A new year
Join me as I organize my thoughts about the upcoming week
SPX spent four of the five days this week trending down, but critically, we bounced on the 20 week, previous resistance, at 5865. We ended the week down .5 percent. This concludes 2024 and the santa rally as well, which leads us into the January effect. Is there anything to that this year? Or will it pan out much the same as the rest of seasonality has in 2024?
Market Review
Thursday bounced off the election gap, and by next week, the 100d sma should be near the top of the gap. I do think it holds, but I would not be surprised if it overshoots down before moving higher. It could even close below, but then recover within 2 days. This would be a weaker bounce when compared to Sept or Nov dips, and signal that this overall up move is weakening. Overall though, I still expect a recovery and a new high to be made. We of course will discuss more as it continues to unfold.
I ended the year at 38.5%, which is significantly down from the highs of over 100% in July and Aug, I had a rough 4th quarter that was plagued by incorrect decision after incorrect decision. Despite resetting my short puts to a strangle this week, I'm still in a “recovery trade”, with higher deltas than I would normally sell. My intention is to work my way down, as I typically do in these scenarios. Selling for say 65, and closing at 50, then selling for 55, and closing at 40, until I can get down closer to 20. Then resuming selling for around 15 and closing at 10. During a recovery trade you are at increased risk, so while you can make money back quickly, you can make your situation worse for yourself. On the plus side, typically there is calm after you've had a bad time.
Currently, I’m up 1.6% and the market is down .7%. One consideration I had while contemplating my give back in 2024 is that the higher my percentage gets, I should reduce exposure. So a hypothetical would be that I go full position until I hit 30%. If it never gets to that, so be it, but if it does happen, I reduce positions by a percentage. In my current case, that would be removing one contract. And then continuing that every 10%. I have been trading with 7 contracts, so that would get me up to 80%. Odds are I wouldn't remove a contract at every 10% because it would be a lot of BP allocated per trade. So chances are I wouldn't need ALL of that allocation, but not allocating enough is ALWAYS what kills you.
I always like starting a new year and why Tracker is built the way it is. It gives us an opportunity to wipe the slate clean. No matter how good or bad we did, it doesn't matter. We all start the year fresh. I like to write myself a couple letters as well. A financial summary that I can go over my goals I had for the previous year, and how much progress I made on them, as well as my new goals for the upcoming year. I can track my net worth year over year and quickly see my progress. The second letter is what I did right and wrong in my exploration of the market. As we all know, I can't not experiment, and 99% of that doesn't pan out. My goal is always to limit my experimentation to only that with which I'm willing to lose, and only enough to scratch the itch. Maintaining my focus on what I've proven works is always a challenge for me and a large reason why I do this letter, as a journal to keep myself accountable. Let's see if I can do better in 2025. If I'm able to do these letter in a timely enough manner, and they are good enough, I may publish a version of them, but it's just a summary of what I say each week anyway.
TastyTracker.com
I've covered user accounts, portfolios, and portfolio balances. Next I’ll cover entering a position. This is nearing an end for what I currently have developed, but I make it a point to make at least a couple check-ins each week, until we get to a more fully-featured product. So new features are coming. In the meantime, this is the core of the application. If it's too hard or not intuitive, I've failed.
So how would I enter the positions I have above from TastyTrade into TastyTracker? I’ll walk you through that, but here is the output. You can see I have the short put vertical as one position, and the strangle as another. Instead of entering the strangle as one trade, I actually entered in as two trades within 1 position. This is because I may or may not close the strangle as a whole. I also may need to add hedges if buying power required it. A hedge would be a 3rd trade within the same position. There is no hard and fast set of rules that dictate how you enter trades, and whether or not they should be in the same or different positions. You will find out how you like to organize your trades, and everyone is different. My goal is to have Tracker be flexible enough to handle any method of entering/tracking, and that it provides value in every case. A classic use case is a covered call. Chances are you had stock, maybe you even grew that to a 100 share position slowly over time. Once you get 100 you add a short call at resistance. You would want to add that short call to the same position, so that it can calculate your new break even. It’ll even include closed trades in that calculation, so if you are able to close or roll that short call, it continues to reduce your basis. The tracker makes this all seamless.
So let's get into the various buttons/links. Click in the + in the header row (beside the text `2 Positions with 3 Trades`) will present you with a form to create a new Position and Trade. If you click the + beside the position header (‘/ES Strangle’ as an example) it will NOT create a new Position, and only create a new trade. To see details and modify an existing trade, you can click on the trade title (ex. ‘/ES 6400 Short Call Single x4’). Clicking the 3 dots on a positions “card” will allow you to rename or delete a trade. Now let's walk through adding a new position/trade. We will click on the main + button.
We can select Securities or Options. Note, we would select Securities whether it's a stock, an ETF, or a futures contract.
