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Hey this is Sasha Evdakov, it is March 3rd 2016, welcome to episode number 74 of let’s talk stocks.
In this week’s episode what I’d like to do is share with you some insight about economic indicators and more importantly the Jobs report or the labor report.
Just so happens, we haven’t talked too much about the jobs report, or a lot of economic indicators, that come into the market.
What I’m going to do is give you some insight about this economic indicator, about the jobs report and really, does it really matter? Does it really not matter if you’re trading in the market?
I’ll give you some quick insight about this jobs report, in general what most people look for when they’re looking at this jobs report is they’re looking for how the economy is performing, it’s an indication of really how many jobs are created, how many jobs are lost, and it gets you to see how the fundamental market is really behaving.
Does the jobs report matter?
In terms of the relative size or relative scope to your personal positions, do you really care about the jobs report? Do you really care in terms of trading in your investments? Does it really matter if the job gain or growth is two hundred thousand, three hundred thousand? Does it really matter?
No, absolutely not, it doesn’t matter. What you care about when you’re looking at your trading, at your position, you’re looking at what’s your risk, how’s the market moving, how’s the market reacting, what is it doing and how does it perceive that jobs report. That means, what does it mean for everybody else’s trading as this job report comes out?
If you’re a retail trader, assuming you’re listening to this, you’re probably not a hedge fund, but if you are a hedge fund, you’re the type of person that can manage and move around the market.
But being a retail trader, what you’re doing with these jobs reports, is you’re watching to see when these things happen, when these economic indicators come out and then you’re tweaking and adjusting your position based on how the market reacts to them.
Focus on your position
Really it doesn’t matter if the job growth is great or if the job growth really just stinks and it’s horrible. All that you care about is how is the market behaving and how does that affect your position, your profit loss, your stocks, your risk within the market.
For everybody else in terms of, if they’re running a hedge fun, for them it’s a little bit of a bigger deal, because they might be looking at a longer term scope and they need to really manage and adjust their positions.
Running a marathon
How do they do it? Well, don’t stress about that too much, because it’s kind of like, if you go into a marathon race, or swimming, you don’t care about how fast the guy next to you really swims, if you’ve got, let’s say, 10 thousand runners, like in the Boston marathon, or some marathon race, you care about your pace, your water, your liquid, how is your bike running in the tour de France, how are you running if you’re running a marathon in the Boston marathon, you don’t worry about the guy next to you as long as he doesn’t get in your way, you’re trying to run your race and do it the best that you can do, that’s your goal, that’s your focus.
The same thing here, you’re not really worried about what the other guys are doing, instead you need to look at your positions and how that’s going to affect your positions when this economic indicator come out.
You need to plan and prepare for this, because it could give some room to the upside, or it could give room to the downside.
Does that mean a great jobs number is actually going to give you high results or give you a great movement to the upside? Absolutely not.
Does that mean a bad jobs number is going to pull the market down? Absolutely not.
There’s a video I’ve done actually on my backstage income YouTube channel that I started not too long ago, where I talk about book reviews and why some books actually get really bad reviews, and it’s really for some of the most basic things, in fact a lot of my books have had some bad reviews ass well, and people will review things in a very negative way, because of their perception. Maybe because they don’t know how to open up the e-book file, it could be simply the chart isn’t big enough and all of a sudden they mark it down quite a bit. It is because what they expected is not what they got.
It all depends on your expectations
When it comes to a jobs report, if you’re expecting an average number and you get a much better number, it’s a surprise and it could put stocks to the up side, but if you’re expecting a high jobs growth, and even though you got, let’s say a medium jobs growth, all the sudden that’s not as good as your expectation or your perceived value. So now that could pull the stock lower.
That’s why I always say, there’s always a couple of headlines that you may see in the news that sometimes they’ll say “Well, this week stock market is higher because gold is higher” The next week you might see, stock market is lower but gold is higher, so they really aren’t one to one related.
It’s important that you don’t stress too much about these job numbers and job reports, all you’re looking at is your personal account. How it’s moving, how it’s behaving and how the market is setting up for it.
Let’s take a look at the market
If we look at the market right now, currently it’s pressing, it’s pressing against this 2000 level on the S&P, 2005 is really where we want to watch, 2000-2005, that’s kind of the level you need to be watching, there could be some resistance here that could be coming up right now, and it could be dangerous for the market. So you need to pay close attention to that level.
