Lou Mercer: You have tons of experience in the industry. You're a charter market technician. How do you go about setting yourself up for success?
Lee Bohl: Sure. Well, the first thing I do is I take a look at the futures markets. And you can take a quick look and you can see, even before the market opens, are we going to generally open higher or lower, based on the discount or the premium to the fair value of futures.
I also try to see are we today going to be risk on or risk off? And you can tell that a lot. So that's the first thing I do, is just try to get a sense of what the day is going to do by seeing risk on, risk off.
Lee Bohl: Well, after I take a look at the futures, the next thing I'm going to do is take a look at - for stocks, I'm going to look at all the major indices. I've got a layout built where I've got the S&P, NASDAQ, the Dow, and NASDAQ composite. And under that, I also have the 10 year and the 30 year yield.
And I can take a look at that pretty easily and see, okay, we're challenging - let's say we're - today, on the 200 day moving average on the NASDAQ, but we're not really breaking through it. If we start breaking through it towards the end of the day, I'm going to get more aggressive now. And I'm monitoring that. I'm also monitoring the relative strength of each index to each other, because what I want to see, especially if it's a risk on day, I want to make sure that the Russell and the NASDAQ are beginning to outperform the S&P, if I'm going to put more of a risk on trade. So I tend to really get a feel for where the money is flowing that day, and if I'm going to get more aggressive or less aggressive.
Kevin Horner: Can you speak briefly about the Russell and the NASDAQ specifically being your leaders to that extent?
Lee Bohl: Well, generally speaking, if you take a look at long term charts, when the market is really on a roll, right, you'll see that the higher beta, more aggressive stocks, like the Russell, are going to be outperforming. On charts on our platforms, you can put a relative strength line. You can compare this versus that.
And if you take a look at a long term chart when we were really running up, say in 2013, you can see that the Russell relative strength was just continually going up. And that makes you feel a lot more comfortable.
When you get a little bit worried is that, okay, now let's say the S&P is continuing to go up, but the Russell is now rolling over. Even if you're not trading the S&P, it's going to make you a little bit more worried. So I always try to look at the relative strength of each index versus the other. The ideal situation is that you've got the more aggressive companies leading and not lagging.