%, but look deeper:
• Only 180 stocks advanced
• 320 stocks declined
• A/D Line: -140

Translation? The market looked healthy on the surface, but underneath it was gasping for air.

Why This Matters For Your Trading

Imagine three scenarios:

The Perfect Rally
• Market price: UP
• A/D Line: UP
This is what you want to see. It's like a house built on concrete, not sand.
The Warning Sign
• Market price: UP
• A/D Line: DOWN
Red flag. When fewer stocks participate in a rally, it's usually running on borrowed time.
The Hidden Strength
• Market price: DOWN
• A/D Line: UP
This often signals a bottoming process - like a spring coiling for the next move up.

The Pro's Edge

Here's how I use it:
• Strong A/D Line = Focus on long setups
• Weak A/D Line = Either sit out or look for shorts
• Extreme readings (4:1 ratio) = Potential reversal incoming

Bottom Line: Price tells you what happened. The A/D Line tells you if you should believe it.

Looking Ahead to 2025 🎯

While we're all enjoying our holiday spreads, let's talk about spreading your trading knowledge. There's never been a better time to level up your game, especially with what I'm seeing in the markets right now.

Your Black Friday Trading Feast 🎁

Speaking of leveling up - I've got something special cooking. Instead of fighting crowds for a new TV this Black Friday, how about investing in your trading education?

I'm offering my top 7 beginner-friendly strategies in a 12-week coaching program. We're talking: