All right welcome everyone to day two bright and early. Today I have the pleasure to introduce Dr. Rand Waltzman deputy CTO of Rand Corporation and Z-term program manager at DARPA. He'll be speaking on disinformation. Without further ado can we give a large round of applause for our speaker. Well good morning everybody. So since this is after all DEF CON people are interested in how to do things. I'm going to give this talk about disinformation not from the point of view of how do you protect people from disinformation or me am I but how do you actually do disinformation? What what makes quality disinformation? How can you tell? And I also want to specifically emphasize the reason for the title of the talk saying that it's the thought that counts is that I want to try to make sure it's the purpose really is to get you in the right frame of mind for this kind of business and the right frame of mind is not to get hung up too much on technical tricks. You've heard a lot about deep fakes and you're talking about deep fakes and all that. Okay that stuff is all fine and these are tools of the trade but they are not the main point and that's what I'm going to try to show you explain to you today. So I want to start out with a quote the man who never looks into a newspaper is better informed than he who reads them in as much as he who knows nothing is nearer to truth than he whose mind is filled with falsehoods and errors and how all do you think that quote is? Thomas Jefferson 1807. So how much is really new? Well that's pretty questionable I think at this point. Actually I don't know. I haven't even heard the first speaker yesterday anybody? Yeah so that guy he made an interesting point you know he was trying to say well disinformation these kind of techniques are not really new they even go back as far as the 40s. Well I got news for that guy to go back way further than the 1940s. These kind of techniques go back a very very long way and they have a very long tradition. People talk about the Russians for example. People talk about the KGB you heard him active measures how many times active measures you know what that is. So people talk about that well I can tell you that the KGB was using a playbook from the Ochrana. Anybody know what the Ochrana was? So the Ochrana was the predecessor of the KGB that was the czarist secret police. The czarist had a very active very effective secret police and also involved in a lot of active measures and disinformation campaigns and other kinds of things. They were very active in fact I just wanted to start out by going give you an example to show you how far back this really goes how effective things can be without technical tricks and there was a case there was a guy by the name of Raczkowski who was the head of the Ochrana office in Paris at the end of the 19th century the very beginning of the 20th century and he was he was one of the great minds in the field of active measures really really one of the truly greats and one of his schemes actually is still out there and active today over a hundred years later it's spectacular so I want to talk about that a little bit just to show you but before I okay so I had one one side here you know sort of the bottom line up front is a sanitary basically things have gotten to the point where you know time is compressing to a point space is just blown out completely and you can get messages out anywhere in the world instantaneously as you have this confluence between communications technologies everybody seeing everything that's going on all at once and all these things that happen and it gets to the point where that alone that state of affairs is having a great impact on events and offers tremendous opportunities for this kind of activity so just to show you the first example how many of you ever heard of the protocols of the elders of Zion oh look at that some of you have see now the protocols of the elders of Zion to me that is one of the great pieces of deception and disinformation of the 20th century the way it came about was my friend Rajkovsky in Paris from the Ochrana got this brilliant idea among many and he found this document called what was the original name of the document let's see this is so tiny to read it yeah he found his document called the dialogue and held between Machiavelli and Montesquieu now that document in French was political satire had to do with Napoleonic politics had nothing to do with anti-Semitism at all totally irrelevant so Rajkovsky took found this document which was already old by the time he did this he took the document and he edited it somewhat and he transformed it into the protocols of the elders of Zion in fact if you look at the protocols and you look at this original work this dialogue you'll see huge pieces of the text are just like taking word for word but then he did some creative editing and this was all done in French and then he took the document he sent it to Russia he had it translated into Russian and it was released in finally in Russia in 1902-1903 timeframe and so some of you have still heard you can still get it on the internet today it's still out there okay that's more than a hundred years later now what's really interesting about this and show you how effective it really was and it also illustrates some important principles behind doing this kind of work is that Henry Ford remember Henry Ford Henry Ford had this thing translated and printed up and distributed 500 thousand copies of this piece of crap in the United States and at the beginning of the 20s when it was exposed by the London Times as being a fraud you know what Henry Ford's response was I got bad information so assuming that was it didn't change a damn thing the thing is still in circulation today didn't make any difference it was used the Nazis used it for propaganda and their techniques I mean it was used by all sorts of people throughout time and it's still being used to this very day so I think that's speaks to the genius of Rachekov see now he didn't have any computers he didn't have deep fakes he didn't have anything but what he had was a lot of imagination and he was in it he looked at these things from a point of view of the long game and this that's really important and I want to I'm going to keep emphasizing that so the next frontier of course in forgeries are digital forgeries as we as you've seen today and so first I want to talk a little bit about just very quick coverage of some of the new and fun techniques and digital forgeries that are coming down the pipeline and you know we've partly even I mean the point is that we've barely begun to deal with tech space forgeries or tech space disinformation and now we're getting into this multimedia business and you know things were bad before and I can guarantee you they're going to get a lot worse real fast so deep fakes is part of the next generation of forgery technology so everybody's pay careful attention I don't know how many how many of you've ever tried this website that I'm showing here this person does not exist calm yeah it's really great isn't it I mean you can just keep doing a refresh and generating bogus faces all day long it's really impressive nice very nice piece of work but the basic the really the bottom line of all of this and with the tools that are coming out tools that are in the pipeline tools that are about to become available is total democratization of weapons of mass disruption is how we call them basically anybody will be able to build these things for very little cost so you do it at home create your own digital forgeries high quality really high quality digital forgeries and you know like this I don't know if you heard the second speaker yesterday but he talked about you know how he found ways to counter to detect these forgeries well you know the reality is it's in an arms race as fast as somebody figures out a way to detect these things somebody will find out a better way to make them so they're not going away this is that is not actually going to fix the problem I mean it's you have to do it it's a great thing to do but it's not the end of the day so I want to talk and said a little bit more about what kinds of fun and interesting things you can do with these kinds of forgeries so here you see a few sort of broad categories like you know distorting policy debates eroding trust and information damaging national security disrupting international relations all kinds of interesting things you can do with these forgeries that you produce here are a couple of more specific examples so like for example the first one fake videos could feature public officials taking bribes uttering racial epithets or engaging in adultery that's a useful thing to be able to do if you really if you really have to get somebody that's a good way to do it soldiers shown murdering innocent civilians in a war zone precipitating waves of violence and even strategic harm to the war effort or even better a deep fake might falsely depict a white police officer shooting an unarmed black man while shouting racial epithets that's always a winning concept so lots and lots of fun things you can do and I just wanted to show you quickly a couple of examples and you've seen some of these that we may have seen this one specifically but and I went to Russia and took this you know beautiful shot of a cathedral it's great you know it's almost good enough to be reasonably priced easy to download stock footage which it may in fact be but it's got this horrible spotlight blocking the cathedral the whole time right so I'd love to get rid of it how can we do that should we even try should we yeah Photoshop and I'll select the spotlight here and the top here and use the incredible content aware fill and we'll see this result is pretty good I'd want to touch it up I could use the stamp tool here because there's a lot of repeat what that result looks like if you put all those frames back to back and this is obviously not going to work right it's too obvious there's like some sort of force field effect it looks like the shape of a of a this here and look at the result and you'll see I removed this spotlight thank you so in this case you know we're removing something that's sort of freestanding in front of a background but this will also work in cases where it's something's attached you know so if you have a stain on your shirt or you've got graffiti on the wall you want to remove or maybe your your drone has a shadow you want to remove in this example I'm removing the strap from the guy's backpack and this is kind of a subtle result but I hope you're impressed because it's really hard we never see behind the strap so we have to imagine what it looks like behind the strap and then you know convincingly propagate that through time even as the guy moves and the lighting changes yeah so this is