Mondays are THE big day for options traders.
Most options contracts expire on Fridays, leaving fresh cash in our accounts to trade new positions Monday morning.
This past weekend was colored with caution because just before the market closed on Friday, it took a big dump.
FinTwit was alight with people questioning: "Why"?
An educated guess is that this selloff is linked to the CPI report (the year-over-year inflation report that comes out every month), and the big institutional investors are waiting to see what will be revealed.
I popped over to Yahoo Finance to see if anything else was happening in the market this morning.
(If you’re an experienced trader or a beginner, you know that reading Yahoo Finance for 20 minutes a day, gets you an unparalleled financial education over time...)
Yahoo told me the DOW was up +146.85 at 10:45 CST Monday AM, but other stocks were lagging.
One of my favorite stocks $AAPL had dropped off from $192.00 on Friday to $187.70 Monday.
$AMZN, has had a beautiful run lately, and when I checked in Friday night, I was smitten with the stock because it hadn’t dropped off. It was still sitting at its more recent high of $130.
But that was Friday…. and by Monday AM, it had joined the gang of stocks in selloff mode and dipped down to $126.80.
I didn't love the market trend, and it gave me a feeling that I might be wise to pause trading until after the CPI data is in.
When I logged in to my brokerage account and saw that the overall value of my account had sunk a bit with Friday’s selloff, it confirmed that I'd have to muster up some discipline to wait until Wednesday to trade more.
This was a bummer because trading has made Mondays my favorite day of the week, where I usually rake in cash on my SIMPLE, EASY + FUN trades.
Whenever there is a micro pullback like this past Friday's, and we await financial news, the big institutions wait to trade. We know this because the falling share prices tell us they took money out of stocks and are sitting on cash.
These institutions make a heck of a lot of money, and I’m willing to bet they know a lot more than me…so what do I do with that information?
I copy them.
I do what they are doing.
I put aside my desire to trade today and wait until Wednesday.
This takes DISCIPLINE, but it also saves me from potentially making a few trades I’ll regret.
When the CPI data is released, the market will either love the data that comes in or hate it.
If the market likes the data, stocks will get a bump, and there will be time for me to buy in and ride the wave up.
If the market hates the news, share prices will fall. I'll let the dust settle and start trading from the new discounted stock prices.
Either way, I'm better off being patient.