Here is the securities screen. By default, it shows either the portfolio you have selected in the main portfolio drop down, or if you’ve selected All there, it’ll choose the last selected portfolio. Simply typing in the security, its quantity, the price, and multiplier are all that's required. The opened date and time is defaulted to the current date and time. The ‘Trans. Fee’ is the total transaction fee and is optional. I decide to not enter this in for speed of entry, and instead use my brokers fee total, but you are welcome to use it.
Note: There is a small bug with Publish Position checkbox at the moment, it shouldn't be disabled here. Also, notes are not fully implemented, but high on my list, and so at this time it's disabled.
Now let's take a look at the options screen. In the old version, you were required to enter the strategy, but the new version will auto-detect the strategy. It will show what it detects, along with other information, in the summary section at the bottom. If you enter /ES it’ll automatically change the multiplier to 50. I have a bunch of these futures multipliers set up already, but if you find one missing, just shoot me a message, and manually enter it in the meantime. The nice thing about how I have this screen set up, is that you can enter most positions without clicking on the side or type buttons. In our previous example of writing a covered call, you simply put your quantity and strike and expiration in the 3rd strike row. I will ignore any rows that aren't completely filled out. As you can imagine, having my form default to these settings will allow for things like iron condors/butterflies, put or call credit spreads, long or short naked puts and calls, among others, without much form modification. Again, the transaction fee is the total fee for the transaction, and NOT the per contract fee, despite the price being per contract. This is because this is the way most brokers display this information, so it's easier to enter.
This section has gotten long enough, so the last thing I’ll talk about this week is that when you enter a quantity or expiration on the first strike, it’ll fill out the rest to match. So even if you are selling a call credit spread, it may be worth your effort to fill in those two fields of the first strike before filling out the actual details for strike 3 and 4. Perhaps in the future I will allow this functionality on any field. Next, if you are in the strike field, and you hit the enter button, it’ll move to the next strikes ‘strike’ field. Normally you would tab between fields, but using ‘enter’ there can be a quick way to enter your position. When I publish a video demoing this, you will see that I enter quantity, then expiration, and then strike, hit enter and put in my next strike. I almost always do it in this order. The last thing to note here is that entering a negative value in the Price field will toggle the Net button for you to negative automatically, since you are net long.
Next week I'll cover the trade history and trade actions like closing and rolling a trade.
That's all I’ll cover this week. More details to come next letter. If you have and ideas or find a bug, the best way to let me know is in discord.
Visit Tasty Tracker
Posts
Starting off with the negative side of the ledger, but this letter doesn't have many, so fear not. There is still concern due to most securities being down. The overall market is struggling, while the major indices aren't really showing too much concern. My read on this has been that it's resting for the next leg up, but a crash (or simply more downside) is also one of the possible outcomes.
We didn't get the end of year rally, and in fact had the worst year since 1952. Quite the record, given I wasn't even alive when we last experienced something like this. Just goes to show that no one ever knows where the market is going. We have to be prepared for anything, and right more than we are wrong, but there will always be times when we are wrong.
I included this to point out that we had two stellar years in a row. When I started publishing this newsletter at the beginning of 2024, I reiterated that we don't go up one year and down the next. So just because 2022 was rough, and 2023 was nice, does not mean that 2024 would be rough, people can be very short-sighted. Now, at the beginning of 2025, my message is that we can't expect outsized returns every year. This doesn't mean 2025 will be down, but a more modest gain is likely.
Given that I was doing insanely good and gave a bunch back, it's easy to be hard on myself and look for how I can be better in the future. That won't stop. But as always, some perspective is good. I beat many hedge funds, beat the market, and beat the market average. It's hard to beat myself up too bad with that being the case, but there's always room to improve. It was not my best year, so naturally my unofficial goal is to have my best year, every year.
Just including this because we keep saying “now is the time for IWM” and yet it feels like I keep losing. In reality, I won 8 of 8 trades in 2024 from the old tracker, and only had trouble in the last month or two, when I switched over to the new tracker. Unfortunately I haven't built this report yet so I don't have the numbers for the last couple of months, but I have lost a couple on IWM (I have some on now again).
While I cover these two, Tom points out that we are at a level that we occasionally see a turn around. So this post marks the transition into the positive side of the ledger for this letter.
ISM isn't where it needs to be, but we are making progress.
Subu saying there is nothing really concerning about this pullback. While I'm hesitant to say a bear trap is coming, with a quick bounce, or even that this pullback is over, it should be noted that the r/r continues to improve.
Because individual names have been beaten up, the likelihood increases of better returns in the near term. I'm also seeing many charts that look good. Scaling in is a good idea, and allowing plenty of time for the thesis to play out is critical.
