☕ 2 trade ideas and 4 reasons to “turn it all off” ahead of the Fed

Good morning! 👋 

There’s not a lot in the news that we haven’t already talked about at great length. 

The Fed’s expected to cut by 25bps while critics are arguing for 50bps, the S&P 500 is nearing record levels (again) and stocks like Apple, Nvidia, Intel are on the move even as Amazon wants people back in the office and another storm pummels the SE United States. 

As always, that’s an opportunity. 

To learn. 

It’s a habit I picked up years ago. 

I will often take a very deliberate break to perfect, refine and study my craft ahead of major news announcements or events when conditions are quiet like they are today. 

And I don’t mean halfway either. 

I will very deliberately turn off everything - the TV, my phones, social media and my email – the whole shebang – to concentrate. 

Admittedly, this is hard to imagine and even harder to do in an age when society places a premium on “connectivity” - a word I am really coming to dislike lately. 

Not to get off topic, but there’s a growing body of evidence suggesting that the “constantly on” state we live in today is rewiring our brains, making us dumber, less engaged, and less able to engage in long-form thinking... let alone polite conversation. But that’s a story for another time. 

The point I want to drive home is that we’ve been pre-conditioned by the news cycle, Wall Street and social media to pay attention to the minutia in today’s markets because that’s what we’ve been led to believe we’re supposed to do if we want to be successful. 

Not so. 

Learning to deliberately walk away from your screens is the real flex. 

There are four benefits: 

1. Better Preparation: Study, analysis, and planning can help you make quick decisions when you need to for the simple reason that action beats reaction every time. The unprepared make decisions by the seat of their pants, most of which cost ‘em dearly.  
2. Better risk management: Knowing how different market conditions and events impact your investments, your trades and your tactics can help you manage risk more effectively at all times while staying ahead of the curve that trips up the majority of investors. 
3. Better opportunity: Quiet markets often give you a few extra precious hours to think. The extra profit potential I find often pays for itself many times over. That, in turn, helps me clarify my vision, my objectives and my analysis. It also allows me to practice new strategies, run different analyses, refine my approach and more... all without the added pressure of a fast-moving market.  
4. Better discipline: I talk a lot about the importance of keeping your emotions out of the equation but this is different. What I am talking about when I use the word discipline is deliberately developing the ability to remain calm and focused. The payoff – quite literally – is a positive mindset that comes from the ability to think clearly and make the best possible choices even when faced with unexpected distractions, adversity and headlines. 

Give it a try! 

Learning to focus can change your inner monologue, a process motivational expert Tony Robbins encourages like I do because it reframes the negative into the positive. 

Speaking of which... 

What do I make of current market conditions? 

Funny you ask. 

Today’s rally comes down to traders trying to get ahead of the Fed’s widely anticipated cut. 

The debate rages, of course. 

Will it be 25 or 50bps... when... and how fast? 

My guts – and nearly 45 years of experience in global markets - tell me it’s a massive head fake. That’s why I find myself looking at the “other side” of the trade this morning. 

I think there’s a good chance Wall Street’s merry marauders are engineering a downdraft tomorrow by sucking in the FOMO crowd today. 

The trader in me is thinking.... 

If I’m right, that suggests volatility will expand in which case going long – buying - ATM (at the money) VIX call options could be interesting.  

The September 25, 2024 $18s (VIXW240925C00018000) last traded at $0.77 but an exit at $0.96 or higher within the next 24-48 hours would mean a quick 25% in the bank if there’s a VIX spike.

If not, it’s a bust ... but I know that going in so I won’t waste the brain power worrying about it and keep risk to a minimum by only using money I can afford to lose entirely if the trade doesn’t work. 

That said, computerization has arbitraged a lot of the volatility traders used to count on out of the system so a simple 3X leveraged inverse fund like UltraPro short QQQ (SQQQ) ETF could be an effective way to play a short term downdraft if there is one over the next 24-48 hours. 

As always, do NOT attempt to follow along with these trades if you have no idea what I am talking about or lack the risk tolerance needed to do so (which I have no way of knowing). 

The investor in me is thinking... 

That a downdraft could bring several names I want to buy into range.  

Big tech, in particular. 

Two of my favorite tactics - LowBall Orders and Selling Cash Secured Puts – tend to work very effectively when it comes to a downside move. 

People fret about down days, but I don’t see ‘em that way because I love a good “sale” when I see one. Not for nothing, but tactics like these can help you maintain the advantage Wall Street would otherwise enjoy. 

Bottom Line 

85% or more of all buy/sell decisions are wrong - meaning investors buy when they should be selling and sell when they should be buying.  

Keep your emotions out of the equation! 

And yes, study. 

As always, let’s MAKE it a great day – you got this! 

Keith 😊 

PS: If you’d like to up your game, I’d like to toss my hat in the ring. Thousands of investors are already along for the ride – some for decades - and it’d be an honor to welcome you to the OBA Family, too. We have real conversations about what it takes to win in today’s challenging market conditions and, of course, the stocks, funds and income-oriented choices that are most likely to help you do that. (Learn More)