To The Moon

Thanks to Tiger for award the weekly top predictions SPY & QQQ last week again! Can we see another week of record breaking streak in an uncertain February, a month that has been considered the second worst performing month in a year? 🤔

The U.S. stock market, as measured by the S&P 500 Index SPX, stumbled into the end of January. On the positive side, since January registered a gain, that is a longer-term positive under the "January Barometer" philosophy (as goes January, so goes the year).

On the other hand, this market is in need of a rest, especially from the positive earnings from META and MSFT (M&M) late last week. There could be some legs left to run but be aware that February has been a down month in many years - sometimes very harshly as indicated:

Pullback is imminent

February (Year of S&P 500 movement)

2002 -23.5

2003 -14.6

2004 13.8

2005 22.4

2006 0.6

2007 -31.4

2008 -47.9

2009 -90.8

2010 30.6

2011 41.1

2012 53.2

2013 16.5

2014 76.9

2015 109.6

2016 -8

2017 84.8

2018 -110

2019 80.3

2020 -271.3

2021 96.9

2022 -141.6

2023 -106.5

Gains 12

Losses 10

Total SPX points -218.9

There were gains in 12 of the years and losses in 10, but the total S&P 500 point fluctuation was a loss of 218.9, and the past six years have shown four large losses. So, a certain amount of caution is warranted from these statistics.
 With this background, one should be particularly careful not to avoid sell signals that may arise.

Getting into extreme greed?

Market is watching for SPX to break 5000 to achieve a record milestone follow by SPY to break the 500 mark inevitably. Those are strong magnets no doubt but market makers will definitely pull the rug when retail traders start thinking of quitting their day jobs to trade full time, housewives recommending stock tips or basically whenever fools rush in.

It is a good time to consider taking part profits as the market will soon experience a healthy pullback from time to time even in a bull market, especially if one is trading on margin. Avoid getting caught in a bull trap and become a bag holder to suffer unnecessary forced selling when good profits vanished overnight caused by greed and fear.

Otherwise, hold on and add to position during the pullback like a discounted buy if you have a deeper pocket. As the saying goes, we can’t time the market and we don’t know exactly when is the rebound. We could missed the surge back up and miss the boat trying to sell high and buy low at times.

Indicators can be helpful 

Start small & build deep

Had my very first futures trading the Micro E-mini, MES which tracks S&P 500 last week using the Tiger mobile platform. The beauty about Futures is that it is available almost 24/7 and there is no time decay unlike options trading. Yes, that means you can hold the futures contract just like holding shares but with the advantage to long or short it.

However, there is trade margin to take note of. It’s recommended to set aside $2k to $2.5k to take on one MES contract to try it out. Every 10 point move earns $50 per contract before commission in short (see 4973 to 4983 above). 

In addition, over trading can be detrimental to one's mental health since it is available round the clock. Better to stay disciplined by setting some perimeters to trade futures with preset entry, take profit and stop loss with the help of support and resistance marked out using the Tiger app.

Let me know if you’re keen to explore futures trading. Have a great Sunday and get ready for more action in the coming week! Stay green as always! 🙏

Weekly options trades summary

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