Even if it's a counter bull bounce in a larger downtrend, things are beat up enough that some upside is in order.
Banana and a couple firms throw their hat into the ring for 2025 predictions. Last letter I said I was guessing around 15% +- 2%. Jan 2nd opened at, 5891 * 1.15 = 6,775. This would put me near the top of these guesses, but not the highest.
But for context, here are the guesses for the end of 2024. We opened at 4745, and closed at 5886, well above predictions, so it's anyone's guess. This is more for fun than anything else, we can't predict where the market will go that far out with any accuracy. It's hard enough to get the next week correct…
Quick Charts
Apple continues to not align with the market. Down 4.8% this week, and honestly look like we will get to the 235-238 range. More downside expected. This adds headwinds to the market, but given it hasn't had too much correlation recently, perhaps it's nothing to worry about.
IWM has a really nice base, and has worked off the oversold condition. I'm hoping for a pop in the coming 2 weeks. Up .92% this week.
Vix is back at the local average, with room to move down, if the market chooses higher. Up 1.1% this past week.
We are not overbought or oversold, and bouncing here. At -14 up from -30 last letter.
Flat this past week with a lot of room to move up here, minimal downside.
From 34 last wee to 32, flat in this metric as well.
No movement in the last week.
Earnings and Events
2024 Results
Q2 Winners: ELF, FSLR, CHWY, CRWD, AVGO, ADBE, ORCL, FDX.
Q3 Winners: GS, SPOT, LMT, ENPH, TMO, RTX, MCD, PYPL, PLTR, UBER, UPST, SHOP, LLY, TTD, SE, ORCL, MU
Q3 Losers: UPS, QCOM, LRCX, MBLY, W, INTC, ROKU, SMCI, ABNB, DG, AVGO
Q4 Winners: TSLA, CVNA, PLTR, ELF, SHOP, SPOT, DIS, SNOW, DE, CRM, LULU, ULTA, AVGO
Q4 Losers: HOOD, ROKU, W, MELI, NVAX, RKT, AMAT, TGT, ORCL, ADBE, MU
Last Week
Nothing
This Week
Interested in: Nothing
Nothing last week moved the market, and this week looks a lot more of the same. I don't see anything on this schedule to make me feel something either way.
Thoughts
Last letter I thought that a lot looked like it was at a bottom, but a couple other areas weren't there yet and that we could tread water. That's what happened, and I think things are closer to moving productively, but wouldn't be surprised if it was flat again this upcoming week.
With the indecision, in a sense it could go either way, though r/r favors upside. As discussed, if we continued moving down, 5780 would be my base case, but 5550 would be my absolute low.
Rating
My attempt at being clearer on my expectations for the upcoming week:
Bullish
Bullish/Neutral
Neutral/Bullish
Neutral
Neutral/Bearish
Bearish/Neutral
Bearish
For three letters now, I've come in at a #4, but that's just how I feel. Tentatively, I'd plan for #3 in the next letter.
Conclusion
Feeling much the same as last week- that I don't think we moon here or anything. It looks like we have bottomed, and if that's the case I expect within the next 6-8 weeks we make a new high, even if it's barely a high. Then in the following 6 months have a 10% drawdown. My hope would be that it would pan out over several weeks, or months (2-3) and if that happened we could trade the move down and back up. If it comes quickly, it's harder to make money, and instead you kinda have to shelter in place. We shall see.
Good luck out there!
As always, staying realistic and nimble is key to moving forward productively.
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Socials
Twitter: @toddhorst
Discord: https://discord.gg/gt7WaZN
Affiliate Links
Tastytrade - My primary broker. I have my primary margin account and IRA here where I trade strangles on /ES.
Robinhood - For dead simple charts (without the noise) of spy daily. I keep my dividend portfolio here because it’s a simple platform. I do not use for options.
WeBull - I use for charting and news. I do believe they will be the new “it” broker eventually when they finish implementing options and futures. I have some spill over long-term holdings here.
Tradingview - The best charting platform period.
Disclaimer
This newsletter is not trading or investment advice but for general informational purposes only. This newsletter represents my personal opinions, which I am sharing publicly as my personal blog. Futures, stocks, and bonds trading of any kind involves a lot of risk. No guarantee of any profit whatsoever is made. In fact, you may lose everything you have. So be very careful. I guarantee no profit whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission, CFTC, or with any other securities/regulatory authority. Consult with a registered investment advisor, broker-dealer, and/or financial advisor. By reading and using this newsletter or any of my publications, you are agreeing to these terms. Information and quotes shared in this blog can be 100% wrong. Markets are risky and can go to 0 at any time. Furthermore, you will not share or copy any content in this blog as it is the authors’ IP. By reading this blog, you accept these terms of conditions and acknowledge I am sharing this blog as my personal trading journal, nothing more.