Trade Numbers Not Noise

Hey Traders,

I hope everyone had a pleasant and profitable week! (And if you missed my biggest announcement of the year on Wednesday, check out the replay right here.)

There was much ado last week about Fed Chair Jerome Powell’s appearance on “60 Minutes.”

The central banker sat down with Scott Pelley last weekend, discussing everything from the state of the economy and the coronavirus, to a possible “digital dollar” — or Pitcoin, perhaps? — in the works.

Pitcoin – my proposed Fed-backed crypto

Considering the Fed is a notoriously tight-lipped group, used to having their speeches and meeting minutes under an analytical microscope, people tend to pay attention when ol’ Jay (or any central bank chair) steps up to the podium.

In fact, there are a few people who successfully trade stocks and options on Fed noise alone …

I’m just not one of them.

And today, I’ll tell you exactly why I don’t put my money on the money printers — and what DOES move my wallet instead.

A Calculated Caste of Characters 

As I said, Fed speeches can be a big deal — they can literally move markets.

Of course, not EVERY Fed speech — or even most — WILL hold enough sway to move stocks … 

There are lots of Federal Reserve members, and their respective places in the central bank caste system, not to mention their known stances (dovish, like St. Louis Fed President James Bullard; or hawkish, like Boston Fed’s Eric Rosengren), strongly factor into whether their public comment makes much noise.

But at the top of that hierarchy is relative centrist Fed Chair Jerome Powell.

No one in the central bank holds more sway than Jay. 

Of course, it’s nothing to do with the man personally — just ask former Fed Chairs Ben Bernanke and just-appointed Treasury Secretary Janet Yellen, neither of whom are strangers to having their every word dissected.

Those of you trading back in March 2015 might remember a massive one-day rally fueled by the Federal Open Market Committee (FOMC) policy statement — and that’s just ONE example.

In fact, one word — “patience” — was removed from the post-meeting statement, where it had been featured in previous communique, and this omission was largely interpreted as, “the economy is growing at such a healthy clip that the Fed is now considering a rate hike in the short-to-intermediate term.”

Daily chart of SPY in early 2015 – courtesy of StockCharts

So, against this backdrop, when the head of the Fed talks, Wall Street tends to listen.

And because the Fed Chair knows Wall Street is listening — as evidenced by that SPY move above, amongst others — you can almost guarantee everything they say has been meticulously calculated.

Which brings me to …

Jay’s Agenda

When you know die-hard Fed stalkers are going to pore over your every verb conjugation, you have to choose your words carefully.

And because you have to be so cautious, it stands to reason that when you speak publicly, you’re either fulfilling a duty (like a post-meeting presser), you have an agenda, or both.

So while many of my esteemed colleagues spent last Sunday watching Jay Powell on “60 Minutes” and reenacting the Michael Jackson/popcorn gif …

Guess what I had on the tube?


Because I already knew Powell’s agenda, which I’ll outline in a moment, there was nothing he would’ve risked saying that could’ve shocked me … or even stirred enough in me to initiate some sort of stock or options trade.

And that’s what this is all about, right? The TRADING?

Had I thought there was even a remote chance that Powell would get Charlie-Sheen-level candid with Scott Pelley on “60 Minutes,” and possibly drop big enough bombs to majorly move stock futures Sunday night, I might’ve tuned in … only because that could’ve impacted my portfolio.

But alas, the only certainties in life are death, taxes, and Fed Chairs RARELY spilling good tea, as the kids say.

When I read the summaries of the Powell interview across various media outlets on Monday, it was exactly what I’d expected from a sitting Fed Chair, whose running agenda includes:

        • Reassurances about the health of the U.S. economy
        • Keeping tabs on things like COVID-19 cases and cryptocurrencies
        • A relatively sunny outlook for post-vaccine job growth (though there are always risks, of course!)
        • Keeping an eye on inflation and the key 2% target
        • Vowing to get to the bottom of the Archegos margin-call mockery 
        • Constant reiteration that the Fed is an apolitical body here to provide monetary support for as long as it takes, but only for as long as necessary 

And yada yada yada … Wake me when it’s over, please.

What I Watch Instead

So, if I’m not paying much mind to things like the Fed, what AM I watching?

Well, not TV.

At least, not financial T.V.

Just like Jerome Powell, the talking heads on CNBC and other stock-focused channels ALSO have an agenda — one that serves their sponsors … and doesn’t align with my interests.

To be honest, if I want background noise during the trading day, a lot of the time I prefer the wonderfully upbeat Game Show Network, where there’s clearly defined risk/reward and only one agenda — to win the game!

Game shows over analysts, too – change my mind

Instead of following someone else’s narrative, I let the market itself dictate my narrative.

I mean, it shouldn’t surprise you too much to learn I’m what you’d call a “numbers guy.”

Give me the good old-fashioned CHARTS, all the OPTIONS DATA you got, then throw in the VIX and all the VOLATILITY assets, mix with my own PROPRIETARY trading systems, and that’s really all I need to make most of my day-to-day trading decisions.

And so far, tuning out the noise has been successful for me.

If you find the headlines to be overwhelming — or, at least, not generating profits for you — try “unplugging” for a while. 

Still do your homework, of course — like checking on a company’s earnings date and shopping option strikes — but let the NUMBERS, and not the NOISE, be your guide.

Enjoy the rest of your weekend!

Your Only Option,

Mark Sebastian 


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