Weekly Market Overview June 6, 2021

“The art of living is more like wrestling than dancing, because an artful life requires being prepared to meet and withstand sudden and unexpected attacks.”

--Marcus Aurelius (Emperor of Rome)

“A good person dyes events with his own color . . . and turns whatever happens to his own benefit.”

--Seneca (Stoic Philosopher)

“I know that this is dangerous, but there are six things that I could do right now, all of which will help make things better. And it’s worth remembering, too, there’s no problem so bad that you can’t make it worse also.”

--Chris Hadfield (Astronaut) 

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A big theme that we focus on in all of our work at Pollinate is to pay attention to the "Reaction to Action."

There are a million things going on in any given moment, whether it is the earnings of a stock, the stop lights turning from red to green, a politician Tweeting rubbish (or a CEO for that matter) and any number of other things happening. None of that do we have much, if any, control over. But what you do have control over is your reaction to it. 

How many times have you been cut off in traffic only to get enraged at the person who cut you off? We build this grand story into our mind that we've been slighted, that this other driver is rude, self centered and far less important than us, acting as if they are way more important, that cutting us off will surely be a point showing how great they are, and how little we are. 

In reality that car that cut you off checked all around but somehow missed you in their blindspot and as they see you in their mirror they are shocked and scared even that they made the lane change almost causing an accident. 

Either of these scenarios is possible, as are many others. None of which do we have any control over. It happened, you were cut off, but how you react to being cut off is what makes all the difference in the world, to you and how well you perform the rest of the day. 

This is especially true in that market's. 

As I've mentioned time and time again, there is only a very small number of people who are actually successful trading. Making the move from passive investors to earning a living as a trader is taking a BIG step, it is not an easy path, and it requires a very high level of discipline. 

According to City Traders Imperium only 4% of all traders who try out to join their proprietary trading firm actually get funded, which means 96% of traders fail. I've seen other studies showing similar statistics, but closer to 90% failure rate. In either case, those odds aren't good. 

Right away this suggests that you should be focused on doing things that most other traders aren't doing. Focusing on the reaction to the action is one of those things that most traders aren't doing. Instead they are watching a moving average crossover or a touch of the 61.8 Fib line, they are focused on the action, the big news event, the big selloff and find themselves stuck in the middle of massive whipsaws not waiting for the reaction. 

This is how you stay long a big massive trend instead of getting shaken out on the first big down move. 

This is how you get long after a big down move, not just buying the dip because the market dipped, trying to catch the proverbial falling knife. Instead wait for the price action to prove to you that the underlying edges and incentives within that market have returned and now that weak hands have been stopped out, they will be forced to buy back in later. 

Time is on your side, don't let artificial influences interfere with your ability to stack edges, sit back and let the action play out, then observe the reaction, this is where the best clues to the truth are hidden. 

Let's look at Gold $GC right now, after Thursdays big down day. 

Thursday was a painful day for a lot of people trading Gold, closing -2.00% on the day, which is something we haven't seen since February of this year. 

Friday bought back in strong buying after testing lower early in the session, but that really doesn't tell us everything yet. It does tell us that there are indeed buyers willing to pay 1870, 1880 and 1890 for it. 

That long wick down on Friday means sellers kept selling early in the session only to be met with a wall of buying. Bears had control for a minute, but the bulls came back strong. 

Keep in mind the price action since the March bottom has been overwhelmingly bull quiet'ish, meaning be lazy and long and be rewarded. While the SQN indicator is close to flipping back into the bull quiet regime, with 89% of all trading days in existence to be in a bullish regime, this is a simple statistical edge that we are leveraging. 

With the same habit of reacting to the action let's have a look at the S&P 500 $ES first with the monthly chart.

After last months dip, and rally into the end we have our "Action" now it's our job to pay attention to the "reaction". Already the price action on the monthly chart is extremely bullish which is why we have been long $SPY in the Monthly Macro ETF strategy since last September. 

The weekly chart show's that same resilience to take prices lower. Each attempt has been met with strong buying late in the week. 

Everything is pointing to bullish and we needed that pullback last month, the action to test the new bulls coming in and buying the top of a 5 month rally. These are the weakest hands in the business and when met with a little bit of selling they will sell quickly simply because they bought at all time highs expecting things to continue rocketing to new all time highs day after day and week after week. 

They will, don't worry. 

But not before a bunch of "action". So we sit back and watch the pain kick in, letting the action play out with our eyes open to observe the "reaction". In this case, the $ES dropped a couple hundred points, the bears were in control, and wouldn't you know it, the bulls stepped right back in and bought it up. 

When you are sitting at all time highs and take a 5% haircut in three days, there is a lot of energy around that event (action). 

And as we can see on the daily chart above, the bulls stepped in and bought that dip, quickly and aggressively. This was the first "reaction" and quite useful information indeed. But the next dip the following week looked like bears had regained control and we were heading lower. 

But that second attempt lower was bought up, you can see by the shape of that hammer candle, and pushed higher quickly.

When the best looking sell setups in the world fail, this is the market telling you that you are in a bull market and ready to move higher. 

Except this is where it gets tricky. 

All three major indices have yet to move up to put in new highs, with the Nasdaq $NQ trailing the farthest, and without tech leadership things might feel a bit heavy for a while. $NQ is the key!

The summary here is we need to wait for a bit more "reaction to the action" before taking a position. Unlike Gold which keeps reacting positively to the action. 

Finally in the Trading Lab we continue to trade the cryptocurrency strategy. The reaction to the action of the big selloff a few weeks ago seems to be constructive, though I expect a long frustrating summer for those only accustomed to massive big pushes higher. 

Our strategy in the Lab is up 5% on the week, and still profitable since launching less than a month ago. We avoided ALLLLL of the pain and chaos while most traders took a 50% or higher haircut. 

If you can remove yourself from all the hyperbolic drama of cryptoland and use the appropriate strategy for the appropriate market regime with hedge fund risk management (not meme stock shorting hedge funds, mind you), there is multi generational wealth to be made there.

Our strategy is only available to Trading Lab members.

Today is the last day of the 50% discount on the Systems Mastery Course. A number of you have taken this course and I'm so happy to help you all on this battle to stop losing money in the markets and take complete control of your trading business once and for all. 

After today the discount will no longer be valid. 

Systems Mastery Course 50% Discount