the market had a 47 sigma move yesterday. it happens once in 8 million years or something.
if im not mistaken, we’ve had like 5 of those this year. what is the use of using normal distributions in financial markets again..?
and absolutely no one was ready for it they tell me.
wrong.
if there’s one thing i can tell you with 100% certainty, it’s this..
i am not afraid to bail on a thesis if the market changes:
a lot of people forget that trading is not investing. nothing i talk about with clients or online is about how to get rich slow, protect your wealth over the long term, stocks to hold for 12 months, or whatever else the youtube types do.
i am a trader. i trade. i am here to make money. and that means when i feel the heat, i react. because at the end of the day.. you must act in your own self interest. you cannot blow your account. no matter who you piss off through the process.
wednesday’s reaction was a trap
i was open to the fact that the market could have bottomed on wednesday morning.
we were through the midterm elections. the dems had sweeped both chambers. and risk assets reacted sharply to the upside.
but by midday on wednesday, something didn’t feel right.
the high beta, risk-on trade was underperforming the low volatility, risk-off trade.
defensive sectors were being bid. and big money was actively rotating out of semiconductors and the tech sector as a whole.
simply put: the things that wall street should have been buying if the weakness was over were not being bought. they were being sold. and that means you must react to what the market is telling you.
so i shorted the market and alerted the team right before the close.
the biggest wins come when everyone around you calls you crazy
if you stick around long enough, you’ll realize that you’ll normally have 3-4 really big opportunities per year.
these opportunities are there to seriously move the needle on your account. if you can nail them, they negate the relatively large amount of smaller losses you take throughout the year. and they serve as your prime money making opportunity.
yesterday was one of those opportunities:
i added roughly 15% to my trading account. i’m happy. but the jobs not done.
yesterday's trades are in the books. and they do not guarantee anything moving forward.
but yesterday was the short side equivalent to being long energy earlier this year prior to the iranian invasion. i was long XOM. that trade net me nearly 3,000%.
or long memory in april. i was long INTC. that trade net me over 3,000%.
or short the market yesterday. which added 15% to the trading account.
i have to be positioned for the big move. the contrarian move. the move no one wants to take because it goes against what everyone else is yapping about.
trading is hard. this entire year has been hard. but days like yesterday are what move the needle. and i can't afford to miss them.
there will always be another opportunity.. be ready
yesterday’s puke has turned into what appears to be a dead cat bounce in the middle of a steeper sell off.
just check out semiconductors via SMH:
that’s a daily candle printing an inside bar.. a classical candlestick pattern that suggests a slight pause before price resumes in the direction of the trend.
and the trend, at least as of right now, is down.
but i’m not necessarily looking to short anymore. the big move — the meat of the short — is now gone.
everyone loaded up on downside protection. the put to call ratio is over 1. and that means markets tend to be more squeezy to the upside than capitulatory to the downside.
so while i still have some short positions on, i’m mainly looking for the next opportunity to buy the leaders.
maybe that’s next week. maybe it’s next month. i have no idea.
i’m open to the v-shaped recovery like we saw in april 2025 and july 2024. both markets puked big on news, shook everyone out, and then rallied hard over the next six months.
my very best trades come out of those environments. and the conditions are setting up for another one right now.
this newsletter turned into something i didn’t quite expect to write when i started writing it. but hopefully you found value in what i’ve written.
trading is sloppy. markets are hard. and the only thing that matters at the end of the day is your PNL.
want to buy the v-shaped recovery with us? join the community. sit in discord. attend the weekly coaching sessions. and watch the nightly recaps. you will learn how all of this works.
could be fun. could be life changing. who knows.
follow the money,
hamilton
founder, the trading initiative