Matt: [00:00:00] Hello I’m Matt Davio Welcome to the one minute trader podcast we’re helping time crunched traders succeed in trading the markets while on the go.
Matt: [00:00:37] All right. Matt Davio with the One Minute Trader and I’m here with one of our traders Tony. This week he’s a newer trader but wanted to talk a little bit about the Mechanization of end of a market for the week, month, and quarter. All happen on the same day which is unusual that we closed the markets on a Friday so we closed a week, a month, and a quarter all on the same day. This is unusual that it happens all within the same calendar day. So how are you doing Tony? How was your trading this week.
Tony: [00:01:25] Non-existent.
Matt: [00:01:25] OK. You didn’t didn’t find a heck of a lot. June turned out to be so far this year it’s been the most liquid and volatile market for me as a trader. And that’s because a lot of things got into play besides just the normal indices. We had grains had a huge week this week. As a Matter of fact. I want to say wheat was up about 10 percent for the week. Oil rallied a solid 10 percent last three days of this week and a lot of that has to do with the month end games that go on. What I mean by games is markets have, You know, people that are investing for others. Those Mutual funds and Hedge Funds Want to put out a letter at the end of the month and they want to be truthful. So that means they’re going to put in there that they bought oil and they bought you know that they sold Amazon if it was going down.
Tony: [00:02:21] So close out on a profit.
Matt: [00:02:22] Exactly so they want to describe they want to close out their positions at a at a time that will match them with the letter. The letter goes out to clients and then often times they’ll say we don’t own any of an asset, just to come back in July and buy it again. They also will get rid of it at the end of the week before it fell because like the fang stocks the Facebook, apple, and the alphabet Google etc. all those stocks got hit hard this week and that really played into the month/quarter/week end sell off. We actually had a red or down month for the Nasdaq for the first time this year whereas the S&P still finished green and was green again for the month. So we’ve been up eight months in a row now and the S&P were 1 percent basically from the all time high here. Whereas the Nasdaq 100 you did see some massive selling. I mean there’s some serious selling for those big five stocks that make up large percentage of the 100. And whether or not that continues into the next quarter we’ll see. Oftentimes when they see the selling come back and buy it the first few days.
Tony: [00:03:21] So quick question when you see like you saying like when they close out the end of the month and one report of something or other. For example he said well maybe they didn’t own.
Matt: [00:03:33] Yeah maybe they didn’t own any oil and now that it got down to $42 they actually did go in and buy it and then rally this final week. Nearly 10 percent so it went from 42 to 46 today. And so now they’re long and write that in their letter and they’re probably going to sell it. Yeah. Monday and make their 10 percent because they got it right. They got lucky. So it’s that type of thing. So those gains like you’ll see a lot of these things have either been sold or bought hard because they because everybody wants to then say we sold it or we bought it because that’s what the market did with those things during this especially during the last week.
Tony: [00:04:16] So for you knowing that that kind of action is going to happen.
Matt: [00:04:19] You can use that to your advantage. To go along with it. During the last week or two. As they are positioning.
Tony: [00:04:27] Like an entry.
Matt: [00:04:29] Wall like oil it looked oversold. So you buy it. And now I’m selling it into that continuous buying and then you could also use it to set up trades excuse me for the next month or so Oil happened to bounce right to a resistance area that it basically fell down from 40650. So knowing that when I started selling it today I was not involved. Had it had a huge market in the grains particularly the wheat complex and corn today. Wheat had a huge day today. It was up 5 percent. It was a 5 percent yesterday. It was up 10% in the last few days. It’s up over 30% for the year. From the low so wheat’s had this huge run but it’s nothing new. And the only reason it had like kind of this blow off today was in the month and a week and a quarter along with an USDA crop report that only comes out every three months that crop report said there’s the lowest amount of wheat that it has ever been planted in this country. While we were over “wheated” before that. So right. I mean if you look at the information and believe we are ripe for it doesn’t really exact a corrective action meaning had to get out the law or everybody was too short. So we shake out all those people and we have this 20 percent run in the last month. Right.
Tony: [00:05:47] Creating supply and demand.
Matt: [00:05:49] Creating like this huge gap and hole below us. So now what will happen is we had shorts that were trapped. Now we’re going to get longs most likely better Trapped because of where the market moved to the market moved right to the area where it broke down to two years. So we’re coming back and testing in an area that had been like the bottom for a long time. And then we went to 40 percent lower and now we’ve come back to the same level we broke in the past and.
Tony: [00:06:14] So there’s got to be some kind of fear factor there.
Matt: [00:06:14] Right.
Tony: [00:06:16] For anyone who was watching that market right
Matt: [00:06:17] Yeah. So now you you trapped everybody was too short for too long couldn’t go any lower and you had the binary event.
