TGIT: Think Twice About Monday’s Massive Stock Market Selloff
Your guide to recession risk, volatility, and what to expect next. Oh, and a Nvidia trade. Also, Harris-Trump, Jack White’s new album, and much more.
Thank Goodness it's Thursday (TGIT)! We’ve been eagerly awaiting this day to debut our new weekly newsletter. Subscribers to our award-winning print magazine will immediately recognize this as Luckbox. And, of course, we hope you share it with your alpha-type friends and family—anyone intent on "owning" life, money and probability.
And, what a week! Only a few days ago everything was same old, same old—our usual intense political division, sustained inflation, wars in Europe, Africa and the Middle East, and a trade war with China. But, the stock market kept climbing. Then, on Monday, **it hit the fan. While things have calmed down a bit (and today's jobs report should help), two themes are competing with Taylor Swift, our presidential candidates, and the Olympics for a share of the zeitgeist—volatility and recession risk.
That's our focus for issue No. 1.
It's time to get lucky.
Sahm Wrote the Actual Rule on Recessions. So, What Does She Say?
After last week's employment report, everybody’s suddenly talking about what the Sahm rule may or may not indicate about the probability of a recession. (Just last week, no one knew what the Sahm rule was.) So, what does its originator, economist Claudia Sahm, believe it says about our economy? You wanna know. She wrote the rule. Read Full Story
Americans owe a record $1.14 trillion on their credit cards.
— New York Federal Reserve
Here Are 3 Big Reasons Why Volatility Isn't Likely Going Anywhere.
Earlier this year some financial pundits were promoting the idea that the volatility index, or VIX—an index created by CBOE Global Markets—doesn't really matter to investors. That's just plain wrong, and this week was a wake up call. But, if you make a habit of checking the weather before you head outside each day, then you already have a good feeling as to why. Read Full Story
OK, But How Much Does Volatility (Really) Matter to Your Portfolio?
Volatility came into sharp focus this week as the VIX reached its highest level since March of 2020 when COVID was all the rage. All in, the VIX has spiked above 60 some fifty-two times in the past. So, what does history suggest is most likely to happen next? Oh, plus, an Nvidia (NVDA) trade idea! Read Full Story
After the Sell-off, It's Time to Take a Hard Look at Teck
No, that's not a typo, but we we’ll get back to that in a moment. As our trade war with China escalates, the world’s second-largest economy has curtailed exports of gallium and germanium—two critical chip-making metals for the global tech industry. No surprise then that the prices of both metals are surging. Analysts from Morgan Stanley, ScotiaBank and RBC Capital have issued ”Strong Buy" ratings on Teck Resources (TECK), with targets ranging from +33% to +54% over current levels. Our analyst breaks it down. Read Full Story
T&T for Advanced Traders 🎓🎓🎓
Ready to Get Wonky About Volatility? Start Here: Read Full Story
This week was a good reminder of the value of a low-cost, short-delta, long-volatility options strategy. Be ready next time. Brush up on trading a put SPX butterfly.
The Rockhound:
We Put a Label on Jack White’s New No Name Album 🏃♂️➡️💿🎸
On Friday, Jack White dropped an album called No Name, after handing it out for free on unlabeled white vinyl last month to Third Man Records customers. The album vaulted to No. 1 on iTunes, and the vinyl was trading at as much as $1,000. What's the Rockhound's take? Read Full Story
The Prediction Trade:
Place Your Bets on Harris, Trump or the Recession 🐘🎱🫏
Luckbox readers know our addiction to the prediction markets resurfaces every two years in front of the presidential and midterm elections. (We even host a weekly show about events trading.) After Minnesota Gov. Tim Walz delivered a 33x return (from 3¢ to $1.00) to some lucky Harris VP traders on Predictit, freshly minted prediction pros are now handicapping Trump vs. Harris as a draw. While that market isn’t tasty enough for our risk appetite, the recession risk markets on Kalshi have certainly caught our eye.
Fake Financial News:
I Guess I'm a Vibes Trader 😎 🔮 📉
There are technical traders, swing traders and momentum traders. I’m not any of those. I’m part of a wonderful, magical generation that has never seen a sustained bear market. Sure, the crash in 2020 was scary, but the vibes magically seemed to return to normal within just a few weeks.
Then came Sunday night. I saw the e-mini’s drop, then keep dropping and then drop some more. When the market opened on Monday, the vibes were definitely off. But I know some grizzled, hardened traders who didn’t seem worried. So, I just acted as though I’d been here before. What's this about the Japanese yen? Should the Fed have cut rates sooner? Was the jobs report really that bad? And, who’s Sahm? Plus, I could literally have saved myself a lot of handwringing by looking at a chart showing the history of how long it takes insane spikes in the VIX to normalize. Usually, not too long.
Advice has been abundant this week, so here's mine, When the market gets wonky, keep calm and remember the probabilities. Maybe check to see if Mercury is in retrograde to find out how the market vibes will be. —Vonetta Logan
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Sahm Wrote the Actual Rule on Recessions. So, What Does She Say?
