Trade The Journey

Trade The Journey

A year older…

Top of the Morning! At the end of the week, I celebrated my birthday. Beginning last year, I started setting goals and developing a plan detailing the progress I planned to make for the year ahead. In the past, I’d reflect on the previous year, make a couple of mental notes on the years’ events and proceed to celebrate my birthday.

This year, I wrote down my goals and thought about some of the things I would have to change about myself to accomplish them. It was hard for me to acknowledge that I still had a lot of work to do if I wanted to become the person I envisioned.

Reflecting on my progress, I can see the changes in how I approach everything. As I began to change the way I managed my time, I adjusted the way I thought about time. “Time is an opportunity,” I thought to myself, so I began to plan everything in time slots.

I once read that your income level is tied to the detail in which you manage time, with the most successful people planning their time schedules to the minute.

I reasoned that if I could get up early to work for someone else, surely I could get up early to work for myself. I typically arise at 6:00 or 6:30 am, meditate, and visualize myself accomplishing my goal of financial freedom, then I get to work.

The longer you stick to the process, the more observations and adjustments you can make. This year I became a little more comfortable with the idea that every day is a step towards or away from improvement and progress; there is no end destination.

I’d give up on pursuing a goal in the past because of the length of time and space I saw between where I was and my goal. Now I understand that “Good things sometimes take time,” as the experienced wall street trader said to Bud Fox in the movie “Wall Street.”

Market Story

The market slipped from its highs on the news that another Coronavirus variant was found in South Africa. The variant, named “Omicron,” has 32 different mutations, is highly transmissible, and may be able to evade the vaccines’ protection.

Most countries reacted by banning travel from the infected South African areas, but it may be too late. The variant has made its way to Europe, and doctors believe it’s already here in the United States. Currently, the delta variant is the dominant strain, but that may soon change.

Some country’s citizens are protesting the vaccine mandate and reimposed lockdowns even with a new variant being announced. People are tired of the virus and want to return to their everyday lives. The U.S. can’t afford to reimpose another lockdown, nor do people want another lockdown.

Yields gapped down on the five, ten, and thirty-year bonds as people were buying into safety. The emergence of a new variant spooked the markets. With a shortened trading week due to Thanksgiving, most participants expected a low-volume trading day on Friday to close the week. Instead, the markets braced for more uncertainty in the weeks ahead.

With the emergence of a new variant, will the Fed continue its plan to reduce its monthly bond and mortgage-backed securities purchase reduction?

So far, no announcement has been made by the Fed to change its current policy trajectory. With inflation remaining stickier than expected, one can only imagine the difficulty facing the Fed in its future policy decisions.

Supply constraints remain a concern of many businesses, as does the continuing labor shortage.

The dollar fell, as did crude oil prices at the end of the week. Gold halted its downward movement on the news and may rise further as the market remains in limbo as more details arise on the Omicron variant.

Personal Income rose, and personal spending remained strong while Businesses ordered more capital goods and increased their inventory. With the rise in crude oil prices, governments banded together to release oil from their reserves as OPEC proceeded in its production goals, declining to raise production as the United States and other countries asked.

I have included a picture of the Business cycle I took from a book I’m reading.

Techincal Story.


Russell 2000

The Omicron variant caused the Russell and other indices to drop, taking out nearly a month of upward progress on the weekly chart. On the daily chart, the price broke below the 50 and 200 sma. Price action during the week was already bearish; the variant announcement further exacerbated the move down. The 2317.6 reference level may serve as resistance for the week ahead.

S&P 500
The S&P made a high at the beginning of the week and closed on its low at the end of the week. On the daily chart, price gapped down on the variant news after sideways action near its high. Price could drift down lower towards its 50 sma at 4527.51 or the 4549.08 level.

Dow Jones
The dow fared the worst on the virus fears. The dow was already trending downwards before the variant announcement. On the daily chart, the dow gapped down below its 50 Sma. The 35513.38 level could serve as resistance for the foreseeable future. The last three weeks have shown that the bears on in charge.

Nasdaq

The Nasdaq took out a month of bullish action on the weekly chart. The Nasdaq started the week at the all-time highs and closed on its low to end last week. The 15378.12 reference level will be a level to watch if Monday is another down day.

The crypto market also took a hit with the latest variant news.

Volatility will remain elevated as the uncertainty will remain with the emergence of a new variant. The holiday season brings families together, and the cold weather results in more people staying inside together for more extended periods, leading to an increase in Coronavirus transmission.

Be cautious trading these markets as new developments could rock markets. It might be a good time to start looking at potential investments if the market continues to react to this variant news.


Short Reflection:

I have read almost every book recommended by market participants and find myself relistening to books previously completed. I’m now delving deeper into Options trading, mainly focusing on understanding the Black-Scholes model and volatility.

I’m also working on developing an options strategy by paper trading. One thing I’ve noticed about myself is my eagerness to make a lot quickly. I tend to do well when placing trades I have thought out.

Unfortunately, I grow impatient after a couple of trades resulting in small profits and want to risk more.

I usually grow overconfident with the smaller trades and feel that I should be making more, so I place larger trades without fully thinking about the trading strategy.

In the coming weeks, I will work on becoming more skilled at placing larger trades. If I can develop the proper mechanics of entering and exiting a paper trade, I will soon be ready to trade with real money.


Cash-flow Management for the past week:

I managed my cash flow well. My goal is to be conscious of what I’m spending money on and why I’m spending the money. Do I need what I am purchasing?

I focus on the small purchases because the small purchases add up. If I control my urge to spend, I have the opportunity to earn a return on the dollar I avoided spending.

Grade: C
Reason: Continued Improvement.

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