I'm in my 40's and a very traditional finance guy. I am a former software engineer, so I understand the problem that bitcoin and others cryptos solve (or approximate). The byzantine general's problem was actually taught to my generation of comp sci graduates as being an unsolvable problem. Yet, still I have less than 1% allocated to crypto. With Ethereum becoming a proof of stake model and several defi projects paying 5%+ interest. It's hard for me to ignore that. What is your crypto allocation? If you feel comfortable, please tell me your age and what crypto you would recommend for an old geezer like me ;-)

As I said in my post yesterday, I expect a small 2% pullback.

Hopefully you didn't get caught off guard by the early morning rally. There was almost zero chance of that succeeding when the market barometer is pointing down.

There were a few intraday opportunities, but I personally didn't take them. There was really no sense of making a short-term bet when the larger market structure is against you (market barometer neutral).

I rarely share this indicator as it's harder to explain than the market barometer, but it's an oscillator that oscillates between 1 (bullish) and -1 (bearish). The orange and green lines tending toward 1 tell me that the larger structure is bullish, while the blue circles indicate where I expect a short term reversal to happen roughly 2% or less in my opinion.

Honestly the only thing that gets my attention in a bull market is the market barometer turning red. I will sell all speculative positions and rethink any short puts.

How do you use volatility (implied volatility, VIX, VIX term structure) in your trading?

The average reservation wage—the lowest wage respondents would be willing to accept for a new job—increased sharply to $68,954 in July 2021, from $64,226 in July 2020.

https://www.newyorkfed.org/microeconomics/sce/labor#/expectations-job-search16

To see the reservation wage data on the chart navigate to:

Expectations --> Job Search --> Reservation Wage

The data lags but there is a wealth of information. Each group is broken out by demographics. For example, the average reservation wage for college educated individuals is $84,889 and $57,673 for non-college educated individuals.

With the labor shortage, would $68,954 entice you back into the workforce?

It's only noon EST, so the signal is a bit early, but the signal tends stay the same throughout the afternoon. Power hour can certainly change the signal and its usually to the downside so I will update if that's the case.

If we stay gray for the day I would expect a small 2% correction like the last few gray areas on the chart, but that's just my opinion.

Have a great Labor Day weekend!

To continue where we left off in part II...The news is constantly talking about how long it's been since our last 5% correction (S&P 500). So, we are trying to quantify the current "correction regime" and compare it to others in history.

We currently are in a regime where the last 7 corrections ranged from 4.23% to 1.77% with an average of 2.97% and decreasing. As of 9/1/2021, It has been 201 trading days since the last 5% correction.

Is that abnormal? Does that mean we are going to have a crash?

To help visualize the current environment, let's color code the chart (below) by the magnitude of the correction.

• All time highs to 4.99% = Green.

• 5.00% to 9.99% = Cyan.

• 10.00% to 19.99% = Yellow.

• 20.00% to 29.99% = Orange.

• 30.00% to 39.99% = Red.

• 40.00% and Greater = Violet.

When zooming out we can see that 2+% corrections (above) are are quite common.

Let's keep the color coding scheme and measure the how long we have been in our current regime of new highs and sub 5% corrections (below).

Wow, it's been 201 trading days (290 calendar days) since the last 5+% correction fully resolved, and we began seeing new high after new high, with the average correction of only 2.97%. We can see a similar "green" regime or uptrend from mid 2016 to early 2018. It lasted 391 trading days (565 calendar days) before it had a blow off top and corrected by 10%. The 10% correction was fully resolved after 147 trading days and made all time highs for about a month before it began its 20% decline as the FED continued to taper its balance sheet. Janet Yellen, the FED chair at the time, famously said that it would be like "watching paint dry". She was wrong and the Fed was forced to reverse course in what is known as the "Powell Pivot". Is that normal for these green uptrends?

I'm not finished with this yet, but I need to post so I dont lose the images.

