Dear Santa: Where Are You? | ShadowTrader Video Weekly 12.19.21

good evening i'm peter reznicek from shadowtrader.net and this is another edition of the shadow trader video weekly for sunday december 19 2021. dear santa where are you i was thinking that this is the letter that a lot of traders and investors must be writing to the north pole this year because they're wondering where is the quote-unquote santa claus rally and when is it going to come usually we're heading into a very bullish time of the year as we're closer to christmas and then that period between christmas and new year's is usually bullish as well and that usually spills into some buying action into the beginning of the next year but that just hasn't happened yet at all this is an hourly chart of the spx and you can see the chop that happened this week which was absolutely massive just huge volatility in both directions but most importantly a lot of traders getting sucked into this move which was the fomc rally on wednesday which really didn't make a lot of sense because the tone was more hawkish they cut the bond buying down by 30 billion this time so they're parrying off even more opening the door to rate hikes as soon as potentially april of next year and yet people bought that up but then took it all right back down in the subsequent two sessions which was no surprise to me we'll get into that a little bit later in the video to get a better handle on the price action and maybe show a little bit clearer as to what might have sucked buyers into this i'm pulling out to a daily chart now in the spx the first one was an hourly and i want to point everybody obviously to the section here which is the current price action but most importantly look at the downtrend line that started from here and took it right to there and this fed induced move went right to it negating this bearish action that preceded it and this is what i think sucked a lot of people into this rally thinking aha it's on santa claus is coming to town and we should be buying this market but generally these fed moves tend to retrace themselves 100 percent soon after and i think it's the type of price action that's kind of not really trustworthy and again i'm going to show you what my stance was on this fed and a couple of tweets that i sent out and what the market profile also looked like on the fed day which i think you may find interesting but regardless in hindsight looking back at the situation i think this is what sucked everybody in and in the same way that we had 100 retracement on the way up note that the activity of thursday and friday being relatively bearish because it took back that whole move and now you have a hundred percent down move uh retracing that prior up move from wednesday which of course in the bigger picture leaves us where still in a technical downtrend and really going nowhere fast now switch the chart to a weekly to show you that in as much as we are not going up anymore we still haven't broken any trends and this is important so i want everybody just to focus on just this area here which i've purposely made really big and i have expanded it in such a manner to show you where the trend line is but obviously because of uh keeping the chart really large for you i'm not showing you the start of the trend line but just understand that this line here which is the dominant trend in the s p okay which is the most important benchmark for what the market is doing is coming from april of 2020 in past videos we've looked at it but again i'm blowing it up here because i just want you to focus on this part here okay so weekly chart classic dark cloud cover which is just when you have this red bar sort of overshadowing the prior large expansion of range which was green and most importantly the downtrend from here still intact so you really don't want to get overly bullish until you get the signal that that trend line has broken but in the bigger picture uptrend still intact and that is going to be coming in right around here just around the 45 50 45 60 you kind of want to extrapolate it out and pretend okay where would the next weekly bar form it would probably form like there so you want to be looking at that area let's call it a range 45 50 to 75 is where you want to be looking if that gets lost then the prior lows here which are in the 44s probably in the high 44s that is going to come into play okay so this is what you want to be looking for as we move into the end of the year and as we look at this weekly chart one thing that i want everybody to keep in mind is that there are a lot of cross currents currently in terms of news being bullish or bearish people gearing up for a larger reopening a bigger reflation post covert etc and also the fear of fomc potential hikes different tone a little bit more hawkish coming in 2022 and how is that going to affect things we've also talked about the cross currents between certain sectors in the s p that are pushing and pulling vis-a-vis the weakness in technology strengthening consumer staples utilities we're going to get into that a little bit as the video progresses think of that also as a cross-current meaning that things are blowing in two different directions and it's acting as a push pull on the market and what i think that people should be thinking as they look at this weekly chart is simply that this sort of malaise that we're seeing here for lack of a better word where we're chopping in this large range this can go on for a while and i think it's so important for traders and investors to stop for a moment and think of what i always refer to as door number three i use this term very often with my subscribers i call it door number three and that just simply means that the market will not be up and the market will not be down it will be sideways there is always a door number three people i think don't put enough emphasis on the fact that the market is in balance very often remember that the entire purpose of the market or of any market is to distribute goods and this particular market distributes shares of equity futures contracts etc it's just a market for distribution and a fair market is one that has a fair price that the greatest number of participants deem to be fair so that the greatest amount of two-sided trade can go on buyers are happy sellers are happy fair market that's balance markets can stay in balance for a while and that's very very important and as we come up here and it feels like we're peaking it doesn't mean that the next move has to be hard down we could have this sort of push pull coming into early next year which i understand would run counter to what most people are thinking because seasonally this is supposed to be a very bullish time however as i was alluding to earlier it feels to me like there are just too many cross currents out there to get people really excited about equities during this period so just be aware of that think of door number three as the potential outcome