The Storm Before the Storm: Upside Volatility is Still Volatility.

Friday 8th November - Daily Update

5849 - 5872

The wiggles are wiggling. I’m not sure what the shift was, but since 2016, we’ve seen this accordion motion in the SP500 distribution.

We experience a two-step volatility compression after an expansion event. After the first year, everyone says, “We’ve gone too far, too fast,” only for the trend to continue for another year.

It’s the second year, when everyone is enjoying the gains, that does the real damage. Look at the lines now on the right. Over the course of 39 days, an equivalent “black line of doom” drawdown in the SP500 went from -9.96% to now -6.9%.

“So, does that mean we should keep buying the dips?”

Well, yes—but only in combination with other measures, not solely based on this observation.

The key point is that crashes happen when a single move can break multiple timeframes of trend in one go. It doesn’t have to be a one-day event. What I’m emphasizing is that, while everyone is excited about all the potential benefits the new President might bring to the market, it’s getting easier, day by day, for a sudden turn to occur.

That said, the portfolio is currently long and has done very well this week. The advantage of this system is that, if the worst happens, the first step is to secure our open profits as positions close.

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Riding Out the Pullback: Cash on Hand, Strategic Patience, and the Myth of the ‘Trump Trade’

You can see more in this week’s weekend rundown and portfolio update.

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• Current Open Equity = 35.1%

• Stop Loss Trigger = 28.4%

• Current Closed Equity Return = 26.1%

Open equity now sits at +35% since December 2023. If all positions hit their stop loss triggers today barring crazy gaps we would be 100% and a closed equity return of 28.4%.

That 7% gap while nice still belongs to the market!! Until our positions close and the profits are in our accounts they are not ours. Yet!

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