a this hard one to do and could you still use that on the people can you yeah we can we can remove the people yeah see where did they go being tracked and then they disappear they got taken by aliens so so that particular tool that comes from adobe and the real innovation there was as you saw so they have they had a way to write simple bounding box all you got to do is draw back anybody can do that for around the object it's pretty simple and you press a button and remove it from a still image the real innovation here was that it would work across multiple frames in a video instead of having to do it frame by frame so that's that's really a nice piece of work but again it shows how easy it is for somebody to do that it's really easy you know in the old days when Stalin wanted to remove somebody from a picture and erase them from Soviet history it was a lot of work an awful lot of work to do that today just like that this thing will be available in a store near you soon there's another fun example now listen carefully what the guy says the narrator is really fun let's try and darken that up a bit with some cloud oh that's wonderful what if we were to change all that to rock okay let's click on rock and then we can press the mountain let's try waffles by pulling water down from the top there okay wouldn't it be great if everybody could be an artist if we could take our ideas and turn them into compelling images this technology allows us to create a smart paint brush so that if you wanted to create a new picture you can just draw the shapes of the objects that you want and the neural network can then fill in all the details if we add a water feature the network is able to add reflections not because we told it that but because it learned it or if we change the ground to be covered in snow then it knows that the sky also needs to be a different color i really think this technology is going to be great for architects designers people making virtual worlds to train robots and self-driving cars the input to this model is something we call a segmentation map it's like a coloring book picture that describes here's where a tree is here's where the sky is here's where the ground is and it doesn't have any details and then the neural network is able to fill in all the texture and shadows and the colors based on things that it's learned from a large database of real-world images i would like to see that tree reflecting in that pond the real advance here is that we're able to synthesize images with a lot more diversity and more fidelity than we were able to in the past i really think this technology is going to be great for the dreamers of the world what he didn't say was that this technology is going to be really great for those who want to create nightmares not just dreams so he kind of like kind of glossed over the issue of all the interesting people who are going to be able to take advantage of this kind of technique but you know after all well he's selling this thing what can i say but yes as you can see that comes from the video nice piece of work that will also be available to you soon which can imagine with very little artistic skill anybody can conj up beautiful pictures of all sorts showing all kinds of things that don't exist now as i you know said before this kind of deep fake this is this kind of technology is really an arms race so here was just an example to show that even the speaker yesterday because he did this work but i'm throwing it in anyway i'm repeating if those you didn't hear it uh somebody noticed that in these fake videos people weren't blinking the eyes weren't blinking that doesn't look natural so so he and his friends they all came up with some brilliant algorithm to detect cases where the eyes are not blinking well unfortunately within like a few weeks of the time that they posted the paper online describing this really clever technique that they came up with he started receiving links to pictures of fake videos and guess what was happening in the pictures the eyes were blinking there you go so all his fine work well it wasn't for nothing but um wasn't going to save this it wasn't going to solve this problem so here's one i want to show you now that pay careful attention to the final result of this look at this video from saturday night live that someone altered and posted on youtube i'm sorry let's this is going so well on the left kate mckinnon as hillary clinton on the right clinton's face digitally inserted they did the same trick with vladimir people can now buy software and doctor video at home to create what's called deep fakes at carnegie melin university professor alan black specializes in speech synthesis he shows us how it works with an audio clock he has me read some times the time is now almost 12 and then plugs my voice sample into a synthesizer he's able to have me say whatever he types time is now exactly 10 past three in the morning okay i didn't say that and so and that folks is the real point so it's the so which is really what is really all about it's not the trick itself the techniques it's what are you actually going to do with it and the point is that an end in real disinformation real deception okay disinformation is part of a larger idea of deception operations so any any kind of large-scale deception operations whether it's a tactical hit-and-run type of event or a large long-term deception or plan it requires a lot of thought a lot of imagination and a lot of planning it isn't only about technical tricks and i want to show you a few examples so here was this was a really interesting case so there was an incident that had occurred in India in the state of Uttar Pradesh in 2013 so in Uttar Pradesh you have two kind you have hindu and muslim populations living side by side and there's a lot of tension and discussion between them so there was an incident where a hindu girl was being hassled by a muslim boy she went to complain to her brother her brother and cousin went over and paid this boy a visit and he ended up dead so that set off some significant amount of violence things were looking bad until somebody got the great idea they did what i call a cognitive vulnerability analysis a cognitive vulnerability analysis simply means what is it that my target audience is prepared to believe and so they did that they thought it over and they put up this video so if you have a weak stomach you might want to turn away but this is a very gruesome video i'll stop it there but it goes on this thing goes on and it shows two guys getting beaten to death by a mob and it's really i mean he gets really if you thought this is better he gets really ugly later in the end it took 45 minutes to kill these two guys beaten into death in in front of a mob like that and then he dragged the bodies to the street was a whole was a whole thing somebody took that video put it up on youtube and said it was the two hindu guys who murdered the muslim boy being beaten to death by a muslim mob in retaliation for that murder when that video went up the violence got so bad that the indian government was forced to bring in 13 000 troops to put down the violence okay so this isn't just some random things right i mean this is this is pretty heavy stuff so it turns out that the video is in fact a real video showing two guys getting beaten to death by a mob that's for real just not those two guys not only was it not those two guys but it wasn't even india what there really was pakistan and had nothing to do with hindu muslim relations it was about two guys who got caught as thieves in this village in pakistan which is predominantly muslim village and being caught as a thief in a muslim village as you can see is not the healthiest thing to happen to you so but it was just the video required no doctoring nothing nothing at all all it was was the right label and it was like pouring gasoline on a fire another fun example again didn't require it didn't require any technique at all actually so you remember when there was a big tidal wave and the hit fukushima the nuclear power plant in japan and everybody was scared this thing was going to melt down and a big radiation cloud was going to come and kill everybody so the chinese so you had a billionaire you know a bill over a billion chinese who were scared to death that this was going to happen to them so in that midst of that panic i mean they were sure this radiation cloud was going to come over china and kill everybody so in the midst of that panic somebody got a bright idea to start a rumor in chinese social media space that if you eat a lot of iodized salt you'll be protected from this coming radiation cloud clever idea and so what they managed to do was to create a run on salt there were stores in major cities in china where you could not find salt so i mean it really got out of hand i mean people were putting advertising all kind of people were taking fun advantage of it for example one guy put an advertisement in the paper you know in china there's um is it shorted to women because of the birth birth policies that they've had so it's not often easy for men to find wives this guy put an ad in the paper and he said i have a dowry if you come to marry me i have you know i have several sacks of salt that's that's my dowry so he's giving away salt as a dowry as a result of this idea it was pretty good i mean and there were a lot of jokes and fun made about it but the chinese government took it very very seriously because a run on any kind of commodity item like that is a is a spike in the supply chain and any kind of supply spike in the supply chain could lead to potential instabilities and if there's one thing the chinese government really really detests its instability of any kind so they took it very seriously in the fact that uh this has been done with other commodity items in china as well so imagine if you really wanted to get you know get underneath the chinese skin well all you had to do is create a whole series of these simultaneously and boy you could really generate panic throughout the country so so it's interesting again but required very little technical skill just how could you spread a rumor in social media space not that difficult especially when people are already in a state ready to believe it and that's crucial by the way any good piece of disinformation and deception operation has to be built on real events it has to sound plausible to the target audience you can't just pull something out of your behinds and say okay well i'm going to just put this out and i'll have some fun with it no most of it will fall flat if the thought the thought doesn't go into it to make it really appealing to your audience it won't work so that's really critical it was another example of that this was a case that required a little bit of technical skill but still it was