Here's the Deal with Markets - December 16, 2024

Economy: In Slowdown

Market Cycle: Bullish

_{Week 50 of 52 for 2024: 96.2% of the way through 2024}

This Week in Markets

Seasonality continues to unfold with almost uncanny precision, so much so that it feels like discovering a hidden cheat code in a classic video game. And this comparison isn’t far-fetched. As markets have evolved, they’ve become increasingly gamified, partly due to the influx of former and current gamers into the trading space. If this idea seems laughable or far-fetched to you, it’s a sign you might be a step behind the times.

The reality is that many retail traders today come from gaming backgrounds, some of them even as professional gamers. This is no coincidence. Top proprietary trading firms across the country actively recruit individuals in their early 20s from the gaming world, due to their pattern recognition, quick decision making, and quick response time on electronic devices. Skills honed over thousands of hours of gaming.

Why? Because being a top CPT (Consistently Profitable Trader) isn’t solely about analyzing spreadsheets, crunching numbers, or poring over company prospectuses. Instead, it’s deeply rooted in the ability to recognize patterns quickly, maintain a disciplined and structured approach akin to a high-level athlete, and embody the mindset of CANI (Constant And Never-ending Improvement). These traits, sharpened through gaming and competition, align perfectly with the demands of successful trading.

While fundamental analysis is certainly valuable, its importance diminishes in the fast-paced and highly competitive world of high-level trading. Here, the ability to assess immediate risk versus reward and calculate opportunity cost takes center stage. These skills often prove far more critical than deep dives into company fundamentals when decisions must be made quickly.

This is not a new phenomena. In fact, it traces back to the earliest days of open markets, centuries ago.

Case in point, we expected some seasonal weakness this week and some seasonal weakness we got as the Dow has now dropped 7 straight days.

As is the case with small and mid-caps as IWM has also retraced after hitting new highs. Right when they typically do in the middle of December.

Meanwhile, the S&P 500 and NASDAQ continue to show strength while they consolidate at new highs.

As is Bitcoin which is also enjoying it’s seasonally strongest time of year.

A testament to all three considering the strength in bond yields,…

…and the dollar the last several weeks. As strength in both typically act as headwinds for stocks.

You absolutely want to watch for a break of these ranges in the coming weeks. Especially as more signs of a deteriorating economy continue to materialize.

Seasonality and Patterns in Human Behavior as a guide.

I get it. It seems really weird at first that markets can operate in such a consistent pattern time and again. That is until you’ve been following it closely long enough to consistently witness it happen repeatedly.

Rest assure, this absolutely does not make trading and investing “easy.” However, it does make it “easier” as you can use this knowledge to direct your daily and weekly research to the sectors and companies in play instead of using your own intuition. Which, let’s be honest, if your intuition were that good and consistent you would not be here reading my analysis for insights or looking to others for theirs.

I point this out as there are a number of seasonal trading opportunities in the coming weeks with The January Effect about to kick back in, the Free Lunch Trade, the Santa Claus Rally, and Whipsaw Hunting Season.

I will be writing about those in the coming days and let you know what names I will be tracking and trading for each. In the mean time, you can also hit the link to The January Effect to learn what the trade is, some history behind it, and what stocks I have been tracking and trading for that opportunity since November as well.

If it’s getting weird reading me say that the economy is slowing, but the markets remain strong, I get it. It sounds conflicting on the surface.

However, consider this - unemployment still remains low while wages are increasing as a whole. Meaning that every month more money comes out of paychecks (mostly) tax free and put into markets through retirement plans and pensions. Which of course, send markets higher. It’s one of the many reasons stock markets tend to perform well until the last possible moment in the credit cycle.

Hope that helps.

The Week Ahead

Economic Data to watch:

Earnings to watch:

WTF of the Week

This is actually from week before last, but I didn’t write about it due to the vacation. As I saw no reason to get pissed off while recharging on the beach.

Remember that girl who went super viral for her drunken response on how to… shall we say… service others?

Well, she turned that into quite the following. Podcast and all.

Great job. Actually very impressive to turn that into a career and drastically level up in life. It was a fun story to see play out for a bit.

Problem is, she then turned that into an opportunity to run an alleged pump and dump on her followers. And now she has gone silent since a horrendous attempt to explain the situation on X Spaces after the fact.

My bet is she had absolutely no idea what she was doing with this project or much about the people in which she was choosing to get involved. It’s not like she’s been some market or economic savant. Problem is, that may not matter as she could find herself in some serious legal trouble over the issue.

Here in lies the problem with getting involved in a scheme which you do not understand. Especially when it comes to financial markets.

Then again, it’s hard to feel sorry for anyone who decided to purchase a financial instrument for financial gain, because someone who got famous talking about things that go down in Motley Crue songs said it was a good idea.

Hailey Welch Goes AWOL After Failed Hawk Tuah Token Launch

Quote of the Week

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