Some days the markets just don’t make sense

I don’t remember if I’ve shared this particular trading wisdom before -- I picked it up from options trader John Carter before I found my current, profitable system -- but I want to share it now:

“The markets can remain irrational longer than a trader can remain solvent.”

A scary thought.

It also helps explain why so many traders lose their proverbial shirts in trade ideas that “should work” (and often, eventually, do) but don’t work right away.

I’ve had many discussions with my dad around earnings.

Talking about how strange it is for a company to beat on earnings and then trade lower. Or lose on earnings and trade higher.

Irrational.

In fact, that’s the kind of thing that has kept us from trading earnings actively anymore. Now we seek to avoid it (mostly) because most of the time we just can’t make heads or tails of how the market is going to react to an earnings report.

If you watched DKNG this week, a similar irrational thing happened.

I put on a trade on Monday because the setup looked good. On Tuesday they came out with good news about a pretty big business joint venture. 

And then the shares took a long jump off a long cliff.

Lots and lots of selling volume.

Crazy.

Now I’m in it until at least November, patiently waiting for it to come back. It’s all good because I have ways to make money in my trading system even when nut-so bearish action happens like this. 

For a little bit more crazy (not too much), check out today’s headline:

Policymakers — including the Federal Reserve — have been keeping an especially close eye on the labor market's health.

Why it matters …

So, this one is almost comical. The implication is that “key questions” would be answered if we had the missing jobs report, noting that the missing report is generally revised more than once in subsequent months after it is released. Garbage in – garbage out! “Oh no! There is some molded bread missing from the dumpster ...  Whatever will we do??”

From the article…

“A report from payroll processor ADP showed private employers cut 32,000 positions in September, and another report from the global outplacement firm Challenger, Gray & Christmas showed employers’ year-to-date hiring plans were at their lowest since 2009.”

The ADP report is known to be more accurate than the government’s report. I vote we just roll with the ADP report and permanently furlough the folks responsible for the multi-reviseable jobs report from the Bureau of Labor Statistics!  (... okay, rant over. I’m better now. Thanks for listening.)

Comments: The market is mixed to the upside. The government is still shut down so the jobs report was missing this morning when everyone looked for it. Probably a little disconcerting for data junkies, but no “sky is falling!” crash see for today…at least at the market open.

Check your positions like a normal Friday and be prepared to roll or watch the close based on your preferences. My guess is that most of your premium has decayed and you are waiting for positions to expire, load the coffers with dry powder for Monday. I love this trading system!

Another Alpha scan trade idea for around 1.39% return on risk into next Friday’s expiration.