Senin, 31 Juli 2023

Market Whiplash: Preparing for a Correction

 
   
     
   
 
JULY 31, 2023
 
   
GUY COHEN’S MARKET MOVERS
Buckle Up for the Ride!
 

Thursday's price action was a classic ‘monorail’ outside bearish bar (*see editorial note in P.S.), with many stocks now looking exhausted to the upside, but the main indices recovered their poise on Friday. 

A proper correction is only a matter of time, so a break of Thursday’s low would be the constructive signal to the downside. If the markets continue to make new highs, we would expect to see more bearish monorail bars and volatility in the near future.

This week, we have a mix of bullish and bearish setups. As always, trade only the breakouts and manage your risk according to our trade plan. In this environment, be extra careful with pre-earnings setups, and look to act only after the announcements on clean breakouts if you're watching.

Here is this week’s watchlist:
 
 
Follow the money,

— Guy Cohen

* Editorial note: Guy used the term “outside bearish bar”, but you may be more familiar with the term “bearish engulfing candle”.

Remember that Jeffry also mentioned this on Friday. And in our experience, when multiple experts start talking about the same thing it’s time to really pay attention. In this case, the trend reversal that both Guy and Jeffry have been warning about could be upon us. Trade with caution.
JEFFRY TURNMIRE
Trading Bots Exposed: The Flash Crash
 

Imagine a financial world where every transaction, large or small, is executed in microseconds. This isn't science fiction; it's the reality on Wall Street today, thanks to algorithmic trading bots.

The importance of these bots can't be overstated. According to estimates, over 80% of the stock market's trading volume comes from these swift digital traders.

They're relentless — working around the clock, sifting through vast amounts of data, and making split-second decisions that impact the markets in profound ways.

The financial landscape has dramatically evolved since the inception of algo-trading in the late 1980s. Fast forward to today, and we have high-frequency trading (HFT) — a branch of algo-trading that takes speed and efficiency to the extreme.

HFT firms use advanced technology to execute millions of trades in mere fractions of a second.

However, such high-speed, high-volume trading comes with its pitfalls.

One such instance is the notorious "Flash Crash" of May 6, 2010. (a.k.a. “the crash of 2:45”)

In just 36 wild minutes, the Dow Jones Industrial Average plunged over 1000 points, only to rebound just as quickly. This erratic event was largely attributed to a rogue algorithm that triggered a domino effect of sell-offs.

While trading bots are designed to maximize efficiency and profit, they're still limited by their programmed rules and lack the human capability to interpret external factors.

Events like the Flash Crash expose this vulnerability, highlighting the potential for cascading failures in a system overly reliant on machines.

And the more that these Wall Street bots hold an influential role, dictating the market's ebb and flow, the more potential there is for crafty traders to exploit their weaknesses.

But not all bots have such glaringly obvious flaws as the one that caused the flash crash. Some are more subtle and require close observation.

For example, did you know that there’s one specific ticker in the market that has a flaw that misprices its options?

It’s true. I discovered this a while back and I’ve been exploiting it for over a year with flawless results.

If you want to learn more about the little known flaw I discovered, I’m going live at 1pm Eastern today to share all the details. Just click here to reserve your spot.

Hope to see you there,

— Jeffry Turnmire
   
 
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