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How To Prepare for Thursday’s CPI

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Written by Timothy Sykes
Updated 10/12/2022 5 min read

Inflation is on everyone’s mind these days.

It’s no longer just traders waiting on government reports. Every household is worried about how much worse things will get.

Sure, main street cares about stocks. But they feel inflation every day when they fill up at the pump or can only afford half of their grocery list.

Yesterday, I put together this video for my members to discuss CPI, what it means for stocks, and how I’m trading around it.

Normally, I never post their exclusive content for the public

However, with talking heads offering terrible advice, this issue is far too important for me not to speak up.

A lot of market promoters will tell you everything is fine, buy the dip, yada, yada, yada.

Clearly, they aren’t looking out for you and me.

Because if they were, they’d tell you what I tell everyone who will listen right now…

Image credit: tete_escape/Shutterstock.com

If you can only take away one thing from this newsletter, make it those two words.

Contrary to popular belief, markets crash from lows, not highs. What happened in 2020 was an anomaly.

Typically, markets cycle through phases as they push lower until everyone throws in the towel, purges their portfolios, and creates a bottom.

This means all it takes is one news catalyst to push stocks over the edge.

Everyone has their hackles up, with their trigger finger ready to click the mouse at a moment’s notice.

The last few times we saw a bad CPI reading, had a Fed rate decision, or one of the Fed members spoke, markets moved.

So it’s easy to see how markets could crater no matter what the CPI says.

I’ve seen younger traders on Twitter and YouTube point to a daily chart of the S&P 500 ETF (NYSE: SPY) like this…

And say something like, “We’re already down so much, the market is definitely going to bottom soon.

The problem is they discount all the world’s real problems that didn’t exist before the pandemic.

More importantly, they don’t take a broader view of the market using a longer time frame.

Because if they did, they would show you something like this…

Looking at markets this way gives you an entirely different perspective.

Every single rally faded as sellers overwhelmed buyers.

Now, I can’t tell you WHERE we’ll hit a bottom.

But I can tell you likely WHEN we do.

In one of my recent blog posts, I wrote about capitulation and signs of market bottoms.

These are common, simple ways to identify market bottoms.

The thing is, I don’t need to pick off the lowest print.

I find it far easier to wait until I get confirmation before stepping in.

Since I don’t trade large-cap names, I rarely discuss the broader stock market.

However, even as a penny stock trader, it’s important to have a sense of what’s going on.

Penny stocks are my favorite because they create tradeable opportunities even when the major indexes are in free fall.

However, they are still susceptible to being pulled along when we see huge selloffs or rebounds.

Unlike large-cap names like Apple, which may drop only 5%-10%, penny stocks can lose 50% in a matter of minutes.

This past week, I haven’t traded all that much. And when I did, it was with small positions.

Frankly, I had a great first six months of the year that I don’t want to blow trying to swing for the fences.

Because even though I’m cautious, some great names are still out there, like Global Tech Industries Group Inc (OTC: GTII) or Protext Pharma Inc. (OTC: GTII).

Nonetheless, I wait for the setups to form and don’t force the trades, much to the chagrin of my Twitter haters.

And I can almost guarantee you I won’t hold anything overnight into the CPI announcement.

Now, there could be some juicy setups that form after the news release.

But trying to guess what will happen beforehand is a fool’s game, or at least one I’m not very good at.

So, take the time to study the patterns, design your setups, and prepare so that WHEN the opportunities come, and they will, you’re ready to jump on them.

My goal isn’t to make people a millionaire overnight. It’s to make them millionaires in their lifetime.

Take the first step and join my Millionaire Challenge.

—Tim


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (205) 851-0506 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”