Weekly Markets Overview January 2, 2021

overview regime Jan 02, 2021

First of all, I want to say that I'm grateful to each and every one of you. I truly hope that my work is helpful to you, in the memorable and historical time of most of our lives. 

While 2020 brought an immense amount of pain, suffering and death to the world, I'm reminded of something that I either thought of myself, while reading countless history books about war and other historical times, or thought up myself while spending years and years in wars and seeing all of it first hand. 

"Except for all the death, wars are incredibly productive for society."

Since I couldn't find the actual reference to someone way more eloquent than me, I'll borrow this quote and if I ever do find the person who actually stated this, I will give them credit!

2020 did indeed bring World War III, by way of a virus that traversed the globe rapidly and continues to kill. 

This new war is unlike any other war in history, yet the analog's are so similar.

Rather than going on about the parallel's of the SARS Cov2 (CoVid19) and World War I and II, or any other war for that matter, I'd rather spend time looking at some of the amazing things that happened or are playing out right now.

In January 2020, China posted the DNA of SARS Cov2 on the internet, the same day that the first death was reported in Wuhan, China. 

Within 48 Hours Moderna had already created the vaccine. 


Let me hypothesize about why this is so important not just for Corona Virus, but for society. The ability to map out the code of a virus or disease in the genome, then make the adjustment to the mRNA and inject it into the organ/organism affected and allowing the bodies own immune system to fight it, changes everything. 

A company like Moderna, can perform this task, then print out the solution within days of identifying it. The next big hurdle then becomes the speed and safety of testing for approval by the FDA. 

It took a WWIII type event (Pandemic) to open peoples minds and change the way we solve this problem and hopefully others, like cancer, in the future. 

As much as I want to spend the rest of my weekend summarizing the macro changes we will be experiencing from things like mRNA, Protein Folding, complete reshaping of supply-chain/logistics, digital currencies, cryptography and every other amazing thing that changed the world this year I'd rather take a look at market. 

The Monthly Macro strategy will go deeper on these subjects in addition to the actual portfolio positions, entries, exits and what we see as the major trends in markets over the coming years. 

As a member of the Trading Lab, you get this service included with your membership. Expect the monthly email before the first trading day of the month. 

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Adding insult to injury, for many 2020 was a very difficult trading year. Many traders got sucked in to thinking that what is happening on the news is what should be happening in the markets. 

If ever there was an argument to convince traders to turn off CNBC/Bloomberg, curate your Twitter Lists (and mute key words), and look at the market without the influence of these mental cesspools, 2020 was indeed good!

Following along with Pollinate Trading this year we got long the Nasdaq on April 5th and kept adding to our winning position as it climbed higher and higher from just below 8,000 levels. 

Then we sent out the warning at the end of August to either take profits, lighten up the positions or get hedged.

Once the market sold off, we started building a new position the end of September, cautiously until Mid November when it became obvious that we were back in my beloved Bull Quiet regime. 

Since getting long near the end of September, we have added 8 times to the $NQ long position since and will continue to add as this market gives us the opportunities to do so. 

The past few weeks I've been digging deep in to further characteristics of each market regime. 

The most important thing I want you to know is that all assets that are in my trading universe (the assets that I have manually backtested to perform according to my trading strategies) spend between 70% and 80% in the Blended Bull Quiet Regime.

I created the Blended Bull Quiet regime by noticing that the Neutral Vol, Neutral Quiet and Bull Quiet regimes all trade very similarly. Their characteristics were very similar, which means I was able to double down on certain trading strategies. 

That is, instead of identifying a trading strategy for all six market regimes I only need to focus on one to get about 80% of the results. Look up Pareto Principal. 

Have you ever looked at a chart and said "It's overbought" only to watch it go on for another 30% move higher?

Most traders/investors suffer from this, thinking that the market is one day away from a 1987 Black Monday style crash, AKA Bear Volatile. However these days/weeks/months in Bear Volatile crash mode only account for less than 1% of all trading days since 1871!

Your default mode should always be Bull Quiet!

Yearly, Quarterly, Monthly, Weekly and Daily charts on the indices all closed positive on December 31st and all are in Blended Bull Quiet

It's easy to think that the New Year means a completely new market. Don't get sucked in to bear mania!

In The Trading Lab we work on this analysis together as a team, helping each other become better traders, get funded at prop firms or run your own money. Join Us!


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