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ST & IT Long: Moment of Truth


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#1 dTraderB

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Posted 06 February 2019 - 07:02 AM

Yesterday was a really hectic 10-hour trading session where I was seduced into daytrading QQQ options, quite enjoyable, frenetic, and profitable, but I had to focus 100% on it.

 

SPX backed off the earl highs, you may say it tested the 200ma, just 2 points away from the SPX high, and then buyers' remorse set in.

 

There were a few more attempts at rallying but indecision (and fear?) prevailed for most of the afternoon hours. 

 

So, here we are at this critical point in the market, ST & IT long, no doubt about that, but a market that seems to be either resting/consolidating or unable to go higher because of lack of buyers' motivation. 

 

A quick resolution of the shutdown issue can provide a 3 to 5 % rally, good trade negotiations can also do that, but the markets now seem to be running out of catalysts to take it much higher. In such an environment, minor bad news can send it lower. 

 

In my decades of experience, I have observed it is the reaction after the first 1 to 2% pullback that will determine the the next major market move. Of course, you may never get a 1 to 2% pullback until the market reaches a new record high! 

 

But, I am looking for a pullback.\

 

 

This from GMM:

 

The Setup

Because the S&P500 is now so overbought – the highest RSI since the market top – the risk of another facial from a short position is limited, in our opinion.    Waiting for the 200-day to be penetrated, then setting a short limit order just a few points below the 200-day, right around today’s close.

The Stop Signal

Two or three green candle closes above the 200-day sets the index up to challenge the December high and key Fibo at 2800.   Whoops, we were wrong again.

As always we do reserve the right to be wrong, as we, or you, or anyone else, don’t know jack scheisse about the future.

Stay frosty, comrades.

sp_chart-1.png?w=640

sp_table.png?w=640

 

https://macromon.wor...oment-of-truth/

 

#2 dTraderB

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Posted 06 February 2019 - 07:06 AM

VXXB nearing a buy level 

 

Frank Cappelleri @FrankCappelleri
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While the $VIX tests 4 month lows, the $VVIX (Vol of Vol) has dropped to levels not seen since July 2017... during one of the calmest equity markets in history.

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12:30 PM - 5 Feb 2019


#3 dTraderB

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Posted 06 February 2019 - 07:09 AM

My hourly VIX buy has been triggered several times during the previous 25 trading days but the daily has not.

It could do so this week.

 

I couldn't begin to explain this in a single tweet, but the expectations for $VIX (based on $VVIX, the VIX of VIX) have crashed at a record pace. VIX options players are expecting LITERALLY half the VIX they were just 30 trading days ago. That's never happened before.



#4 dTraderB

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Posted 06 February 2019 - 07:12 AM

I am not a Bollinger Band fan since it is too imprecise and I can't seem to get anything useful from it ....ditto for oversold/overbought indicators.... 

 

Charlie BilelloVerified account @charliebilello
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Volatility Index down 59% from its Dec high, at its lowest level since early October, below lower bollinger band for first time since last August. $VIX

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7:57 AM - 5 Feb 2019


#5 dTraderB

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Posted 06 February 2019 - 07:15 AM

Not surprisingly, greed increases but not at extreme levels

 

https://money.cnn.co...fear-and-greed/

 

McC oscillator still in nose-bleed territory with minor divergence

 

McClellanOsc_472.gif

 

while Summation Index is just powering ahead...

 

https://www.mcoscill...t_breadth_data/



#6 dTraderB

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Posted 06 February 2019 - 07:16 AM

Europe seems to be weaker than China

 

Holger Zschaepitz @Schuldensuehner
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The Recession word is getting louder. #Germany's Industrial Order dropped 1.6% in Dec m/m vs a gain of +0.3% expected. Capital goods orders fall 2.5% m/m.

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11:13 PM - 5 Feb 2019


#7 dTraderB

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Posted 06 February 2019 - 07:20 AM

Tom McClellan @McClellanOsc
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What drives investor sentiment? People see what has happened, and they change their minds accordingly. When sentiment gets to an extreme, it is usually because what prices have just done is at an extreme.

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8:29 PM - 5 Feb 2019


#8 dTraderB

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Posted 06 February 2019 - 07:29 AM

Lance Roberts @LanceRoberts
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TECHNICALLY SPEAKING: TOO FAST, TOO FURIOUS - The rally from the December 24th lows has been breathtaking but has now hit the targets I laid out on #ChristmasDay. So, what now? $SPY $TLT https://realinvestmentadvice.com/technically-speaking-too-fast-too-furious/ 

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3:26 AM - 5 Feb 2019

 

 

 

An interesting note from Deutsche (h/t @zerohedge) on equity outflows versus the short-covering market surge. Either flows will pick up, or the markets will catch down. $SPY $TLT https://realinvestmentadvice.com/technically-speaking-too-fast-too-furious/ 

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3:36 AM - 5 Feb 2019

Edited by dTraderB, 06 February 2019 - 07:31 AM.


#9 dTraderB

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Posted 06 February 2019 - 08:03 AM

POWELL at 7pm means I MUST monitor the markets after hours....

 

Key Events

The U.S. trade deficit for November, released at 8:30 a.m. ET, is expected to narrow to $54.3 billion from $55.49 billion the prior month.

U.S. labor productivity in the fourth quarter, also due at 8:30 a.m., is expected to rise at a 1.6% pace, a slowdown from the prior quarter's 2.3%. Unit labor costs are expected to increase 1.7%.

Crude-oil stockpiles are out at 10:30 a.m. and expected to have advanced by 1.4 million barrels during the week ended Feb. 1, according to the average forecast of 11 analysts and traders surveyed by the Journal. 

Fed Vice Chairman Randal Quarles speaks at a stress-testing conference at 6:05 p.m., and Chairman Jerome Powell participates in a town hall at 7 p.m.



#10 dTraderB

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Posted 06 February 2019 - 08:22 AM

But the market is rising, so hold your nose and trade it....

 

Something Smells

smells.png?resize=223%2C112&ssl=1Something doesn’t add up and it smells. If you read Fool me Twice you’ve probably sensed that I’m not all that convinced by the “there won’t be a recession” line of argument.

Yea we may experience some slowing, but overall things are solid and steady so the argument goes. But are they really?

For one the earnings outlook picture is deteriorating quickly (never mind the Fed induced vertical rally in stocks):

“As the fourth-quarter results roll in, the S&P 500 is poised to post an average earnings growth rate of 12.4 percent, the fifth straight quarter of double-digit growth. These results have boosted the stock market, with the S&P 500 enjoying its best January in more than 30 years.

While companies are reporting great numbers, their outlooks are falling short. And that’s caused analysts to rapidly slash their earnings expectations for the current quarter. In fact, Wall Street’s expectations for earnings growth for the first quarter of 2019 have just turned negative with profits expected to fall on average by 0.8 percent, according to FactSet. That would mark the first year-over-year decline in earnings since the second quarter of 2016″:

EPS.png?resize=461%2C265&ssl=1

“Earnings are deteriorating even faster than we expected,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note Monday. “The earnings revision breadth over the past month has been even more negative than we expected leading us to think are earnings recession trough in the U.S. could be later than 1Q and deeper.”

So negative growth with a view of a bounce back later in 2019. So we have slowing growth in the economy and negative earnings growth now in Q1 2019.

Now if 2018 was fantastic perhaps a temporary blip is not so bad so the current thinking goes. But was 2018 really so great?

If it were we should be able to see it in earnings and earnings are generally reflected in tax receipts, specifically growth in tax receipts, but there is no evidence of that:

https://northmantrad...mething-smells/