“Timely Tom” came out with a warning in late July about being scared of August. Stocks responded almost immediately…Tom is out with a warning again, and he says you should “buy stocks aggressively. Tom has been one of few that has been right about this market all along. He states:
“We believe this 3% pullback NEEDS TO BE BOUGHT aggressively,” Lee wrote on Friday. Emphasis his.
Lee considers the simple history of stock price moves.
“Newton’s ‘law of motion’ applies to stocks in mid-September — 90% of time, if stocks up between 5% to 20%year-to-date (YTD), gains continue to year-end (YE),” Lee observed. “Since 1940, to gauge what stocks do between 9/15 and YE is simply look at YTD performance. When stocks are up 5% or better, they rally into YE 87% of the time (90% when between 5% and 20%). When stocks are down YTD (thru Sept), they historically show no further advance until YE.”
Tom Lee observes that stocks tend to rally into the end of years. (Image: FundStrat Global Advisors)
This line of reasoning may be a little oversimplified for most investors, especially considering the lineup of market-moving events going into the end of the year. It’s worth noting that Lee’s study found that the pattern he observed also held during election years.
Lee went further to consider fundamental and economic reasons why markets could rally from here.
“Why is this ‘law of motion’ at work?” Lee wrote. “We believe this law of motion is simply reflecting that whatever forces and factors drive YTD gains, are likely to remain in place into the end of the year. And we see this at work in 2016—(i) global search for carry; (ii) US economy remains on strong footing; (iii) underinvested investors (performance chase) and (iv) contrarian sentiment.”
Lee has 2,325 target for the S&P 500.
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Whatever indices weakness comes in the very near future (if any weakness at all), is purely an epic bear trap and should be bought hand over fist, in my humble opinion.
Are we going with Timely Tom being a contrarian indicator or one of the few talking heads that gives fairly reliable advice? Usually, whenever these “strategists” go on TV, they’re almost always talking their book, and seem to be great leading contrarian indicators. Would appreciate your take on this OA; Tom’s been pretty headstrong about a long term bull market. That’s why I’m seeking clarity.
I’m not sure if this is what you are talking about, but I’ve had difficulty before because I was expecting that I had to come up with a trading method that wins every time, and that never exits a trade earlier than the highest profit point. Even if OA doesn’t have time to discuss this right now, I am willing. And perhaps some others here might comment.
Once I realized that the above expectation was unrealistic, I tried to come up with methods that would, on average, win more than they would lose me, and follow those rules. That seems to me to be realistic.
Only a clairvoyant could know how to win every time.
To set a stop or a rule, and then, in the stress of the moment with the trade going against me, to expect myself to guess correctly each time whether or not I would make more money by ignoring my stop or my rule– that doesn’t seem to me to be something that can realistically be done.
I notice that OA lets a number of options expire worthless each month, knowing that, on average, he will make more money overall than he will lose. That’s not the strategy for everyone.
But to me it makes sense to set some kind of rules, and then to keep them– and to aim for developing rules that, while resulting in some losses, overall it result in making money.
I think unrealistic clairvoyant type expectations is one of the major pitfalls of trading.
We’ve been having a lot of these conversations in AHWOA lately. I could write on this, but couldn’t cover everything. Would be easier to do this via webinar and talk through it.
My observations are that people are way too emotional when they trade. That’s why I’ve always said that if you trade options, you have to use size that makes you unemotional. People manage positions watching their account balance fluctuate, rather than based on price action in the underlying stock.
If people get emotional about the unrealized gain/loss movement, either they are too heavy, or shouldn’t trade OTM contracts.
With all the stocks I trade, under most circumstances…if I am wrong, I am wrong about time. So being early sometimes hurts me trading short dated options. A remedy for this is buying more time.
I trade the way I do because this is where I’ve found I can make the biggest gains. I also have defined risk.
I place a stop immediately after purchasing a stock. I adjust it downwards only in very unusual circumstances. The key however is the entry point. A lousy entry point will almost always result in second-guessing and emotional trading. If you miss a trading opportunity it’s no biggie. Odds are the opportunity will present itself again. Also, if you feel like you have to make a trade every day or multiple times a day then that’s gambling not trading.
Tom is out with a warning again, and he says you should “buy stocks aggressively. Tom has been one of few that has been right about this market all along. He states:
$LABU high as a kite here.
Your $PLUG indicator popping
No, it has to explode, not just trade up.
Sorry was referring to your turd indicator post a couple ago not the market has topped indicator.
Right, I meant that you’ll want to take note when the stock is up 15-20%, not just up on the day.
The apathy / lack of fear in the options market is of great concern. Intraday put to call ratios are some of the lowest I can recall in many months. S
ell.it.all.
