People keep telling me they’re getting killed.
With all due respect, we haven’t even begun to sell off in the S&Ps. The S&P 500 was down about 1.3% this morning while the NASDAQ was down close to 3%.
I heard this same talk early in my career, and the market looked exactly like it does right now.
In 1999, Traders Bragged About Making Tens Of Thousands A Day
In ‘98, ‘99 and 2000, I was working on a trading floor in Chicago and flying back to Scottsdale, Arizona, on the weekends. If you’ve ever spent November through May in Chicago, you understand why.
I was 23, 24 years old, and almost everything we did on that floor was non-directional. Then I’d come out here, have some drinks at a bar and listen to people talk about the tens of thousands of dollars they made that day.
By 2000 and 2001, those same people were telling me, “I’m getting killed.” What are you talking about? In the summer of 2000, the NASDAQ was already cooking lower, but the S&P had barely started to descend.
Why Most Traders Have Never Seen A Real Selloff
We have an entire generation of traders that has never been through any real adversity. 2016 was a flash in the pan, and we were right back up. 2017 did nothing but rally.
People say 2022 was a bear market. That was a slumber party for bears.
You don’t have that many people left who’ve been through the real thing, and I’m talking about the people who ran trading firms too. The only remaining CEO of a finance firm who was there for the financial crisis is Jamie Dimon.
The Signal That Tells You The Bottom Isn’t In
Capitulation, the moment everybody gives up and sells at once, doesn’t happen until stocks start moving as a unit. Until then, you can have bounces, but you’re nowhere near a bottom.
Right now, money is rotating into Walmart, Target, Costco and healthcare while tech gets hit. That rotation is suppressing volatility, and the VIX isn’t even at 20.
When the rotation stops working and everything goes down together, the real selling starts.
The last time the market looked like this, most traders found out the hard way what real volatility does to a portfolio.
This time, the election is four days away, and the volatility futures are already flashing.
The traders who know how to play volatility are the ones who get paid when it hits, and we’ve put everything we teach about it in one place. See how to trade the volatility everyone else is afraid of.
To your success,
Don Kaufman
P.S. I’m betting against the rotation. It’s gotten so crazy out there that people are basically buying toilet paper, so I took a bearish position in the consumer staples fund, XLP, with 21 days left. I anticipated the rotation would die, and I think it will.
