slow is smooth | Outlier Insights
Welcome to Outlier Insights!
Each week I work hard to gather and curate information for your convenience. There are two main topics to the newsletter:
Market Analysis is where I share some high level key market datapoints to complement my daily livestreams.
Erik’s Brainstorming is where I share a couple ideas to watch each week along with my perspectives; often market related, sometimes not.
If what I do helps you out, please consider either subscribing on Substack or joining the Patreon to support my work and join the Outlier Community! You can also simply share the content, which is a big help as well.
Be an Outlier!
-Erik
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1. Market Analysis.
Macro & Rates
Core PCE Inflation: The Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, rose 0.1% in April, bringing the year-over-year rate down to 2.5%, the lowest since March 2021.
Federal Reserve Commentary: New York Fed President John Williams emphasized the need for a strong response if inflation deviates from the target, highlighting concerns over potential inflationary pressures from recent tariffs.
Equities
Major Index Performance: All major U.S. stock indexes posted weekly gains. The S&P 500 rose 1.9%, the Dow Jones Industrial Average increased 1.6%, the Nasdaq Composite gained 2%, and the Russell 2000 advanced 1.3%.
Monthly Highlights: May marked the best monthly performance for Wall Street since 2023, with optimism fueled by easing inflation and positive consumer sentiment.
Volatility & Options
VIX Movement: The CBOE Volatility Index (VIX) declined over the week, closing at 18.57 on May 30, down from 22.29 on May 23, indicating reduced market volatility.
Options Activity: Options markets reflected decreased demand for hedging, with a notable flattening in the SPX skew, suggesting a shift in investor sentiment.
Flows & Positioning
COT Report Insights: The latest Commitments of Traders (COT) report showed that large speculators reduced their long positions in gold futures by 3,975 contracts, while commercial traders increased their short positions by 7,192 contracts, indicating a bearish outlook among institutional players.
ETF Flows: Tech-focused ETFs experienced significant inflows, with investors showing renewed interest in growth sectors amid easing inflation concerns.
Notable Movers
Tesla (TSLA): Despite a 3.3% drop on May 30, Tesla's stock surged 23% in May, driven by investor enthusiasm over AI and autonomous vehicle advancements, including plans for a robo-taxi launch in June.
Eli Lilly (LLY): The pharmaceutical giant's stock rose 2.09% on May 30, outperforming competitors amid strong trading volume and investor confidence in its product pipeline.
Ulta Beauty (ULTA): Ulta's shares soared 12% after the company reported better-than-expected Q1 earnings and raised its full-year outlook, signaling robust consumer demand.
Regeneron Pharmaceuticals (REGN): The stock plummeted 19% following the failure of a Phase 3 trial for a COPD treatment developed with Sanofi, leading to a significant sell-off.
Economic Events for Next Week.
(from Trading Economics)
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2. Erik’s Brainstorming.
When I started trading options in 2007, I was expecting to turn my small account into a ton of money - quickly. The goal of this post is to share some of what I've learned over my 18 years in markets and the critical turning point that allowed me to create wealth trading.
Similar to when we try to move really fast, we tend to make jagged, uncoordinated movements that actually slow us down. A great example is disassembly and reassembly of weapons in the military. A fun game I would play with my Marines was offering them an early day if one of them could beat me in diss/ass of an issued weapon of their choosing. They typically loved the challenge for an opportunity to beat me and typically felt they had an advantage because they generally spend more time with the weapons that I do. Yet, things typically didn't go their way.
Rather than trying to move as fast as possible, I mentally emphasized efficiency. I visibly look like I'm moving slower than who I'm competing against and it's because I was. Yet, I finish first.
Trading options is complicated, there is no dancing around it. The sooner we can accept that fact as traders, the sooner we can actually prepare. Which, funny enough, really isn't hard. The hardest part is accepting the challenge and putting your head down to do the work.
Pivoting your focus from how you're going to trade your small account into your future wealth, to how can you create a reliable process for trading that as you continue aggressively saving and increasing your income will ultimately make or break you. This process is much slower than the trader who jumps right in after a few bs youtube videos and naively thinks things are magically going to work out.
What to do? Simple.
Stop. Rather than slinging money and not even being in a position to reap the maximum benefit from what you are more than likely to lose, pause. Slow.
Ask ChatGPT to summarize the performance statistics of retail traders, options traders, etc. Ask for citations for you to review. This is your opportunity to understand the reality of what you're trying to do, which is statistically challenging but absolutely not impossible. Taking the time to appreciate the task is pivotal to embracing the work. NOBODY would waste the time training if they thought they'd be able to easily perform.
Begin learning. I have a post that literally outlines a prospective syllabus to work through in order. You can find that here. You can also just ask ChatGPT to create one for you. I highly recommend using AI to serve you quizzes and tests to help solidify your learnings. https://outliertrading.substack.com/p/stop-wandering-aimlessly
Take the time to learn. This can be as short as a few months if highly regimented and consistent. It can take a year if you choose to progress slower. This is the slower phase.
As you ramp your approach as a trader, creating structured trading plans, trading logs, iterative processes, you will find your performance will very quickly outpace anything you would've done by just haphazardly trying to rapidly grow your small account, hanging on each individual trade.
Spend the time to learn & build a robust process as a trader (slow is smooth) then implement and refine this approach (smooth is fast).
Be an Outlier
Erik
DISCLAIMER:
The content presented is for informational purposes only and any opinions, news, research, analyses, or other information contained are provided as general market commentary and do not constitute investment advice. Outlier Trading, its affiliates, and employees are not responsible for any investment decisions made based on the information presented. We do not guarantee the accuracy, completeness, or reliability of any information presented and are not liable for any losses or damages arising from the use of or reliance on this information. By accessing this content, you acknowledge and agree to these disclosures and terms of use.