Because we’re getting a little extended here at this level. But if this breaks, this market has wanted to go higher, we bounced right here since that release of potential oil production cut. We’ve been wanting to go higher ever since, and now we’re almost a little bit over extended here, but if we break above this level, we could go potentially much higher.
And we could get back into this trading range, if we look on the weekly, if we get back above hat 2000 level, we get back right here again, and this market will just continue to move sideways again more than likely, because if it goes too high too fast, markets don’t crash to the upside, they simply typically move slow to the upside, unless you had a nice pull back, then you might get a solid pop to that upside. And that’s what we had the last couple of days.
One of the reasons for that, and I actually talked about it in one of the videos here that I wanted to pull up, is what is window dressing, so if you want to go to this video it’s published December 22nd or you can just search for it.
This really talks about window dressing in the market. Window dressing happens at the end of the month, and then new money comes in at the beginning of the month. So kind of like with this jobs report, there’s new things that happen every month and these hedge fund managers, what they do is they typically get rid of their positions at the end of the month.
Look at what happens here at the end of the month, and I’ll just use this last month as an example here. Monday, February 29th here on the lead day, you can see stocks sold off, and that’s’ because they had a position rotation.
Why did they sell off? And we sold off on fairly good volume, and if you were looking at this, you would say, well, it’s kind of bearish, but if you know and understand that it’s the end of the month, you realize that there’s position rotation that happens, so we had slightly higher volume, even though it’s a little bit bearish, it was really for position rotation.
Hedge funds have to show results
You can see, February 29th 2016, right here we sold off, and then the next day, March 1st, we had buying stepping in. Because people were preparing, these hedge funds were preparing for that new month, because they had a really crummy February and probably a bad January as well.
We had a lot of selling, a lot of bad trading that happened, so they were ready and anxious to buy because all the other people like your mom and pop, your friend next door, your guy that you go fishing with, they guy that you play music with, or chat, or whatever, you go out to dinner with, you hang out in the garage, whatever.
All those people, when they get the reports at the end of the year, they’ve got to show those people something. What is it that they have on their sheet? What is on their portfolio? How much are they making? Every month they’ve got to send them something, otherwise what did they do? They just did nothing all day.
So in this case that’s what happened, it’s that we got buying stepping in right there on the first, on Tuesday.
Did this happen on the previous month? Well, it doesn’t always happen like this, it just depends, but let’s take a quick look at what happened here on the other months.
If we look at here, on Thursday, we got january28th, we had a light little pullback, basically an average move, on the 29th we had a major pop, and then on the first we had kind of a consolidation, you could say rebalancing, so on this month we didn’t really have that happen.
The portfolios didn’t really do a lot there, because they were probably still nervous about the down trend in January, but really on Friday January 29th, what did they do? There was another major move in the markets right before we got into February.
Why is that? Again, window dressing, they had to change the positions. So you’ll typically notice something on the 29th or the last one or two days of the month, and then the first one or two days of the month. You’ll see something happening, a little more volatility, and that is because they had to buy something to show something on the form, on the paper work.
If we look on January here, with Christmas and with New Year, sometimes these things don’t work out as well, but here is what happens.
We had a couple of selling areas and then people came in and then we had a large day on the first, or the first trading day, the fourth really of selling. So we had selling starting to pick up. They say “ok, I’m getting out. I need to rotate positions or the market is kind of acting weak”. And then we continue to selling, so they continued that.
And you can continue picking any month really on the first or the first couple of days of the month, here we had on November 30th, December 1st, look at the little pop we had here on December 1st, compared to November 30th, notice the pop, then we had another one on December second and then the third, so the first three days, four days really right there of trading there’s change of position. You can do your own studies on those and take a look at them.
In either case, looking at the jobs reports and things like that, that also happens and it helps fuel things in one direction or another.
For me I don’t worry too much about it, I look at how stressed the market is or how much movement fuels the market based on this jobs report, and then how does it affect my position.
If for example, let’s just say for conversation sake, we’ll talk about amazon here. If I’m in Amazon, and let’s say I got in it after it cleared this moving average, or after it cleared this, all I’m worried about is, I don’t care if the market sells off, for me I care about my position, right here in amazon, what’s amazon doing relative to the market? That’s what I worry about.
