Archive Category: 10x Profits Archives

As longtime readers know, our model’s risk-off signal triggers when various components of the broad market trade with an extreme degree of dispersion.

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The epic GameStop trade began a year ago today. Shares of GameStop Corp. (NYSE: GME) gained 57% from the close on January 12, 2021, to the close on January 13. Even more mind-boggling was the volume of shares traded that day: over 144 million, or 16 times more than the stock’s then-running average of 9 million shares per day. As a single-day event, the action in GameStop shares on January 13 would have raised eyebrows. But over the following 10 trading sessions, a total of 1.1 billion shares traded … and GME’s share price went vertical, increasing an unimaginable 2,400%.

Market action in December seems to have confirmed my view: Major stock indexes finished the month between 1% and 5.3% higher, and the Volatility Index (VIX) plummeted 27%! It wasn’t just omicron moving markets in November and December. The Federal Reserve spent two months talking the market into being comfortable with an unwinding of its bond-buying program and the likelihood of more rate hikes, and sooner, in 2022. I was encouraged to see the market absorb the news with resilience, which, in turn, gives the Fed more room to walk back this hawkish turn, if and when it needs to.

One of the advantages to running a systematic, or “rules-based,” strategy is that you don’t have to stay glued to your computer screens. I remember the stark difference in quality of life between my first two trading mentors: One was a discretionary trader who was always stressed out and angry. The other was a systematic trader who spent most of his day playing table tennis and reading books in a hammock. (No joke!)