the it was really sort of the psychosocial aspect of it that was really important so this is an event that happened in 2013 where somebody turned out later that there's at least a suspicion that it was some Syrian army but anyway somebody hijacked the Associated Press Twitter account and put out a tweet saying that but it says there are two explosions in the White House and Barack Obama's injured so they put out this tweet under the Associated Press Twitter account the result was that within two minutes or so the stock market dropped 100 points it lost 150 billion dollars of value in the market was wiped out two minutes now three minutes later it had come back but you know that's five minutes of complete chaos and anybody who was really understood what they were doing could have made a fortune on that i mean if it was me i'm not sure it wasn't me but if it was me doing this thing i would have all my trades lined up betting on the market going down i would have all my other the whole other line of trades betting on the market going back up i would have pressed the button when i saw it start to drop like a rock i'd execute all the first line of trades and when i saw it start to come back up i'd execute the second line of trades and i'd be done and i'd have made a fortune now the interesting part about this is i would recall to you a story of Willie Sutton how many of you have heard of Willie Sutton no one fell back there okay okay so Willie Sutton was a famous bank robber in the 1930s he was kind of like a celebrity as well as well as being a bank robber he was a celebrity for being a bank robber and somebody asked him after his course said Willie why do you rob why do you rob banks and he said well because that's where the money is not that complicated the beauty of this kind of business today is i could be sitting in a yurt in out of mongolia and i could have done this scheme i don't have to go to the bank i have to go anywhere i have to be anywhere where anybody could catch me so that's really the foundation of white collar crime today you can do things at a distance you can even do things like assassinations but i won't get into that for the moment maybe maybe this time later i will spend you how you can assassinate somebody with social media i don't know anybody you've just ever seen the show homeland okay well if you ever saw the show homeland starting in the fourth season they introduced a lot of things with social media and the first episode they actually they assassinate the chief of the the head of the cia and and pakistan so all that stuff that came that they're using in social media by the way came from me i was i was consulting on the show and they used my trick about how to assassinate somebody in the first episode that that was fun um okay so next thing another simple example this one is very clever i'll watch this okay so a reporter at large an editor at large from cnn put out a tweet said oh my god oh my god oh my god the polish prime minister snubbed this his wife's the polish prime minister's wife snubbed donald trump okay this is this scene is in poland and he's up on a stage with his wife and with the polish prime minister and his wife so that was the message that came out all right now let's talk about what really happened up there okay so what you see here is that she actually didn't snub him at all and in fact what she did was follow proper pro polish protocol she was supposed to go over and shake mrs trump's hand and then the president and the polish prime minister did the same thing so that's exactly what was supposed to happen and if you had the sound behind you could hear the audience shouting USA USA USA so when you put the sound back in and you showed the rest of the video it told a completely different story than the first cutoff part so the only skill required was just to decide where to chop the video off to produce the desired effect nothing anybody could do that very simple but again it's the thought it's the thought that counts it was another case uh last year uh kidnappings were very popular in india as a topic and somebody showed this video now in india people really went nuts when they saw this video i mean this was this was somebody claimed they had filmed the kidnapping a live kidnapping in the street and this went out and people were really up in arms and upset and um these two poor guys you see in the bottom picture they stopped somewhere to ask for directions and they looked like what you know they were on a motorcycle of the same like the guys in the picture and a crowd uh you know formed and tore them apart and killed these guys and they weren't the only deaths that resulted from all of this business about kidnapping so it became a big deal it resulted in numerous deaths because of people's panic reactions and the fact is the video is so the video wasn't fake in the sense that somebody made it as a fake video for this purpose the video was actually just a little tiny segment of a pakistani training film to help raise awareness about child kidnapping and what this was was a reenactment that they did as part of the training video as a demonstration to show so somebody found the training video they said okay great i'm going to just take that little piece and i'm going to put it up and say it was real that's all i had to do the pakistanis did all the work the guys who made the training video for exactly the opposite purpose of what this was used for and it worked very nicely that's a good trick again the thought it's all about the thought so i wanted to find for you just quickly um what i like to call cognitive security so at this conference everybody's hung up on cyber security cyber security in the united states tends to mean technical hacking i mean it's about attacking the infrastructures attacking the box at the end of the infrastructure and that's all well and good but um cognitive security is actually about using those things to attack the people at the at the end right so it's really all about attempts to do mass manipulation of people and at the end of the day manipulation of people is based on it's really emotional manipulation what we're talking about it's not about reason you're not convincing somebody by a reasoned argument of anybody of anything nobody's really listening to that anyway but things with strong emotional appeal i mean i was talking to the guy the other day about um we were talking about examples of this and thinking about the american revolution so you had the constitutional convention you know these guys brought a lot of clever people sat there made up this constitution they're all this work and hammered all this stuff out and then you know the revolutionary war ensued so then the question is how many people i mean average americans at the time well they were british i guess but average people at the time had any clue about really really really in detail what was in the constitution probably almost nobody really understood it what you know what they understood what the message was the british is screwing us let's get them that was it you know you could take all the articles of the constitution nobody cared you know nobody cared the boston tea party that makes an impression they're screwing us they're taxing us they're doing this it's all unfair we hate them let's get them that's what really drove people not the constitution so the thing that's you know that's different today is that the techniques for doing running deception operations and just using this information there you can do things on a scale that you couldn't dream of before all right i mean you could make things happen instantly over a large period of time so you could do all sorts of things which is simply wasn't possible to do and not only that but the operations themselves are easy to conceal so it's really easy to hide in the mass of things that are happening on a normal basis so really the internet and social media in general provide us with a whole different kind of a background to pull off all kinds of fantastic deception operations and scams of various sorts so that's really that's really i would say different plus the fact that the news media the news itself is no longer the gatekeeper of truth and information people are getting most of the information off from some social media side or other off the internet but there's really very little control there's no redaction i mean it's just whatever people want so you know the journalists have sort of fallen by the wayside yeah another big feature that's new is really the whole idea of participatory propaganda so in this case this information campaigns the people who are you know the people who are the targets are themselves the perpetrators in this kind of a scheme because it's a little bit like the telephone game you see anybody sit around in a circle right one guy whisper something and at the end it comes out completely different all right but imagine that happening on a massive scale as it does today so the fact so the way people communicate with each other the way things get distorted you're in fact supporting the effort in various ways when you do that and so you know planners deception planners today are taking advantage of that kind of thing so it's really really uh it's a very useful trick so it's it's not technical hey you're making a guess about people's behavior and you're estimating people's behavior how they react to things so so a lot of this kind of work i mean really disinformation the deception operations in general is really about behavioral analysis i mean that's really what you're looking at and in a behavioral manipulation emotional manipulation that's really the secret um so what i want to do is also just say a word about artificial intelligence i've worked in artificial intelligence business for 35 years i mean i worked at the very first commercial ai company ever in 1983 and i can tell you that the last big wave of ai which was in the 80s i mean i have lived here in my lifetime two ai winters where ai really became unpopular the first one was in the beginning of the 70s and the second one was sort of the beginning of the 90s just somewhere during the 90s and i was two times up an ai program manager darpa so i've seen a lot of this stuff develop as it came and i could tell you that i could take articles that were written in magazines and publications it was it looked in 1983 it looked just like it does today you can't open an album newspaper you couldn't turn on a deal with anybody ai this ai that is going to save the world right everything so and today you hear about the chinese are going to take over the world with ai well you know what you heard in 1983 in the 80s the japanese are going to take over the world with ai how many of you have ever heard or remember the japanese fifth generation project yeah exactly