And I don’t worry about the rest of the market, that’s not my concern, my concern is my position, my stock, where is my stop? If my stop is 558 and it brings it down, that job report brings it down and my stop’s a 558, that’s where I get out. Otherwise you stay calm, you let things roll, you let things continue doing their thing, and don’t worry about the number.
Don’t worry about the guy next to you
Why would you worry about the guy running next to you? Unless you need to be ahead of him to finish the race, if that is your goal and plan, otherwise you’re really focused on your own.
You’re focused on your breathing, you’re focused on your own weight, you’re focused on your own pace. That’s what you’re focused on.
You’re not worried about how much fuel, as you’re driving, how much fuel the car next to you has. That’s probably the last thing on your mind, who cares? That’s not what your concern is.
You are worried though, if there is a big tire in front of you coming into your lane, and you’re driving 50 miles an hour, then you are worried about that, then that’s a concern you have to make an adjustment.
But here, if you’re cruising, you’re not worried about the car next to you; you’re not worries about the indices, the jobs report, because your position is in a whole different lane. So that’s what I want to get across to you.
These economics reports can shift the markets, they can move them, but you need to focus on your own position and don’t stress about what the actual number is. Because in the end that’s really not relevant. Ok?
Focus on your position. Unless you’re a hedge fund, a hedge fund manager, that’s a whole different game, a whole different story, but in this situation and case, look at your position. How things are moving, how they’re behaving and how it affects your position, because that first month or two, or the first couple of days of the month, the last day of the month, they’re all window dressing, and the same thing here, this now creates a little adjustment point into the trading. So they’ll make some adjustments to their positions based on that outlook, based on how they were positioned earlier.
Looking at some charts
In either case, let’s take a look at some stocks this week, just because we haven’t done that in a little while, so I want to share with you some of the stocks I’ve been posting in the critical charts.
Obviously if you’re looking at some of these stock charts now and you don’t have access to the critical charts, you might have missed some of the moves that we’re talking about. But I’ll give you some training and insight and ideas about just looking at the charts and give you some insight.
Let’s just start with amazon right here, we talked about this one in the critical charts, about this resistance line, and you can see that we were waiting, pushing, pushing, pushing, and then we broke past this resistance line and then if you would’ve gotten in it right here, you would’ve had about a 10-11 point upside swing on this stock.
That was a nice win for the members, some of you guys wrote to me on this one.
Because one of the other reasons is you’re looking at this A-B, B-C, C-D pattern, once that’s completed, something new happens, right? So we could be building an ABC, C-D Pattern again now to the upside, who knows?
Time will tell, but that was our support and resistance line right here, we broke above it, we were building for about a week, about 8 days, and we broke past it, and the stock looks good for now, and we’ll see if it comes into this resistance right around 610 level right there, 605 - 600 level, there’s some resistance there, not to mention here we have this gap right there.
If you draw that across, notice that gap over there, which is already been filled, but it is an empty space, so you do want to still pay attention to it.
If you look at tesla, I talked about this one, I wasn’t sure which way this would go, there’s a couple of variations to this, this is a very solid support line right here.
I did look at this; I said this could be a potential ABCD pattern, where we are moving this ABCD pattern right here. A-B, B-C, it could go to C-D.
But since the market sold off quite heavily, the other option I said that could happen is back to that support level that we had over here, that this stock could pull back to that support and bounce and that’s actually what we’re doing.
We’re not doing it on heavy volume, but more volume can come in, so right now it looks good for higher prices I would use 178, give it a few extra dollars as your stop, fi you didn’t take off half yet, make sure you take off half or a third, just for safety and let the rest rid.
Caterpillar has been acting well as well, here’s the swing point right there, breaking that 70 mark, I got in this one 67 or so, that was my entry point right around there, 68, saw the volume coming in right here on this volume spike, didn’t break it, wasn’t ready, and then it continued to power higher, so it looks good for higher prices.
If you look on the weekly here, this one, if you look on the longer tem A-B, B-C, C-D pattern.
If we look on the monthly, getting in at this level, you could say it’s kind of a value play in a way. Here’s kind of our support line. It’s coming in on the monthly, you can see there’s some serious areas over in 2007 – 2008, 2010, that we’re hitting currently right now. So that’s a lot of value, probably buyers coming in and stepping in.
