At the Fed, spring comes early with return to new ‘normal’
U.S. household wealth has hit record levels. U.S. stock prices recently hit all-time highs. Inflation is nearing the Federal Reserve’s 2.0 percent goal, and the world economy including the once-sick eurozone has skirted the risk of a deep new downturn.
When Fed Chair Janet Yellen holds her first press conference of 2017 on Wednesday she can arguably declare a victory of sorts with an expected interest rate rise that will leave monetary policy looking increasingly normal.
The rate increase expected on March 15 will be the second in four months, a pace unseen since the peak of the U.S. housing boom in 2006.
Central banks are taking off the market’s training wheels
Can investors ride without training wheels?
Federal Reserve Chairwoman Janet Yellen and her colleagues pulled off a masterful display in late February and early March, forcefully nudging market expectations about a March rate increase from doubtful to virtual certainty in a matter of weeks without upsetting financial markets—or at least not the stock market.
Is This Week’s Fed Meeting 2017’s Biggest Binary Event Thus Far?
The exceptional February jobs report out Friday seems to have paved the way for the Federal Reserve to make an aggressive interest rate hike when it meets this week.
In fact, the Fed Fund futures market is already pricing in a 100 percent chance of at least a 0.5 percent hike and a 93 percent chance of a at least a 0.75 percent hike, according to CME Group’s FedWatch Tool.
How Successful Traders Think
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Today’s Trading Lesson…
How and when to trade bigger share size
One of the most challenging moments for a trader comes when you are doing well. You exude confidence when you’re earning money but you feel like you should have earned more. This always leads to thoughts of trading bigger. “If I had X amount of additional shares, I would have earned XX, instead of Y…”
Fight this urge unless you have data that spans more than yesterday’s P&L.
The time to raise you share size is after you validate a strategy and prove to yourself you can follow it, flawlessly. How long is enough time to believe it’s time for you to trade bigger?
Depends on the amount of trades, not on the amount of time. You are looking for a sample size, not a time frame. A day trader could reach that number in a few months, a swing trade maybe 6 months.
You’re looking for results over time-the literal definition of trading edge means results over time. When you have positive results over time, you have a solid foundation to make the decision to trade bigger.
What to Expect
If there is one thing I can virtually guarantee is that you will lose money when you increase your position size. You might be thinking “I’ll just focus on the trade, not the money.” Yeah, that’s the right plan, but it doesn’t work that way.
I saw this play out with 99% of the traders I managed at my firm on NYC. This happens because you got “comfortable” with your risk per trade. When that same trade becomes bigger stop loss, the numbers take on a new meaning. You need some time to adjust to the new risk levels.
Trust your edge. Trust yourself and everything will be fine. But expect it to happen.
On the Tape Today | 3-13-17
AMGN | Amgen Inc showing great order flow and institutional support (notice the change from the open for the past 3 weeks). Not to mention the relative strength and recent breakout. The stock price has room-to-go and is not near a Saturation Point. Game Planning a $182 buy-stop and a swing trade target of $187.75. Stop loss on a close below $180.
PRGO Perrigo Co setting up a new short-dale after getting pummeled and taking almost 2 weeks to absorb the blow. Game planning a move higher and a $72 limit order to sell short. Initial target to cover in the $68 area. Stop loss on a close above $72.75
Tape Reading the SPY ETF
$SPY price action last week played out perfectly according to our “sell the news” game plan.
The only question on the table this week? Does the same story unfold in a bullish manner? It’s widely accepted the FOMC plans to raise interest rates this Wednesday. Is this baked into the current levels in the stock market already and do stocks rally after the announcement?
Great trading requires well-thought “if-then” scenarios. To trade profitably this week you must have best case ideas, and a solid “plan B” as my friend Marc D. says. Having more than one plan doesn’t mean you are uncommitted, it means you know what your best case scenario is and anything else is lower probability.
This means you MUST adjust your risk and trade expectations as you move away from your perfect trade. Be smart this week. Monday and Tuesday could be slow, but Wednesday afternoon through Friday could be awesome.
That’s what I see as of this morning, let’s see how things play out.
Stock Market Today: Heatmap of the S&P 500
Stocks to Trade | 3-13-17 Monday Edition
Bullish Momentum: INCY, RH, PSX
Bearish Momentum: fnsr, aa, bhi, cop, dvn
Bullish Order Flow: INCY, MOMO, ADSK, AVGO, AMGN, UNH, SWKS, FB, AAPL, COF, AMZN, CELG, BA, BIVV
Bearish Order Flow: dvn, sg, rrc, apa, nfx, eqt, sm, slb, trip, oxy, tgt, lb, nem, kors, prgo
Double Normal Volume: DISH, FNSR, LUV, AGN, IONS, ADI, MOMO, THC, LEN, INCY, PSX
Inside Days: csx, cat, momo, dal, mos, hrb, axp, esrx, lly, stx, lb, mcd, wdc, trip, gsk, nov, tso, twlo, bivv, intu
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