my point most of you have never heard of it i know a lot of younger people who are working in the field today never heard of it and in the 80s it was a huge huge deal and the japanese made spectacular claims how they were going to rule everything with this technology and then when the whole thing fell flat the ministry of industry and transportation industry and technology media who was bankrolling this thing they put an enormous amount of money enormous amount of prestige at the end they just shut it down and that was the end of it they you know they declared it a success and moved on so i can see that happening again soon in a different way it looked different than it did last time but in any case to show just to bring back to you know to why i started on this with ai everybody's talking about statistical machine learning okay well i got news for you ai has a much bigger field than statistical machine learning there's a hell of a lot more to it than that and one of the most interesting aspects of ai technology has been developed over the last 40 50 years is automatic planning systems ai planning systems it is a huge area you can look it up i mean the illiterature is enormous now why do i say it's relevant here because when it comes to actually planning disinformation deception operations and disinformation operations planning this kind of planning is key you have to plan how you know how you're going to what is it that you're going to distribute for what effect and how you're going to distribute it and make sure that the effect is actually happening it's also it's very complicated there's a lot to it if you're going to really do this right and really have an impact so i think it's a good place to bring back ai planning technology to help actually plan large-scale deception operations disinformation operations and so on so i know that's coming it hasn't yet in fact i can tell you that the the original title okay the original title of my phd thesis from a very long time ago was going to be the automatic generation of plausible disinformation so it was an ai thesis i was a little bit ahead of my time but i mean i can talk to all about i i worked out a whole topic of disinformation theory as opposed to information theory what does that mean what is how do you define that uh was a whole lots of very interesting problems with it when you really get into it um so anyway plans i think it's worth it i get there's a couple of references here for anybody just you can there are actually entire courses i mean from ai courses about ai planning if anybody wants to look them up and take a look i would i would recommend it so i think i'm going to stop there um you know this is you've heard of mass manufacturing you know mass customized mass customization of mass manufacturing well we're now in the in the in this age of you know customers customizing mass messaging because mass customization you can customize on a massive scale today in a way you couldn't do before and really define target audiences and that gets really into a lot more techniques about how you actually do this kind of work but i think i'll just stop there in case there are any questions yes yes well it it really refers to i mean it's the idea how do you protect people from mass manipulation through new media so it's like it's like cyber security is about you know of defending and attacking technical systems cyber security cognitive securities about defending and attacking cognitive your human beings well there are certainly practices by the way they ripped that term off for me i gave them the term but that's okay i don't mind well so i just showed you a whole bunch of examples of what you can do from the offensive side right i mean all the examples i showed you those that those are really those are attacks they're all attacks they're all they're all attempts at manipulation through this type of techniques so that's such some of the offensive side from the defensive side nobody's done anything so the basic the bottom line is that the united states government has chosen to leave the population completely undefended that's where we are now yes i'm sorry do they need no not not not like this yes it used to it used to it's really interesting i mean up until the beginning of the 70s we had capability to do this in a serious way but it was all disbanded it was an it was insanity because what happened was detente was introduced at the beginning of the 70s the united states government and its infinite wisdom decided well now we have detente we don't need this kind of techniques anymore so they so they shut most of it down what they had and then there were other issues that came up so you had um there were the frank church hearings and you had the whole introduction of fiza courts and you had all sorts of things that made it very difficult to know or next to impossible to kind of work but it all shut down and then in 1981 interestingly enough when reagan came into office he said well you know maybe that wasn't such a smart idea to shut all that down and he made at least some feeble effort to revive this and he created something called the active measures working group so the active measures working group which i highly recommend you to go out and um you know to find to read the history there's some really nice work done on it the purpose of the group was to try to counter soviet active measures and the group was formed in 81 and it was disbanded in 1991 when the soviet union dissolved they disbanded the whole thing and i was talking to a very senior official from the state department together with a friend of mine who was one of the last members of this committee and i said well you know why did you guys decide to disband the committee in 1991 and all the work that they was doing and she said well the cold war was over wasn't necessary anymore i said wow okay is that a view that's widely held by people in the state department at senior level she said yes i said well you know that explains a lot but anybody believed any of that stuff was over in 1991 just because the soviet union dissolved i mean this is like naive in the extreme i mean if you look at the russians today just to take an example as i say active measures just even the sobeys got it from the ochrana from the tsarist sigra police the modern russians russians have got took to hope the playbook from the kgb so i mean this is a long tradition and i there's no reason and it's even today's even some of the same guys from the kgb days who are doing it so you know these things have long continuous histories the chinese the chinese have been doing this kind of work for a very very i mean we're talking a thousand years right and they're masters at it they do fantastic work i mean i can give a i can stand here and talk to you for two hours about the kinds of things the chinese do but um yeah it's it's but from the u.s. government's perspective no and if you really want to see where we are in the u.s. listen to the hearings when mark zuckerberg was called before the center on service committee and listen to the questions that the members that the members were asking him so orin hatch all right i don't know how many of you have heard orin hatch the senator from uh from utah he said and i quote mr zuckerberg i don't understand if you're not charging people for your service how is it that you make any money well you know when i hear that the only thing i can see is vladimir putin rolling on the floor in his office and hysterics clutching his side from pain from laughter and he's thinking to himself you know i could shut down the gru and i could shut down the fsb this is the russian intelligence what do i need those jokers for because i've got orin hatch and all of his moron friends sitting in united states congress and they're doing all the work just for me i don't need to know them i don't need to pay him i don't need to talk to him i don't have to have anything to do with them and they're doing the whole job it's fantastic i mean how can you beat it you can't so that's so those quit and in fact i can tell you that one of the permanent staffers sent me an email before the hearing and asked me to send some questions that the members could ask so i have two pages of questions i sent them so he writes back to me he says you know these are great questions they're not going to use any of that stuff and instead you heard the idiocies that you heard if you listened instead of real questions which would have been something substantial no completely stupid so that pretty much sums up where we are as the united states government so another question yes how does it play out badly very very badly that's how it plays out i don't see any sign any sign of this improving here i mean i'll give you an example i gave a talk the um there's something called afseav and insa these are intelligence community professional societies and i gave a talk at one of their big meetings i gave a talk and i said and it was a source on open source intelligence that was an open meeting and i came in it came to me and i said i said well you know i said the russians the chinese hezbollah isis the mafia google yahoo basically every asshole in the face of this planet has complete free and open access to our public public social media data i'm not talking about breaking into anything i'm just talking about listening to what you can that's available everybody except the united states government now what is wrong with that picture folks there's something terribly wrong if you're either if you live under title 10 or title 50 the u.s. coach means you're either in the intelligence business or the defense business you are not allowed to be monitoring public social media data well i've heard about you but i actually find that somewhat problematic if you're actually thinking in terms of defending the population and that's only the beginning i mean there are all sorts of reasons why this stuff is not being done and what the problems are but um you know i could give a long talk about that but anyway where we it's it's it's heading towards a very very bad end at this point with no relief in sight whatsoever our adversaries they're sharpening their pencils in their work and an improving technique constantly while we do nothing that's where it is so on that pleasant note i'll stop