Wynn, I talked about this one for a little while, we were moving sideways, definitely was posted in the charts I the members section multiple times. This was the area we were watching for clearing of that, cleared it, hung around right there and then exploded, so if you got in on this one, and went after that clearing, you would be up 12 bucks in about 2 weeks, pretty good, and it continues to power higher.
This one had a lot of ABCD patterns, this is a great one to study to the downside, even if you’re not trading this stock, simply let’s just take a look at the two day. You can see here, if you really look at this pattern, you can see there’s a lot of ABCD patterns. A-B, B-C, C-D. A-B, B-C, C-D. A-B, B-C, C-D. A-B, B-C, C-D.
There’s a lot of them that happened, and then we move sideways. This is 8-12 weeks, 8-10 weeks, a consolidation, and that kind of even things out, you can see the moving average starting to clear on the weekly, and we’re starting to take off, so this one might be moving a little bit higher.
If we’re looking for an upside move, how far can this stock move? Well, when we’re looking at it, if I take it out to, let’s say the monthly, again, the reason why I looked for that pull back A-B, B-C, C-D, so the stock was over extended, so once it hits the D point, we know something new is going to happen.
The pull back, if we really look at it, it’s probably right around the 68% line, we talked about the Fibonacci sequence in the past, where just a couple of recaps ago, so you can see, look how interesting this is when it comes into it.
You can see right here, as we go a one to two retracement over here, or as we go from these swing lows over here at the 16 dollar range all the way up, we clear the 61% right here, but it hits this swing points over here at this head and shoulders pattern. This is the monthly.
We don’t get a full one to one retracement, but we do come down into this 50 level and now we’re starting to bounce. So how high can it go? So what you do, based on the Fibonacci sequence, is you take it from the swing highs, go to the swing lows, so we can do a nice retracement to about the 150, and look at how that puts the 50% right here at that resistance point, so we can get there and everything could be natural, so we’ll see.
That’s just something to watch for and to look for, if you look on the weekly, you can see it more clearly, there’s that support, resistance line, 50%, you can see how it hits it just about right on. So it’s very interesting and fascinating how that works. So that’s Wynn.
Let’s take a look at another one. We have Monsanto coming into this support line right here. Again you could say ABCD pattern maybe right there. If it breaks this, then that C-D pattern could continue, so just watch it.
If you look at Apple, here was our support line right there coming into that, starting to bounce. They’re not on heavy volume or anything like that, but it is a rounded bottom, so when you watch that rounded bottom, and here’s the resistance level started to break and then now it’s continuing higher the next couple of days, so it looks good.
Netflix if we look at it, Netflix is building this little consolidation pattern, so I just kind of watch this to see if it’ll continue moving in this area or break lower. If it breaks that support line, that could be trouble or a way to exit.
Facebook is in a similar digestion pattern right there, really the volatility has dropped, it’s just really coming now market, relative to where it was just a month ago.
If we look at Home Depot, coming into the high right up here, at the 126 level, building some energy, so watch to see if it breaks.
We also have Nielsen, that we put in the critical charts there, and you can see this one here already took off, we had this one in there, and today again a nice follow through day, so that one looks good.
And let’s look at Disney. Also here we had a double top at the highs, we had a bounce here at the double bottom on the bottoms for the support, stock’s bouncing here, this would be your area of support that you want to watch, this could kind of be the area at the 90 level, where you want to watch that stock, how high can it go. Take a look at the Fibonacci sequence from the highs to the lows, you can get to right around the 50%, notice where it’s coming into, it’s at that gap level right there, there’s that little gap and also comes into almost that support and resistance level right around September - October area.
You can see, if you take it out to about 2014 or January time frame of 2015, April of 2015, see that’s also the support region or area, so this whole thing at the 50% could be on level to really watch that could show some resistance in that stock.
There isn’t a secret formula
Those are kind of the stocks that you’re watching, stocks that you’re looking at, popular companies, I’ve seen some people write to me and say “hey wonderful curse material, wonderful lessons lately”, and I’m glad you find them helpful, so that’s kind of my goal, just spend a little bit of time to help out the regular person, to give you some insight, to give you some ideas to play with.
Because if you’re looking for a secret sauce, if you’re looking for a secret recipe, there’s no real specific magic to this.