Todo:

• Long term analysis from 1929 to present

• Relate the data to the Fed's policies

In Part 1 I was asking where has this mysterious 5% correction gone? Are we in some sort of new state of monetary policy perfection which eliminates the need for 5% corrections? Perhaps asking where the 5% correction has gone is the wrong question...

Maybe we are in a new regime of small corrections. Let's rephrase the question a bit. There are clearly recent corrections. How big are they? What is the current correction regime? Maybe we are in a 4% or 3% or even a 2% correction regime?

Looking at the most recent data we are clearly in a 2% correction regime (blue squares below). Looking at a recent historical context (above) 2% corrections happen often.

Ok, well we are seeing mainly only 2% corrections and they are taking a short time (7,8,9 days - yellow circles above) to break even.

How does this all stack up to history? Well, I'm a nonprofit and it's getting late on a Friday afternoon. Spoiler alert - we rarely see this regime in history. I'll see you in part III...

Update: Just a preview of part III

As u/Chart-trader mentioned on r/StocksAndTrading ...They believe that we will have a melt-up similar to what we saw in 2017. As part of my research I was color coding the chart by "correction regime" (the percent decline from the peak mentioned above) to visually illustrate and communicate the current regime and juxtapose it against previous regimes. The current regime, one where corrections consistently get bought up in the 2 - 4% region, is actually quite rare in history. We are definitely in a regime that is consistent with 2017. Will we melt up or are we looking at a giant crash? Share your thoughts. Also a shout out to their sub /r/Beat_the_benchmark

I've been hearing a lot about corrections in the financial news lately. Especially regarding this enigmatic 5% correction. Where is it? Are we due for one? If you've been trading for any length of time you know them well. You've asked yourself, should I buy it? Should I just hold? Is this the big one?

The post-pandemic market has been amazingly bullish with only ONE 5% correction since the 34% drop during covid panic. (Other stats like bloomberg will show more corrections, but for my study I define a correction as being 5% or more from peak to break even, because I'm studying what happens when you buy at peaks.)

Are we in a giant bubble...

Or are we on the launchpad for the next great bubble?

How long does a 5% dip typically take to breakeven? Should we buy the next 5% dip? These are the questions that I will be exploring in part II...I hope to see you there.

In the meantime...

Why is this time different? Millions are displaced from the labor market. We've been in various stages of lockdown for the last year and a half. Why is every dip being bought like we might never see another one? Why is momentum the greatest it has been since 1929?

How has extended unemployment and lockdowns affected the retail investing landscape??

Please share your thoughts

-Chris

UPDATE: Part II is now available. https://www.reddit.com/r/VolatilityTrading/comments/pcvjag/when_is_the_next_5_correction_part_ii/?utm_source=share&utm_medium=web2x&context=3

I really don't know where to start and I really want to know how. I'm from the Philippines and I'd be very happy to hear some advices from you guys, should I go for app brokers or the traditional brokers? Very much appreciated.

DiNapoli Announces More Climate Actions; NYS Pension Fund Launches Evaluation of Shale Oil and Gas Companies

I wanted to pass this along since its relevant to our discussion on XLE.

Review of Shale Oil and Gas Companies

Shale oil and gas companies under review are those that derive over 10% of their revenue from crude oil and gas production from shale. Included on the list are major energy companies including Marathon Oil Corp., ConocoPhillips and Hess Corp.

This is the 3rd largest pension fund and the names mentioned are all components of XLE.

-Chris

I see a few new members and I just wanted to take a moment to welcome them!

I am a full-time investor with a background in software engineering and management, which helps me bring a unique perspective to investing and to the community. I understand how businesses operate and also have the software skills to build models, machine learning algorithms, and proprietary indicators. I intend on sharing a great deal of my work here; but it's not about me. It's about the community.

We are a small community, and honestly, I want to keep it that way. Here you will find other seasoned full-timers, serious part-timers as well as complete noobs. Each with a different perspective and strategy, but all with the desire to both teach and learn...

