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Bullish complacency but this time is different so new highs soon!


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#1 dTraderB

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Posted 14 May 2018 - 07:50 AM

Yeah, right.  

Dangerously high levels of complacency and pumping will be evident soon. Be careful if long: place STOPS and be alert to exit long trades. Ride the bullish wave but don't get complacent. There has been some amazing profitable long day trades but don't expect that to continue indefinitely. 

 

A Funny Thing Happened On The Way To Market Complacency/Euphoria
May 14, 2018 12:14 AM ET 
 

Fortunately for Bulls, none of this matters.

A relatively reliable measure of complacency/euphoria in the stock market just hit levels last seen in late January, just before stocks reversed in a massive meltdown, surprising all the complacent/euphoric Bulls.

The measure is the put-call ratio in equities. Since this time is different, and the market is guaranteed to roar to new all-time highs, we can ignore this (of course).

saupload_CPCE5-11-18.png

Two of the more reliable technical patterns are falling/rising wedges, also known as descending/ascending wedges or triangles. Ascending wedges are bearish, descending wedges are bullish.

The VIX index, one measure of volatility, has been crushed by the recent euphoria/complacency as participants realize that since this time is different, we don't need no stinkin' hedges. Unsurprisingly, the VIX has traced out a falling wedge:

saupload_VIX5-11-18.png

But a funny thing happened on the way to market complacency/euphoria this year: every "this time is different" manic rally in the S&P 500 (SPX) formed a bearish rising wedge which promptly reversed once the pattern peaked.

saupload_SPX5-11-18.png

Fortunately for Bulls, none of this matters. Fundamentals trump technicals (heh), and since profits are soaring while wages stagnate (funny how that works, isn't it?), higher oil prices mean something or other that's positive (it can't be higher gasoline prices are good, can it? Must be something else), Facebook (NASDAQ:FB) has recovered from its temporary swoon and the Fed is easing or tightening or doing whatever it's doing, so it's a clean sweep: the fundamentals are all rip-roaring good.

 

Oh wait a minute--technicals do matter--when they support the Bullish case. The descending trendline from the January highs was just broken to the upside, a clear technical signal that new all-time highs are essentially guaranteed--not later this year, but this month--maybe this week, so buy buy buy, you snooze you lose, don't fight the Fed, etc. (insert your Bullish aphorism of choice).

Even more compelling (if that's even possible), the quatloo-bat guano ratio just flashed a huge buy signal, something that only happens on 1.3% of trading days since 1968, so let me repeat: BUY BUY BUY (repeat your Bullish aphorism of choice).

 



#2 K Wave

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Posted 14 May 2018 - 08:38 AM

Am thinking we are getting close to point where we could see a quick couple hundred points shakeout on Dow...

 

Watching this AM bounce for signs of failure


Edited by K Wave, 14 May 2018 - 08:38 AM.


#3 andr99

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Posted 14 May 2018 - 08:58 AM

repeat your Bullish aphorism of choice.....

 

I have one....watch the sky

 


Edited by andr99, 14 May 2018 - 08:59 AM.

forever and only a V-E-N-E-T-K-E-N.....though partly langbardic


#4 K Wave

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Posted 14 May 2018 - 09:20 AM

Looking like like NQ may have 7040 left in the tank before any decent pullback...next couple of 15 min bars may tell us more...



#5 dTraderB

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Posted 14 May 2018 - 09:48 AM

NQ 7040/50 high seems attainable today or tomorrow



#6 diogenes227

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Posted 14 May 2018 - 09:56 AM

 

 


"If you've heard this story before, don't stop me because I'd like to hear it again," Groucho Marx (on market history?).

“I've learned in options trading simple is best and the obvious is often the most elusive to recognize.”

 

"The god of trading rewards persistence, experience and discipline, and absolutely nothing else."


#7 dTraderB

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Posted 14 May 2018 - 11:26 AM

LONG VXX   1/4 position  34.71

Will buy lower, more later on this  



#8 Harapa

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Posted 14 May 2018 - 02:17 PM

LONG VXX   1/4 position  34.71

Will buy lower, more later on this  

Not yet...but are you the one who traded 900000 shrs?


Edited by Harapa, 14 May 2018 - 02:27 PM.


#9 redfoliage2

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Posted 14 May 2018 - 02:28 PM

The bounce is running out of steam. 



#10 dTraderB

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Posted 14 May 2018 - 03:16 PM

NO, that's way above my league, much smaller trade quantity.

I prefer to accumulate VXX, keep my exposure and potential losses small until I am more confident about the logic & analysis behind the trade.

In fact, that's my MO for all trades, including NQ and ES day trades and QQQ options.

 

 

I agree with you that it may be a bit too early for the long VXX trade. I usually wait until the rate of decline of VXX is much less that the rate of increase in SPX; also, the VXX will actually remain at about the same levels even as SPX is rising (example: in January) and in rare cases, VXX will rise even as SPX is rising.

Then, there is the rush into VXX longs as the SPX bullishness wanes and the market tone changes.