Third times the charm?
Whatever indices weakness comes in the very near future (if any weakness at all), is purely an epic bear trap and should be bought hand over fist, in my humble opinion.
Oh no, what gives you the confidence to say this right now? Shit.
I can’t tell if you’re implying that Tom is a contrarian indicator or not. I assume contrarian, but just wanted to check. Thanks OA.
He’s actually had a great read on the market for quite awhile.
He’s been a permabull for some time
But he’s right though. Give the “permabulls” a chance to nail the top before they get the label. Myself included.
Are we going with Timely Tom being a contrarian indicator or one of the few talking heads that gives fairly reliable advice? Usually, whenever these “strategists” go on TV, they’re almost always talking their book, and seem to be great leading contrarian indicators. Would appreciate your take on this OA; Tom’s been pretty headstrong about a long term bull market. That’s why I’m seeking clarity.
I’ve been just as head strong, no?
Agree . He’s been money
Very true OA, thanks man
My only regret with CARA is not owning more. Everything looking pretty decent this morning but for that piece of shit FEYE.
Sorry – I bought it this morning. figured it has always been bad for me, this time would be different….
Hoping ESPN will be catalyst for $GPRO
http://www.theverge.com/2016/9/19/12968620/espn-drone-racing-drl-2016-season-schedule
I despise FEYE and dont know why I keep trying. On the other hand FSLR is the next candidate for a money raise. Now with a 15% haircut
I had shorts on UA and HSY and the market is telling me “FU”. I exited UA friday and exited HSY today.
Added to WYNN and NFLX at 98.25 and 104.75
Oct FIT ,,,,,,,short TWTR weekly
Looks like that TWLO move to ~75 in X time may be getting started.
Fucking TWTR.
Yup.
OA would you say the ability/inability of a person to handle bloop-bloop is what makes or breaks you in the market?
Oh man, it would take me no less than a day to respond to that question.
Lol, I let myself get blooped out of $BLUE and now I’m trying to remain level headed
That fine line between being correct but too early and riding it out, or not honoring stop and getting crushed next day…sigh
I’m not sure if this is what you are talking about, but I’ve had difficulty before because I was expecting that I had to come up with a trading method that wins every time, and that never exits a trade earlier than the highest profit point. Even if OA doesn’t have time to discuss this right now, I am willing. And perhaps some others here might comment.
Once I realized that the above expectation was unrealistic, I tried to come up with methods that would, on average, win more than they would lose me, and follow those rules. That seems to me to be realistic.
Only a clairvoyant could know how to win every time.
To set a stop or a rule, and then, in the stress of the moment with the trade going against me, to expect myself to guess correctly each time whether or not I would make more money by ignoring my stop or my rule– that doesn’t seem to me to be something that can realistically be done.
I notice that OA lets a number of options expire worthless each month, knowing that, on average, he will make more money overall than he will lose. That’s not the strategy for everyone.
But to me it makes sense to set some kind of rules, and then to keep them– and to aim for developing rules that, while resulting in some losses, overall it result in making money.
I think unrealistic clairvoyant type expectations is one of the major pitfalls of trading.
We’ve been having a lot of these conversations in AHWOA lately. I could write on this, but couldn’t cover everything. Would be easier to do this via webinar and talk through it.
That’s great that you are discussing it in AHWOA lately. It is indeed a complex topic.
My observations are that people are way too emotional when they trade. That’s why I’ve always said that if you trade options, you have to use size that makes you unemotional. People manage positions watching their account balance fluctuate, rather than based on price action in the underlying stock.
If people get emotional about the unrealized gain/loss movement, either they are too heavy, or shouldn’t trade OTM contracts.
With all the stocks I trade, under most circumstances…if I am wrong, I am wrong about time. So being early sometimes hurts me trading short dated options. A remedy for this is buying more time.
I trade the way I do because this is where I’ve found I can make the biggest gains. I also have defined risk.
are SRPT options trading?….ameritrade feed seems off?
What’s everyone think of YRCW here, for a run to 13.75-41.25 range?
*14.25
I’m long YRCW from 11.20 but I am liking it here to add if it pulls back to 11.50.
I like the way YRCW has been trading. Also in from lower and have been considering an add too.
$FEYE poop indicator says rally is safe right now.
I place a stop immediately after purchasing a stock. I adjust it downwards only in very unusual circumstances. The key however is the entry point. A lousy entry point will almost always result in second-guessing and emotional trading. If you miss a trading opportunity it’s no biggie. Odds are the opportunity will present itself again. Also, if you feel like you have to make a trade every day or multiple times a day then that’s gambling not trading.
THis is why I am a broken record to people here about not chasing. It’s never worth it.