All right, everybody. Good morning. Lee Lowell here, smartoptionseller.com today is Saturday, May 15, 2021. I'm back.  But today, we will be talking about, as you can see on your screen right here, I always get the same questions people email me whenever we have a decent-sized pullback in the market. If you consider this a decent-sized pullback, I always get the questions. Lee, what do I do during a pullback? How do I protect my stock and option positions when the market pulls back? I get scared. I sell out. I lose money. And then the market comes ripping back higher. And I don't like to get whipsawed like that. So what can I do? How do I protect a position and maybe not lose a lot of money or just not do anything? So what can I do? So I'm going to give you some ideas on how to protect yourself, what you can or cannot do, or what you should or shouldn't do during a pullback. And just give you some ideas of how to become a better trader. That's what we're here to do. So that's part of our Saturday synopsis where I give you some great options information, free options information. And we also do our synopsis of the charts. That's what I call my Saturday synopsis. I look at stock charts. We look at indexes. I give you an idea of what I'm seeing on the charts because to me, that's really the cornerstone of becoming a better trader, whether you're trading stocks or option. You need to know what the stock is going to do or possibly going to do to give yourself a good, a higher probability reason to get into the trade. And for me, that's all about looking at the stock charts. So we look at the charts, see what's going on. I show you some patterns. I give you some insight into where I think a stock or index may be headed in the future and we go from there. So let's jump right in and talk about what to do when the stock market enters into a pullback. Now, most of us are typically long or bullish because over time, that's just which way the market goes. It goes up. So we tend to have more bullish positions than bearish positions. But there, yes, will be times when the market pulls back, whether that's a small pullback or a large pullback, there will be times when the market does pull back and people get scared out of their positions, especially if they bought, you know, right near the top of the most recent move and the market pulls back, they get scared. They don't know what to do. Maybe they haven't been investing for a long enough period of time. So it scares them out. And then on TV, you hear about, okay, well, this is the end of the bull run. Here comes the next bear market and then people get scared out and they try to put on bearish positions and then the market flips right back up and goes higher again. And you get whipsawed out. So investing is not easy. You know, trading is not easy. It's a lifelong process. It's a skill that you have to learn over time. You can't do it overnight. I've been doing this for 30 years and I'm still learning stuff. I'm learning how to tweak my methods and how to get better. It's a lifelong process. So if you're just starting out, don't get overwhelmed. Don't get scared out. Just stay small and learn as much as you can. And I'm here to help you on that path. So we've had a pretty good pullback in the market the last two weeks or so, especially in the Nasdaq, mostly in the Nasdaq. These are the tech stocks. And the reason why we've been seeing those pullbacks is because we're getting news out of the general financial world about possible rising interest rates from the US Federal Reserve and inflation. Prices are starting to tick up in all walks of life, whether that's real estate or groceries at the store or just cars anything that you buy, we're starting to see some inflation creep in. And whenever inflation heats up, and that is a signal that interest rates may start to rise at some point in time. And interest rates rising is usually a detriment to the stock market because now maybe you have fixed income securities that will pay more and that'll be in competition to stocks. So people might sell their stocks and buy into bonds or CDs, just fixed income securities. The other reason why interest rates are detrimental for stocks, especially growth tech stocks is because now money is more expensive to borrow. So if a company has to spend more of their money borrowing, that means there's going to be less in their profits, more costs, smaller profits. So that may hit the stock prices as well. So you get these two things, inflation and interest rates that kind of scare people for a while. But we know in the long run, the market is going to go up no matter what. And you've seen it in the charts, and I'll show you in the charts over the long run, decades, stock prices go up over time. And that's during rising interest rates, rising inflation, we have wars, pandemics, everything that you can throw at the stock market, eventually it will overcome it and start to move back higher. But yet we have these these pullbacks here and there, whether they're short pullbacks, deep pullbacks, small pullbacks, whatever, people get scared or they want to know what they should do during those times of a pullback. So what I have here on the screen is just some ideas that we can discuss to help you become a better trader in what you can do during these times. Now, number one, sometimes taking no action is the best action. As you've seen, if you watch the stock market, you watch charts, most of the time stocks end up going back higher. You just have to wait it out. But it all comes down to, do you have the, you know, the intestinal fortitude to wait out positions? Because maybe you bought a lot of stock up here on the top, and you have to make profits to pay for things that are immediate, like your mortgage or your rent or your car payment, whatever. If you're trading in the market to pay for immediate bills like that, that is a very hard gig to do because you're going to be part of these swings in the market, these pullbacks that could really give your position a short-term hit, which may force you out of position. And then you're in a deeper hole than you were before. So it comes down to the number one here, number two, there is no one size fits all solution because I can't offer a solution to everyone out there because everyone's situation is different.  Or if you're a very short-term trader, like a day trader or swing trader where you have to make money to pay for bills, that's a tough gig. So you can get scared out of positions very quickly if you're trading very short-term. The market is super erratic in the short-term, super erratic. The long-term you can see, you know, the real trajectory of the market. So are you a long-term trader or short-term trader? Are you doing this because you're setting goals for retirement?  Because either way, you're going to have different solutions to your problems. Right? So you need to know, are you a long-term trader or short-term trader? And one solution may not be good for the other person. So a couple of things here is that if you're a long stock and you've held stock for a while, you know, what can you do to protect your position, your stock position in a down low? Well, the Wall Street consensus is, and the long-term advice is, set a stop loss on a position. Set a stop loss. Now what is a stop loss? A stop loss is that an automatic out that you put in with your broker. So if you bought a stock here and you want to protect yourself for the stock falling down to here, you put in a stop loss order, meaning you will sell out of your position if the stock drops a certain amount. What is that certain amount? Well, that is up to you to decide. If you bought a stock at 100, how much are you willing to lose? 10%, 20%, 30%, it's completely up to you. You have to decide ahead of time. And you should always make the decision ahead of time, because once the market starts going crazy and you're in the midst of all that angst and emotional craziness, you can tend to make bad decisions. If you set the automatic stop right when you get into the trade, it's automatic, you'll get knocked out, and you move on. You know, even though taking a loss is not a fun thing to do, it could always turn into a bigger loss if you don't get out soon. So the biggest piece of advice that the consensus is set stop losses on a long stock position.   It's just part of the market. And over time, that 10-20% loss will get turned around and go back up higher again. So you can wait it out. If you're a longer-term trader, you can wait it out. If you're a short-term trader, like I said, a day trader, you need the money quickly, then you have to set your stops pretty tight. Maybe a 1% or 2% stop, because you don't want the loss to get big.  Once again, it all depends on what your timeframe is and how active you are. So setting stop losses, whether it's a 1% stop loss, a 10% stop loss is up to you to decide. Now, your stop losses can be moved along with time. It's called a trailing stop loss. Okay, so as your stock moves up, you move that stop loss up along with it. And I think most brokers have an automatic way to do that. If you want to set a 10% stop loss on your stock position and the stock keeps moving up over time, well, your 10% stop loss keeps moving up as well. And that is what's called a trailing stop loss. So as the stock moves up, your sell point will move up as well. So your profits, your eventual profits can get larger and larger. If you bought the stock at 100 and you set a 10% stop loss, originally, you'd be sold out if the stock dropped to $90. That's a 10% move. Well, if the stock moves up to $110, now your 10% stop loss is roughly $11. So now you'd be selling it out at $99 a share. Okay, it's better than your $90 a share original stop loss.  So that's at $180.  That's a trailing stop loss. So setting stop losses is an easy and simple way to take care of a position, a stock bullish position when the market pulls back. Now, what do you do if you have an option position? If you've bought options, if you bought calls or bought puts, whatever, how do you can you set stop losses on option positions, option positions? And yes, you can certainly do that. Now, there's there's a distinction of do you do you still watch the stock price? If you if you have the option position only, do you want to set the stop loss based on where the stock drops to? Or do you want to set the stop loss based on where the option price moves to? So it's, I'm kind of torn between that, right? The stock is really the main indicator of where, you know, how you should set your stop loss, whether it's a stock position or option position, because options can be somewhat illiquid at times, the bid ask prices on the option can be quite wide sometimes. So if you you can get prematurely stopped out of an option position, regardless of if the stock moves to a certain level. And so my, you know, I pretty much default to I like to see where the stock moves first, because that's my gauge of how I feel about a position. Now, if the stock moves beyond a level where I'm comfortable with, then I would get out of the option position. But some people like to set stop losses on the option price itself, regardless of where the stock goes. And, you know, the option price is going to move not only based on where the stock goes, but also on volatility levels, how much time is left to expiration. So you can really get taken out of an option position prematurely without the stock really breaching any levels that you've set. So it's sort of a trade off. Do I want to set a stop law if I only have an option position, if I bought a call or I bought a put, do I want to set a stop loss based on where the option price moves to or where the stock moves to and that's that's a tough one. Okay, that's a tough one. I would default to where the stock goes, because if the stock doesn't breach the the stop loss, I'm still going to hold but but the option price may have breached its stop loss regardless. So you have to decide where do you want to set your stop loss on the option price itself or the stock price. I default more to the stock price.  