Pre-Market Prep: Insights from Bob Iaccino

*Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 9am ET, as our trading strategies educator. With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading. Below are some excerpts of Bob’s thoughts from a recent live session.

Every morning, my routine begins with analyzing U.S. Treasury yields. Interest rates play a crucial role in shaping stock market movements, and I track daily, weekly, and monthly changes using my custom spreadsheet. Here's why yields are vital:

• The Risk-Free Rate: U.S. Treasuries represent a nearly risk-free investment. The 10-year note’s yield often serves as a benchmark for mortgages and other long-term rates.
• Investor Behavior: When rates are low, investors tend to move into riskier assets like stocks or real estate. As rates rise, alternatives like bonds become more attractive, creating headwinds for equities.

For example, in 2021, the 10-year yield was at a mere 1.17%. Fast forward to now, and it has climbed to 4.20%. This dramatic shift reflects the Federal Reserve's rate hikes and impacts borrowing costs, trading strategies, and overall market sentiment.

One of the tools I rely on is the CME FedWatch Tool. This resource provides real-time probabilities of future Federal Reserve rate changes, derived from market pricing.

By analyzing probabilities for upcoming meetings, I can anticipate shifts in market sentiment and align my trading strategy accordingly.

Understanding rate expectations is essential, as they influence everything from mortgage rates to stock valuations.

Once the market opens, I spend the first 30 minutes analyzing futures and major indices like the NASDAQ, S&P 500, and Russell. Here’s why:

• Market Tone: Futures provide a snapshot of the market’s direction before cash trading begins.
• Sector Trends: By examining sector ETFs (e.g., technology, healthcare, energy), I can determine whether the day is “risk-on” (bullish) or “risk-off” (bearish).

For stock screening, I use Finviz, a robust tool that helps filter stocks based on specific criteria like market cap, earnings schedule, and technical indicators. However, I don’t dive into stock-specific trades until the market stabilizes post-open.

While many traders focus on small-cap stocks or opening-range trades, I adopt a more position-oriented approach. For example, I’m currently watching CareDx (CDNA):

• Setup: A double-top pattern with clear support levels.
• Strategy: If the stock reverses at support and forms a bullish rotation zone, I plan to buy and hold until my moving averages converge.

Live Sessions (hereafter referred to as the “Content”) are produced by TradeZero. The Content may include the views and opinions of TradeZero and a third-party participant, Bob Iaccino. Bob Iaccino is compensated by TradeZero for participating in the Content. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

Trading securities can involve high risk and potential loss of funds. Furthermore, trading on margin is for experienced investors and traders only as the amount you may lose can be greater than your initial investment. Likewise, short selling as a securities trading strategy is extremely risky and can lead to potentially unlimited losses. Options trading is not suitable for all investors as it can involve risk that may expose investors to significant losses. Please read the Characteristics and Risk of Standardized Options, also known as the options disclosure document (ODD) at https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document before deciding to engage in options trading.

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