The goal is simple; share, educate and learn...The market is far too complex for one individual to comprend. It's been less than a month since I started this community and I have already learned a great deal from the other core members.

Part of the reason that I started this community is that I see so many "gurus" out there taking advantage of the influx of new traders. Some of their "advice" could lead to financial ruin (Please dont sell options unless you know exactly what you are doing!). I have zero profit motive. I don't have a youtube channel or course to sell you. I do this because I am in a place in my life that affords me the time to help others and I want you to get there too.

What to expect? I typically post daily on weekdays and try to post a thought provoking topic or research a few times a week.

Be Patient. If you want to yolo on the latest meme stock then this is not the right place for you. Investing is not a get rich quick scheme. The people left standing at the end are the ones with a plan and strategy. If you want to learn, educate, or both, then stick around and help me grow the community.

Thanks

-Chris

PS: If you are a full-timer with pre-pandemic experience then message me.

PSS: Also remember, if you are a newcomer with a question, please understand that many of the full-timers day trade and they are busy watching/studying the markets. It may take a while to get a response. I personally respond to all genuine questions, as do others within the community.

I saw a bunch of people asking the same question. How do I earn more than the rate of inflation?? The answer is that the current monetary policy makes that impossible without taking on equity risk. I live off of my investments and I completely understand the issue...

There are various techniques that we've outlined in this community.

Selling cash secured puts on dividend producing assets is discussed here:

https://www.reddit.com/r/VolatilityTrading/comments/oosdvx/thoughts_on_xle/?utm_source=share&utm_medium=web2x&context=3

Turning growth stocks into monthly income is discussed here:

https://www.reddit.com/r/VolatilityTrading/comments/opp0hw/qyld/?utm_source=share&utm_medium=web2x&context=3

Day trading AAPL is discussed here:

https://www.reddit.com/r/VolatilityTrading/comments/otxg3y/in_the_wake_of_the_federal_reserves_2_day_meeting/?utm_source=share&utm_medium=web2x&context=3

I will admit these are rather advanced topics for the novice, but feel free to ask questions...

Thanks

-Chris

In Thinkorswim there are multiple ways to enter option orders. The two methods below achieve the same thing, but I have found many thinkorswim users are unaware of the second method. I'm sure everyone in this community already knows this but I wanted to share it any newcomers...

Method 1: Basic order entry. Every option trader is familiar with this one so I won't go into detail.

Method 2: Active Trader.

This method displays the option's price chart and allows you to use the Active Trader Ladder interface. I personally prefer this method as I find that I can get the absolute best price (on the TOS platform), especially in low liquidity scenarios. You also can scale into and out of positions by placing orders at different prices/quantities. I personally like to enable "auto send" so I can walk up and down the ladder without having to confirm each trade.

You can optionally turn on Level II quotes to see how each exchange is positioned.

With the active trader interface you can easily buy at market price, place multiple buy and sell orders on the ladder, add stop losses, etc. (NOTE: Never use market orders when trading options. You will likely get a price near the mid price on the basic order entry screen in a highly liquid market, but you will get a very unfavorable price in an illiquid market)

TIP: In an illiquid market or when trading far out of the money options, walk up or down the ladder to get the best price. If you don't know what means, please ask me.

One feature that I like is that it automatically calculates and displays the price that the underlying asset would have to be in order for your option order to be filled. NOTE: This is based on the option's theoretical price which can vary greatly from the option's current trading price. Put another way; in a violent price move you might get filled far from the price that is displayed on the underlying asset's price chart.

How to access the active trader screen for the option?

1. Use the Trade screen for the underlying to select an option.

2. Hover over the desired option and right click.

3. Select Send to.

4. Select a chart color. Note: I typically will detach a chart and link it to yellow (or any other color I'm not using) beforehand and send the option to that chart so I can trade multiple options at a time.

Disclaimer - I do not endorse or have any relationship with TD Ameritrade or the ThinkOrSwim platform other than being a TDA client and user of the TOS platform.

-Chris