But if the option bid ask prices are like 50 cents wide, then it's probably more important to to set the stop loss based on where the stock is trading. So that's very important to understand setting the stop loss on the option price or setting the stop loss on the stock price. Okay. So what's what's another thing we can do to protect up a bullish position in a pullback? Another thing we can do, like I was saying, is looking at the cheat sheet here is that you can sell covered calls on a long stock position, right? For every 100 shares of stock you own, you can sell one call option against that position. What does that do? Well, the call option can offer you some downside buffer. If you sell a call option, you're going to take in some cash, right? So that cash can act as a buffer against somewhat of a move downwards in the stock. It won't completely protect you, but it can protect you for maybe a couple of dollars that the stock might move down. So selling covered calls is a way to buffer some of that downside. But but just know that if you do sell covered calls and the stock goes up, your your stock could get called away from you. So that's just something to consider when you use selling covered calls as a buffer against the downside movement. Another thing that we do often, well, not often, but another thing you can do and something that we do here at the smart option seller is you can roll your put options. When we sell put options here at the smart option seller, we sell naked put options. And sometimes when the stock goes down, that put option position can become in jeopardy a little bit, meaning that the stock might come down to the strike price. So, you know, if we don't feel comfortable in that position anymore, we can roll our naked put to another naked put. And I'll show you that how you how you can do that in a second. But what does that mean? Well, if we sold a put option, we don't want the stock price to drop. We want the stock price to actually stay flat or move up. But in a pullback, when all stocks move lower, the put option that we've sold can become, you know, closer to the possible assignment of those shares of stock. Is that okay with us? Sure, it's okay. But we'd rather get in an even cheaper level. So we will roll the put option. What does that mean?  Now you can sell a new put option for a farther out expiration date and a lower strike price. So let me show you what that means here. Because we've talked about rolling before. And let me pull up the option chain here at Interactive Brokers. So we've got Apple up on the board here, Apple options. And here's the puts on this side. So let's just take a quick look. So let's just say, you know, here's Apple current price $127 and change. Let's just say it's June, our June expiration 34 days before expiration. Let's say we were short a 115 strike put option, which is currently worth about $0.90 per contract. Let's just say, you know what, we want some more downside buffer.  Here's what we would do. It's worth about $0.90. So if you want to give yourself some more buffer because stocks are dropping, what you would do is let's say you'd buy this put option back at $0.90 per contract. Now you have to go out on the expiration scale and sell a new lower strike put at roughly the same price. So what you do is you manually, you have to look through the expiration here. Let's go out to August. So we want to find a new lower strike put option that's worth roughly $0.90 as well. So let's just say we go out to August, which is two months into the future from your June position. And you look for a lower strike put that's worth at least $0.90 a contract. So here you can see, now the 100 strike put is worth about $1.02 per contract. That actually could meet our requirements. So what we would do is we would buy back the $1.15 strike put, and now we would sell this new August $1.00 put for over a dollar, about $1.02 per contract. So you're actually going to do better. Okay, you bought it back for $0.90, but you're selling a new one for $1.02. So you're taking in even more money and you've just lowered your strike price by $15 per share. You went from the $1.15 strike, now you're down to the $100 strike. So you've actually just increased your downside by another almost $28 of cushion. So that's what you can do. That's what's called rolling a trade, a rolling a put option if you get into trouble. So that's something you can do when stocks move lower. So rolling your naked puts can help you increase your downside buffer. The only thing is that you're just lengthening out the trade now, in this case, two months. So that's something you can do if you have a short naked put option. The other thing is that if you have a long stock position or just a long general exposure to the whole market, you can buy long-term or short-term put options right here at number seven. This is the great insurance hedge. Buying put options protects you against a down move because if you're a buyer of a put option, that value of the put option will go up in price. So as your stock positions go down in price, your put option position goes up in price. So one thing's sort of offsetting the other. But buying put options is just like buying insurance. Most of the time, you'll never have to use the insurance. So you're paying for that insurance, you're paying for the protection. You can buy one month options every month at a time, or you can buy a six-month option or a 12-month put option to get long-term exposure. It depends on what you're thinking is. Now, if you never have to use the insurance, most likely that means that the stock prices are still going up, which is good. So hopefully your long stock position will gain on the long stock position will offset the money that you had to pay out for the insurance. So that's something that you have to decide. Do you want to protect your position all the time or just during times where you think the market might get a little crazy? So you can decide. If you're feeling like things might be selling off, maybe you buy a one-month put option, an S&P 500 put option, that could be just protect you in the general overall market. Or you can just buy a put option on a specific stock position that you have. So it's up to you to decide. And you can decide whether you want to take a long-term approach or short-term approach. And lastly, the way to protect yourself in a pullback is buying deep in the money call options instead of buying stock. Now, this is something I talk about all the time. It's the only option buying strategy that I recommend in all usage in bullish markets is to buy deep in the money call options instead of buying shares of stock. And why would we want to do that? Because number one, you have to put out a lot less money buying call options than you would if you bought stock. And as if the stock price starts to drop, you're deep in the money call option will lose money at a slower rate over time than a stock position would. And you're not really exposed so much to the time decay and changes in volatility when you buy a very deep in the money call option. Because it's almost like buying the stock itself. And stocks, of course, aren't their prices affected by volatility and time decay that options are. So deep in the money call options give you all that kind of benefits against buying the stock itself. So if you want to buy shares of stock, I would suggest, or I teach people, buy deep in the money call options instead. And when the market has a pullback, it won't be as detrimental as if you just own shares of stock. So those are the things that I can suggest. And remember, this is not actual individual advice. This is just education and information that I'm providing you. So no, no real investment advice, no real individual recommendations here. So these are some of the things that I can offer as a way to protect during a pullback. And once again, like I said, as we see the market always goes up over time, maybe doing nothing is the best thing. Maybe doing nothing is the best thing. But if you really have a position that you're scared about, you can always choose to look at some of these ideas. Okay, setting stop losses, using covered calls, rolling out your naked puts, buying in a long term or short term put options, and buying deep in the money call up. So those are just some ideas. Everyone has a different risk threshold. Everyone's positions are different. Everyone's a different type of trader long term short term. So no one size fits all right here. Number one, there is no one size fits all solution. It all depends on your situation. Okay, so that's it for our little lesson on what to do during a pullback. I hope this is somewhat helpful to you all. Let's move into our Saturday synopsis of the video here. What is that? Well, we like to take a look at the charts, see what's happened over the last week or two, and get a gauge of what may happen moving forward. We'll look at the indexes with some individual charts. And so let's jump right in. We always open up to our S&P 500, as represented by the SPY, which is the exchange traded fund for the S&P 500. Now, if you've been watching my videos for a while, you know, we've been bullish since the end of the pandemic at the stock stock market end of the pandemic here last March 2020.  