Tony: [00:06:26] Stop the bleeding a little bit.
Matt: [00:06:26] While you had the you had the event which is the crop report which gave you the data to have everybody that was short still freak out and buy. Both longs and shorts. Right? So that’s what one time they said well but it’s a it’s a one time event it’s rocket fuel unless you get another event like that next week or the next week or next week. Which you don’t. It’s not going to happen again. So it’s a good time based on that belief to start selling. I didn’t have a long position but I am selling now and I’ve begun a short position knowing that all those things are in play. They painted it right at the high of the day on the close today. That’s where I sold my position. Yeah. Hold it at the high or more rocket fuel will be needed to take it higher. No it could go higher. It probably will be higher on Monday. But that ain’t going to be 5 percent like it was today like it was yesterday. That two back to back five percent. Now if we do like they are going to be I will re-position and wait and get out a little loss.
Tony: [00:07:32] But how do you account for that in your trading plan knowing that you were going the wrong way even further on you before you start?
Matt: [00:07:39] Well I mean if I have a very small position say 20 percent of my maximum size and I know that with 5 percent move higher I’ within my parameters to trade and it just opened up Monday they’re still within my risk area. OK. So you have to set yourself up so I’m not taking the biggest trade I’ve ever taken. It’s just another trade.
Tony: [00:08:00] Right.
Matt: [00:08:00] But I’m using that same thing with oil , it traded $42 all the way up to $46 last week of the month.
Tony: [00:08:04] I guess my question is do you ride it up kind of the wrong way for a while anticipating turns? Or do you say you were wrong and cut your losses?
Matt: [00:08:12] I have no problem with a position going against me initially. Sure. You know in those two situations yes. For a couple of days. OK. And then if it’s still going up and up and then chasing and then I’m going I’m going to be wrong. But it’s a very small $ amount. So knowing that those games will go on and allow you then to participate in a trade like that even though you weren’t long. So now I’m selling thinking that it’s going to pull back and we’ll get a profitable short trade situation. So I just wanted to come on to a real quick podcast today to talk about that we need to be aware of the calendar. Context is important. How close are we to the end of the month because every month this goes on every quarter definitely. And you look across most markets these games.
Tony: [00:08:58] Especially with crude right? or all-
Matt: [00:08:58] Oh yeah stocks especially you see it a lot of paining and pinning of prices and yet. So you have an expiration. So just want to point out it’s another nuance another context that a trader has to be aware of and for me I tend to make most my money and even kind of in the middle two weeks of the month because the front part of the month you have the exact opposite kind of behavior happening which I’m anticipating.
Tony: [00:09:24] Kind of a correction from the prior month.
Matt: [00:09:26] Right? So you have this like two week cycle every month that’s like this where it just close weird and then it open weird.
Tony: [00:09:35] Is there similar action in like a quarter time period or even an annual time period?
Matt: [00:09:40] I mean annual numbers are big over a quarter, quarters bigger over a month, and a month over a week, then week over day time frames. You just have all four time frames play out today as June 30th was Friday the last day of the month. The perfect storm day, week, month, and quarter expiration. I mean anything bigger would have been December 31 last Friday to close year, because you’d close everything close and fourth quarter of the year everything. So just be aware that every month really those last three to five days you’ll get these like weird machinations. And who knows what. It doesn’t matter why. It’s just know that like that’s a good time to enter and exit positions. Exit if they’re you working out for you. Enter if now is a given you a selling opportunity or a buying opportunity because it’s been pounded down lower.
Tony: [00:10:33] So with all that movement to the beginning and end of the month. You’re not a day-trade so if you’re talking about taking a position for-
Matt: [00:10:39] Taking that’s good for the next period use this information to your advantage. That is a good time to put on a position for the middle part of the next month.
Tony: [00:10:44] Got it.
Matt: [00:10:45] So that’s really the lesson in that. And I just want to toss it out there. This is our inaugural podcast. We just wanted to throw it out there. One Minute Trader. Hey listen sign up we’ve got a three different products we’ve got five minute video that we deliver to subscribers every day that has an actionable trade idea across stocks, options, bonds, futures, and commodities. We will bring you an idea in actionable hey we think you could buy here we think you can act upon here every day. And we do that every day in a five minute video sent to our customers. We also offer one on one consulting for an hour. You can hit the Web site ( oneminutetrader.tv ) for that for a day if you want to spend a day if you’re feeling longer time frames are needed for you. But the whole idea of the one minute trader is really is a group of products for the busy professional busy person who’s got other work that they don’t want to necessarily leave but they want to put their money to work and they want to learn to have their money earn for them. So it’s really about this whole idea of a five minute trader and One Minute Trader is you can learn slowly and by taking your time build your portfolio and build your knowledge as you’re growing your base of knowledge with good traits.