It’s all about learning the business, and learning about how things move, act, behave, how to manage the business. And you know that there’s probably a lot of different businesses out therein he world, and you might have a barber that’s really successful, and the guy cross the street who’s also a barber is not very successful. And it’s not the fact that you can’t make money as a hair dresser or a barber. It’s the fact that the guy across the street that isn’t making money just hasn’t figured it out yet.
Learn to walk on your own
And that’s ok, you’ll experiment with things, you’ll try things and eventually you’ll get it, eventually you’ll put the pieces together, so start slow, build things and really focus on your own trading, on your own craft, my goal is not to really just give you and feed you information and alerts and ideas in terms of what to do exactly step by step and hand hold you.
Because I can’t do that forever, I’m not going to live forever and the same thing with you is that you weren’t hand hold forever I mean, you’re now a grown up and you’re not holding your parents hand every single day, initially you were and you were in their arms, you were in their hands, they were taking care of you, but now you need to step it up, you need to walk the walk, you need to do it on your own and my goal is not to hand hold you anymore.
My goal is to give you variations, give you insight to maybe think a little bit differently, to maybe see things in a different perspective, so that way you can make a decision to what you need to do for your trading.
Whether that is to kind of use some of the strategies that I’m mentioning and implement it in your own trading, or go the other way and completely actually ignore what I say and do it backwards, so there’s nothing wrong with that if you can use some of the concepts in your own way as an advantage to benefit yourself in the reverse hence why some people are contrarians, they trade to the short side, others trade to the long side, there’s nothing wrong with that if you can justify it, if it makes you think.
For me, my goal is to really get you to think, to get you awareness in the tools, the strategies, the variations, why you may want to look at some things and why you maybe don’t want to look at some things, who cares about looking at some other things?
You need to get outside the box and start walking on your own, and that’s really my goal, so I know there’s a lot of sharp services out there for alerts, there’s a lot of things that tell you what to buy, when to buy it, how to buy it, but eventually you have to do your own homework, you have to do your own work and that’s really where the hard part comes in.
Anybody can feed you things, but if you don’t put the time in, once that service, once that item is gone, then you have no strategy, no system, no rules, nothing in place, no business structure and you got nothing. So learn, the secret to this is to constantly learn to try new things, see what works, see what doesn’t, what’s making you money, What isn’t, what kind of market conditions are favorable to you? And what kind of things are not favorable to you?
Look at the conditions of the market
For example, to have a picnic outside is favorable to do that on a sunny day, now on the other hand, to have a fire, a fire place and enjoy the warmth; it’s probably favorable to do that inside on a cold day.
On the other hand you probably wouldn’t create a fire in your fire place on a hot summer day. It’s probably not normal, it’s not the right conditions and the same thing, you wouldn’t go and have a picnic in the snow or you wouldn’t go and have a picnic in the rain, so look at the conditions of the market. When are certain trades favorable, and when are certain trades not favorable?
Start building up your repertoire of your trades, your trading and what works for you and what doesn’t? It takes time, discipline and if I help you get there, make you think a little differently, then by all means use it.
As far as for me, I’m still working on the options course, I have about 24-25 hours filmed now. Constantly keep working on it, it’s taking time, it’s a large course and that’s really my focus, that’s going to be my big course of the year and as far as estimated of when it’ll get done, I really don’t know at this point, probably it’ll take another two month I would say, just because manufacturing itself takes a month.
But it is my priority and that is basically the only thing I’m working on as far as courses go. Besides keeping up with the critical charts and some basic videos that we release. So that’s it, just working on the options course and it is massive.
Looking at what I have done and what I’m working on, it’s going to be about a 60-70 hour course, so that’s about 70-80 DVDs and it’s huge and that’s just simply because I don’t know how other people can trade or teach options in one or two DVDs, maybe they know some secret recipe that I don’t know about, but for me, I’m putting it together for detailed learning, for the motivated people, for the people that want to learn, so I’ll keep you updated on that, but I’m working on that quite hard and trying to get that done with time as well as focusing on my personal trades and investments.
Hopefully you had a great week so far, trading has been a little bit light, remember, they’re setting up right now, stocks aren’t moving as much, just because they’re waiting for the economic indicators for the jobs report and then you’ll see things, either pop higher tomorrow, pop lower, we’ll see what happens and just watch how your positions react, are they reacting favorably? Or are they kind of pulling back? Are they strong or are they weak? You get to see that. You know, which stocks are moving strongly, which stocks are moving weakly on these reports.