You've got a nice clear uptrend showing in the broader market. And then during those times, during that uptrend, of course, we have pullbacks along the way, you can see pullbacks moves up pullbacks move up. But when you get most trending stocks, whether that's an uptrend or down trending stocks, they will typically bounce off the moving average lines. Now, moving average lines are a little bit lagging, because you have to take old information and put it into the new information. That's how moving averages work. They, they take all the prior days and averages out into one smooth line. Now I have my blue 20 day moving average, I have the 50 day moving average and the 200 day moving average. Those are very popular moving average lines that a majority of technical traders will follow the technical meaning their stock, their chart watchers. And down here is my RSI 14 day RSI indicator, which is their overbought, oversold indicator. Now, in the S&P 500, and I'll show you it in the other indexes, this past week, we had somewhat of a pretty decent down move, mostly in the tech stocks. But what you can see, and I always say is that typically on a pullback, the market or the stock will bounce typically either off the 20 day or 50 days. As long as it's still in a good uptrend, one of these moving average lines will catch the bottom and it will catch the bounce. So what we can see here is this is a bar chart, daily bar chart. Every bar is one day's worth of trading. And you can see right here. So Friday, Thursday, so Wednesday of this week, Wednesday, you can see how the S&P 500 bounce right off the 50 day moving average, you can see right here. I mean, the bounce was like practically perfect bounce right the bottom of that day, each bar right here, you can see it bounce right right on Q. Okay. And look where we ended up Friday, right here, actually ended above the 20 day moving average. You can see on the bar, there's a little dash mark on the right side of the bar, which tells us where the market closed for the day and it closed above the 20 day moving average. So that's a very good sign. We had a couple days of good selling, it scares a lot of people out, they think this is it, this is the next big bear market, it's happening. And then out of nowhere, it will just bounce. And it bounced right off the 50 day moving average. So if it goes down through the 20 day, you know the 50 day is the next line of support. If it gets down to the 200 day, that's a pretty significant move. We really don't want to see it go down that far. But if it does occur, the next line of support would be the 50 day, I mean, the 200 day moving average. So you've got this nice uptrend, you've got the pullback. So if you haven't been involved in the market and you've just been waiting for, when do I get in? When do I get in that bullish position? I always say, watch for the bounce off of the 50 day moving average at least.  And then if it bounces, you know that, okay, there's some good buying coming in, maybe I can buy a little bit bigger position at this time. So you want to see the bounce. So I like the market. I've been bullish. There's really no other place to put your money to get any kind of return on your money. And here in the US, the vaccine's rolling out good. People are getting vaccinated. I keep saying this, businesses are opening up again. They're creating more products, restaurants are opening up, bars are opening up, other establishments are opening up. People have money to spend. And when people spend money, that means they buy products. That means earnings for companies go up. That means stock prices will go up. It's just that's how the stock market works. Yes, we may have rising inflation and rising interest rates. But just know where interest rates have been interest rates are just so super cheap. Even if rates go up a little, how much of a detriment could that be? The market will factor that in. The market goes up over time. Let me pull up the long term monthly chart. Here's the financial meltdown in 2008, 2009. The market's just gone straight up since then, the last 13 years, practically, almost 13 years. And that's through good times and bad times. Yes, we'll have pullbacks. But the pandemic was a major pullback here. But it only lasted maybe a month or two before it really started to go up strongly again. The market goes up in all scenarios. So you have to have some patience. You have to be secure in your decision when you're buying into a stock or an index. The index will go up over time. You can have a nice passive position of investing in the S&P 500. It goes up over time. The RSI right here in the middle, in the 50s, that means it's not overbought. It's not oversold. It's just doing what it should be doing, has a nice slow up trend. So if you've been waiting for a chance to get in, you look for the pullbacks to the moving average line. So let's take a look at the NASDAQ because that one got hit pretty hard. And let's look at the QQQs because that's a good barometer for the NASDAQ. Now, as I mentioned earlier in the video, tech stocks will get hit harder because these are the go-go stocks, the growth stocks, they have a lot of hype behind them. So when there's news out there that stocks could sell off, the tech stocks get hit the hardest. So we've had like two weeks worth of down move, whereas the S&P 500 and the Dow industrials didn't get hit as hard because they don't have as many growth stocks in those indexes. So the NASDAQ gets hit pretty hard. So we had this little down move here and obviously, here's the price action, the bars of the price action went below the 20-day and it's gone below the 50-day. But look where we finished yesterday, Friday, May 14th, finished just on the 50-day moving average. It's very constructive close, just basically right on the 50-day moving average. So that's a good sign.  But look how it bounced back right up to the 50-day. So I'm hoping next week we can maybe consolidate here a little bit or start to move back up. What is what is holding things back? What is holding things back? Where else are you going to get a return on your money?  They have to perform for their customers. So money flows back into stocks. This is a pretty big move. So people are saying, okay, well, we've had a good sell-off, it's time to buy back in. So the pullbacks will always get bought up again. And you can use these patterns to kind of gauge, okay, well, when should I get in? Well, I'd like to see what happens on, you know, Monday, Tuesday, Wednesday, next week. Will the Nasdaq be able to stay above the 50-day moving average? Or will it get knocked back down again? There's always a chance it could get knocked back down again. But in the long run, in the long run, it's going to move higher. Eventually, do you have the, you know, the stomach to wait it out? Can you wait it out? Or like I said, are you here to just make money on a daily basis to pay for your bills? In that case, it's harder to do that. But if you have a longer term timeframe, you can wait it out a little bit. Let's take a look at the Dow because the Dow has been really strong. Dow has been the strongest of the three indexes over the last couple of weeks or so. Let's pull this down a little bit here. So the Dow fell through the 20-day, never got down fully to the 50-day and popped back up yesterday. Here we are. So the Dow is still very, very strong. Looks good. You know, if you're, once again, if you're waiting for that time to get in on a bull's position, wait for a pullback to either the 20-day or 50-day and you start to nibble. And when you see it really starting to move back up, then you can get buying more. You know, everyone thinks, well, I don't want to buy at the high. I don't want to buy at the high.  Now you think, okay, well, here's a new high. I don't want to buy at a new high. I'm going to wait for a big pullback. Well, it keeps going up and you keep missing out on your opportunity. There's nothing wrong with buying on a high. Yes, it may pull back, but eventually it will keep going up. That's just how the market works. You'll have pullbacks and then it keeps going up. As long as companies keep putting out products that people want to buy and people have cash to buy those products, the earnings of those companies go up and the stock prices eventually follow those earnings. That's how the stock market works. That's just how it works. It's worked that way since the inception of the market. Here's the Dow Jones Industrial over time, back to the 1980s, just keeps going up over time. All right. And another thing we like to look at is let's look at the VIX because we haven't looked at the VIX all that much lately. Now, the VIX is the volatility indicator showing you when things start to, when the stock market sells off, volatility goes up. It's an inverse indicator. When stocks sell off, volatility goes up. So let's pull this out to the daily chart. What we know is that when the VIX spikes, it lasts a very short period of time, maybe a day or two at most, three days max on a lot of occasions. What does that mean? Well, when the stock market sells off, the VIX, the volatility will spike and it doesn't matter the absolute numbers. So here's like 30%, and here's the height of the pandemic at 85%. The key is that the spikes only last a couple of days. You can see spike here, spike here, spike here, spike here, spike here. They're only a couple of days max. And when it starts to sell off the volatility level, that means the stock market is going back up. So the VIX spiked almost up to 30, but now it finished yesterday at under 19. So it gets a quick move and then a quick move down. So that means the stock market is ready to go back up again. So we like to look at the VIX sometimes to see what's happening. So that's the general market we got the Dow, the S&P 500 and the NASDAQ. I'm still bullish. The NASDAQ got hit the hardest, but the bottom feeders come out. People have to buy these stocks. The mutual fund managers, the hedge fund managers, they have to put their money somewhere and they want to get a good return for their customers. So of course, they're going to buy the tech stocks because those always move the most in certain times. So people will start to buy back in and the markets will go back up after pullbacks. It's just how it is. So let's take a look at some individual stocks as we always do. We look at Apple because we always look at Apple. Apple and you'll see a lot of these tech stocks have pretty ugly looking charts at times. For a while here, let me open this up a little bit. We had talked about the W pattern, had the top here, the resistance it went through. A couple of weeks ago I said Apple was ready to go. It was ready to go. Had earnings, earnings were good. And then it just got caught up in the tech down move. It went through the 20-day moving average, went back through the resistance line, went down below the 50-day moving average and then stopped right on the 200-day average right here. And it bounced. And yesterday it closed above the 50-day moving average. Here's the 50-day moving average. Here's where it closed. You see a little dash mark on the right side of the chart of the bar here. And so our next line of resistance once again is this line right here, this horizontal line. We want to see Apple move above that and start to move back up towards its all-time highs near 145. So it's been hit or miss. Apple goes up, it comes down, it goes up, it comes down and it's just still hovering around this 125-130 level. That's just what's been happening. It's been kind of