and then at the same time while you're thinking of that as a potential outcome just use the simplicity and i really love that so much as the simplicity of trend lines to guide your way as i was saying if the market can't cross this particular line and break the short-term downtrend here then it's not any it's not yet in an uptrend and you don't need to be very bullish on stocks if we were to break this line which is extremely important then the uptrend all the way from april of 2020 which is the dominant trend that we've been in for now is broken and you really shouldn't be long any stocks at that point at all you should be at best extremely selective or maybe just sitting it out and that's also something that is hard for people to grasp i think it's easier for myself because i am a short-term trader i've told people many times i'm really not a longer-term holder of equities i know that many of you people watching this you have 401ks you have long-term portfolios you portfolios excuse me you've got all kinds of stock that you're sitting on so this sort of bigger picture analysis is important to you and you want to know you know when is it going to be safe or not safe but the problem is is that the majority of longer-term investors and this is also how the entire mutual fund industry and pension funds and all the bigger money is geared is they just hold through all of the bad periods they're not uh you know getting out of positions when trends break but that's the beauty of being a very short-term trader uh because you can be more nimble and you can be watching signals like this and you just basically let the charts tell you what to do as opposed to listening to the news or your gut or some intuition or whatever i just let the chart tell me as i was saying before if the top line doesn't break we're still in a downtrend if the bottom line breaks that's a little bit more serious and we've broken a big uptrend from april 2020 and we've got to reassess the situation in a big way which of course brings us to what i feel is always the most important part of these weekly videos where i talk about how i was positioned in the prior week and how i am positioned in the week to come and we did very very little on that fed move if you go to my twitter the address is right there at peter residence check and i urge you all to follow me on twitter i have some snapshots from our pro trading room right here of the messaging that i was putting out at that time to my subscribers saying that a lot of these fed moves often have the dynamic where they retrace themselves 100 percent i've seen this movie over and over and i think that because of the proximity of the top of that fed move right to that downtrend line where it appeared that we would break trend and we did for just a tiny bit the next morning before we tanked horribly i think that sucked in a lot of people but we didn't we didn't get hurt at all we made some money during the week and this is a snapshot i just wanted to show you of what i put out to my folks at the end of the week on friday afternoon because it is relatively rare it's just a short message saying that we're going into next week with zero positions and this is very very rare i generally have anywhere from four to six eight sometimes as many as ten positions on with my subscribers going into the next week because my mo is generally to be looking for opportunities on weekly options in the next week meaning that i'm looking to get into those positions usually around wednesday or thursday of the prior week for the expiry that is either that particular week on friday or usually for the next week's experience so it's extremely rare that i have no positions on and that's where i am right now going into next week this is the message that i put out to the clients of the weekly options advisory on friday afternoon and i think it's very very important for a lot of traders to listen to this because as i was talking about earlier in the video many people do not put enough emphasis on door number three most of the questions that i get via email in my room etc it's constantly when are we going to go up or are we going down or if i say that we're not going up anymore they automatically assume it must be down or if i say this short is not working i don't you know i think we should you know forget this trade or this is not an area where we want to get short the question is always oh well then it must be long but that's not how the market works my mentor in the market profile jim dalton very famously has said markets do not go from trend to trend markets go from trend to balance and back to trend and that trend sometimes could be a resumption of the prior trend or it could be a different trend going in the other direction but just remember that markets don't go from trend to trend they go from trend to balance to trend and as i showed you in that s p chart before on the weekly this could easily be a situation where we are not going from uptrend to downtrend but we are going from trend to balance all right so at the end of the week on friday just to recap i said thank you all for hanging out on a difficult week we picked our spots carefully made some money and most importantly didn't force anything that would have gotten us hurt in a very rare turn of events we have zero open positions right now going into next week i don't think this has ever happened before as the market is not showing its hand much here that's fine by me all right so that's pretty much where i'm at and that's all i have for you this week thank you all for spending a little bit of your weekend with me if you could do me a big favor please hit the like button on this video and also subscribe to this channel so that you'll be alerted to whenever i post new content next week is a shortened trading week interestingly enough the entire day of christmas eve is a day off in the markets because christmas is on a saturday uh this year so friday the markets will be closed so it is a shortened week just as a heads up i will not be producing a video next week and i'll be back with you the week after that which will be right at the end of the year and we'll do a big recap of monthly charts sectors we'll just take a whole big long look back at the year with a lot of longer term charts which should be a pretty exciting so get ready for that all right on behalf of myself and the entire shadow trader team here in beautiful philadelphia pennsylvania as always i wish you good trading and good night you

Channel: ShadowTrader

Views: 9,258

Keywords: shadowtrader, video, reznicek, options, how to, daytrading, technical analysis, market profile, James Dalton, how to read stock charts, weekly options, how to trade weekly options, futures trading, stock market, make money, shadowtrader video weekly, options trading, ratio spread, broken wing butterfly, unbalanced butterfly, risk reversal

Id: 6i1L8luL_64

Length: 13min 39sec (819 seconds)

Published: Sat Dec 18 2021