frustrating. But you take what the market gives. I'm still long-term bullish on Apple. I'm holding on and eventually I know it will go up over time. Let's take a look at AMD because that's another stock that we play quite a bit with in the smart option seller. AMD has been kind of frustrating as well. We had the W patterns, got up above it a little bit and then entered this nice downtrend, had another W here. Pop thought this was the move, thought we were finally going to go and it just got caught up in that last few weeks' downtrend in the tech market. Here's our long-term support right here, this line right here. It went down below it a couple of times, but Friday yesterday it popped back up above it, closed above it. So I'd really, would like to see AMD start to move up again. We have, make it put positions that we sold in AMD, still have buffer, still have buffer down here. We may end up rolling at some point if AMD starts to keep selling off. But if we have to buy the stock, I think it's going to be a great long-term investment. So that's AMD. What other stocks? Microsoft still kind of hugging the 50-day moving average line in and up in a nice uptrend. Let's pull this out a little here. Still in a nice uptrend. You can always draw lines, support lines. You can always draw trend lines. You want to connect most of the bottom prices here. So it's in the eye of the beholder. The way I draw a line might be different than the way someone else may draw a line, but you can certainly see there's a nice uptrend here. And you can draw lines along the tops too and can create this channel. That's part of technical analysis. So within the confines of this channel, Microsoft goes up, it comes down, it goes up, comes down. So we've got the bounce here and it bounced above the 50-day moving average as well. So maybe Microsoft makes its way up towards the top of the channel as the next move, but it's still in the uptrend. So as far as I'm concerned, Microsoft is still in a bullish position. Intel is another stock that had some action. Earnings knocked it back down, but you can see it bounce right on the 200-day moving average. Would I get a bullish here on Intel? I don't know. Jury's still out. I like AMD better even though AMD's been selling off, but Intel has come off of pretty decent ways. It's come off about $12-$13 or so. So if you're looking to bottom pick a little bit, maybe you nibble here. It bounced off the 200-day moving average. It's getting pretty oversold in the RSI. So maybe Intel could be worth a little bit of a bullish position here if you're game for that. What other stocks do we like to take a look at? Let's look at Tesla. Tesla also has a pretty ugly chart. You can see right here it tagged the 200-day moving average. That's sort of the last line in the sand. We really don't want to see a bullish position if you're bullish Tesla. You don't want to see it really go much below the 200-day moving average more than a couple of days. You want to see it bounce, but it did tag the 200-day. It closed above it yesterday if you can see the dash on the right side of the bar. So I guess it's comforting that it bounced at the 200-day moving average, but it's fallen a long way from 900 all the way down to below 600. It's fallen a good way. Getting a little bit oversold on the RSI. So maybe we have a bounce next week. We need Tesla to go back up. We've sold some put spreads. Still have some cushion down here, but we want to see Tesla start to move back up. Let's take a look at some other stocks. I want to show you some stocks that I like, the uptrends that they're in. So you always want to look at uptrends and see how the stocks are bouncing off those uptrends. Let's look at Oracle because I like the way the chart looks.  So Oracle's in a nice little uptrend. I was to get long, possibly maybe wait for the next pullback here if it occurs, maybe to the 50-day, but it's in a nice little uptrend. Cisco has somewhat of the same chart pattern as Oracle.  This could have been a nice little entry here or even right here. So Cisco's moving up nicely. Coca-Cola. I like as well. You can see the similarities in these charts. They have a nice uptrend. They're hugging either the 20-day or 50-day moving average. Coca-Cola looks good, looks ready to keep going. We've got, if I want to draw some resistance here, you know, maybe right here got some, the resistance that Coke has sort of popped through, opened this up a little more so you can see it, popped through it here, popped through it here. So maybe in the next couple days, it can get through it with some force. If it can get through this line with some force, maybe around $55 or so, it could be on its way to maybe taking out its all-time highs here of $60 a share. Let's see if that was Coke's all-time high. Yep. Right around $60 is a monthly chart. So the next spot we'd like to see Coca-Cola go to is $60. If it can get through this $55 resistance line, it should be off to the races. Colgate. Colgate, I like Colgate a little bit as well. It's got a nice little uptrend here. Doing pretty good. Never tagged the 20-day here, but starting to move back up. What other stock did I have? Oh, let's see Procter and Gamble. So these are the, you know, these are the stalwarts of the Dow. You've got these companies, Procter and Gamble, Colgate, Palmao. These are, they make products that we use practically every day in our lives. Procter and Gamble looks pretty good. Starting to move up again. Let me see what other stocks we have here that I might like to take. Let's look at Amazon and Netflix as well. We'd like to look at the tech stocks because those are the ones that move the most. Those are the ones that a lot of people play with, you know, still once again in this long-term channel. Hit the top. I mean, exactly hit the top right here. I mean, I drew this line a long time ago and look where it stopped right at the line. It got knocked back down again. And you know, let's redo this line. You know, this is all part of technical analysis.  Okay, so this is the line we can use going forward for now to see where Amazon, I don't think we really wanted to see it fall all the way back to, you know, under $29 a share, $2900 a share. So it's right in the middle here, our size sort of right in the middle. So Amazon might creep around sideways or hopefully you can get its mojo and move back up again. Netflix, Netflix, still in this channel as well. But it's got hit pretty good. You know, the line of support is right here. That's around $460 a share. So we're just watching Netflix bounce around. Not much happening there. I don't have much of an opinion on that Netflix at the moment. Let's like kind of go through our list here. Oh, Walmart, Walmart, you know, I love Walmart. I'd gotten long some right around here, started to pop through the resistance line and bought a nibbled a little bit. And then it got knocked back down, but it popped back up the last two days. So right at the 20 day moving average, the blue line right here, open this up a little bit more, you can see. So Walmart's here, I'd like to see Walmart get back above the line right here is about $141 a share. I like to start moving back up. It's got earnings out on Tuesday this week coming. So let's see what happens. I'm a little nervous because last earnings have gotten knocked down pretty good. Don't know if the same will occur. So if you're playing Walmart, be careful, earnings on Tuesday. Let's see what else do we have that's worthy of looking at PayPal and Square to the online big payment companies. PayPal, you know, went up, knocked back down, had the W pattern here a little bit, but never got above the resistance line here, sold off quite a bit square. These two companies hugging the 200 day moving average line, I do like PayPal and Square, but I want to see if it could bounce here off the 200 day, getting a little oversold RSI doesn't mean it's ready to turn around right then and there, but we want to see some bottoming action here before possibly getting in that's what you want to see you don't want to always try to bottom feed you want to see some bottoming action before jumping in. All right, I think that's about it here. I'm just taking a look at some other charts here scrolling through the list. What do I like? Facebook, Facebook looks decent, kind of hugging the 20 day moving average line. IBM, IBM not bad hugging the 20 day moving average line. I don't talk about GameStop anymore. GameStop is just, you know, kind of stuck in this pattern here. I'll pull up GameStop. It's kind of getting in the sideways pattern now, not doing much hugging around 160 a share. All right, let's take a quick look at the S&P 500 one more time and get a gauge of what's happening next week. Pull up the SPY. You know, market to me looks good. It's a tag, the 50 day moving average line popped off above it. And I'm just hoping that we keep going. I mean, eventually I know we will keep going. But for now, you've got the headlines out there, interest rates, inflation that may stick around for a little bit, but earnings season is just about over. Companies did okay. So now we have to wait until the next round of earnings three months from now. What will happen between now and then? Well, I think the market's just going to keep going up in this trajectory. Sure, we'll have pullbacks, but in the long run it goes up. So I'm bullish for the long run. Short term is a little bit harder to predict because the market could be erratic on a day to day basis. So try to move your time frame out for a longer term. All right. So that's all for the Saturday synopsis. Let's quickly take go to our website. And as we always like to do smart option seller, put selling basics, that's our bread and butter. If you don't know much about put selling, go to our website, put your name and email address right in here. We'll send you a free copy. What we offer our services tab right here are two newsletters, smart option seller newsletter and the vertical spread trader newsletter. We sell put options, one-on-one coaching if you need some help getting to that next level. We've had a lot of success with our students in this YouTube video. Don't forget to subscribe. Hit that red subscribe button in the right hand corner, bottom right hand corner of the video. Leave me a comment, give me a thumbs up if you feel this is good information. Send me an email. I love hearing from you. Okay, that's all for me today. We're running about 50 minutes in this video. Keeps getting longer. Let me know if you like these longer videos or if you really want short videos. I'd like to give you some good information. It takes me a little time to go through it all. All right, that's all for me today. I hope everyone has a great weekend and week ahead and I'll see you all here next week. This is Lee Lowell signing off.