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Uncertainty high, markets volatile, possibility of further price declines


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#1 dTraderB

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Posted 16 May 2020 - 07:52 AM

IT top, decline to news lows possible.

 

Will be rebuilding SHORT POSITIONS with SPY and QQQ PUTS, prefer QQQ; also rebuilding new CRUDE short position - I prefer CRUDE OPTIONS but that is a treacherous and insane market where too much time is required...

 

Currently holding 10 SPY PUTS; on any rally I want to ramp up to above 60 puts or at least the 55 I held on the previous rally. 

No QQQ position

 

FLAT Crude & ES

 

I am also looking at SMH -- a long position but at much lower levels, ditto for XLF and VOO

 

This is a good read:

 

"Well, talk about covering your butt. My sense fwiw: The Fed knows the collateral damage of their intervention actions has resulted in market valuations incompatible with the economic risk profile that keeps revealing itself. Valuations are too high and they know it. And hence they don’t want to be seen not having been on the record highlighting it, even if it is on a Friday evening after market close. So bulled up investors, take note. The captain just got the lifeboat ready for himself. Why are you still partying on the deck above?

Economic data released this week has continued to show disastrous declines exceeding expectations. The Atlanta Fed yesterday dropped its Q2 GDP expectations to -42.8%. Jobless claims again exceeded expectations. Industrial Production has collapsed in never before seen ways.

So yes, asset valuations, especially in tech remain sky high, and hence the China issue Guy raises is an important one, especially considering we are in a politically charged election year.

And just in the week following us raising all these valuation concerns we saw a rejection of the April highs this week. This rejection was no accident, it was technically well founded and we are discussing it in this week’s episode and the prospect of an intermediate market top and prospect of new lows still to come.

We are also covering the escalating tensions between the US and China, the challenges of reopening the economy, $AAPL, $GOOGL, $FB, the tech sector, the lagging broader market, some causes for optimism, but also concern about the dreadful impact this crisis is having on vast segments of the population, the health of the US consumer, and the reality of what the economy will look like in a post criss environment.

And frankly the reality that is emerging should concern everybody:

https://northmantrad...traight-talk-2/



#2 dTraderB

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Posted 16 May 2020 - 08:00 AM

 

*Walter Bloomberg
 
@DeItaOne
· 16h
FED SAYS ASSET PRICES SUBJECT TO "SIGNIFICANT DECLINES" IF PANDEMIC WORSENS 

Edited by dTraderB, 16 May 2020 - 08:00 AM.


#3 dTraderB

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Posted 16 May 2020 - 08:00 AM

What the smart money is saying: David Tepper: this is the 2nd most overvalued stock market ever Buffett: hasn't made any big investments Druckenmiller: risk-reward in stocks is the worst he's seen Meanwhile, S&P 500 forward P/E ratio is at its highest since the late-1990s

Edited by dTraderB, 16 May 2020 - 08:03 AM.


#4 dTraderB

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Posted 16 May 2020 - 08:02 AM

This week, the smallest of options traders opened 14.5 million contracts betting on higher prices (buying calls and selling puts). That's a record high. As would suggest, it's the Davey Daytrader effect. On leverage.


#5 dTraderB

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Posted 16 May 2020 - 08:02 AM

FED's late Friday afternoon "revelations"... 

 

 

Replying to
Powell pulling an Ackman here
Replying to and
Fed bought puts at the close...
 
 

Edited by dTraderB, 16 May 2020 - 08:05 AM.


#6 dTraderB

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Posted 16 May 2020 - 08:07 AM

"Somehow we have survived 5,000 years without negative interest rates but these geniuses at Ivy Leagues have decided it is a wonderful idea." - Stanley Druckenmiller


#7 robo

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Posted 16 May 2020 - 08:08 AM

All the major indexes I track remain below their 13 EMA.....

 

https://stockcharts....505&a=751814845

 

https://stockcharts....273&a=748833208

 

A video for those that might be interested. 

 

The week after OPTX usually has increased selling pressure..... Blue vertical dotted lines are OPTX days 

 

Daily.....

 

https://stockcharts....286&a=753399686

 

Market insights with

&

Join us for our latest discussion covering a potential key technical rejection, China, $AAPL & tech, economic data, reopening & the implications.

 

 

https://northmantrad...traight-talk-2/


Edited by robo, 16 May 2020 - 08:17 AM.

“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side”   Jesse L. Livermore


#8 dTraderB

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Posted 16 May 2020 - 08:09 AM

I know the markets don't seem to care about retail sales but the math is pretty simple: Retail Sales make up ~40% of PCE PCE makes up ~70% of GDP GDP has a decent correlation to ebb and flow of #Corporate #Profits and #earnings. #investors are likely too #optimistic on #reopening


#9 dTraderB

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Posted 16 May 2020 - 08:11 AM

Sentiment setup for stocks shows more confusion than conviction with the market at an indecisive spot. Traditional retail: scared. Hot-money tactical players: greedy. Professional money: in between. “Everyone” is neither bullish nor bearish. New column.
 
  • Collecting all the Wall Street sentiment readings together leads to a sense that the consensus is experiencing more confusion than conviction.
  • The market has made a head-spinning round-trip, but in other ways has gone nowhere: The S&P 500 has been sideways in a range for about a month near levels first reached in early 2018.
  • Retail investor surveys and fund flows show a cautious investing public, but surveys of professionals and other measures show mixed sentiment.
  • Anyone buttressing a positive case by claiming “Everyone’s bearish” and those calling for deep downside on the notion that “Everyone is too bullish” are equally unreliable at the moment.


#10 dTraderB

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Posted 16 May 2020 - 08:18 AM

I am with BUFFETT and TEPPER -- and even more with BUFFET since many think he is outdated etc. O
pinion: This settles the stock-market valuation dispute between billionaires David Tepper and Nelson Peltz

 

Published: May 16, 2020 at 9:05 a.m. ET
Q-Ratio doesn’t depend on projecting either earnings or revenue

 

The chart at the top of this article, based on data from Andrew Smithers, the U.K.-based economic consultant, plots the Q-Ratio for the S&P 500 index SPX, +0.39% back to 1900. Higher levels mean the market is more overvalued, and that the Q-Ratio currently is well above the last century’s average. In fact, as of mid-May, it’s at the 97th percentile of the historical distribution — exceeded only by the stock-market top prior to the 1929 Crash and at the top of the Internet bubble in early 2000. (Note that the vertical axis of the chart shows the amount by which the Q-Ratio is above or below its historical average.)

What this means: The net result of the COVID-19-induced bear market and subsequent recovery is a stock market that is only slightly less overvalued than it was at the most overvalued points of the last century.

To appreciate what this means for the future, I constructed an econometric model based on the Q-Ratio’s historical correlation with the S&P 500’s subsequent 10-year annualized inflation-adjusted and dividend-adjusted return. This model in the past has been able to explain or predict 52% of the variations in the market’s 10-year returns (as judged by its r-squared). That’s one of the highest r-squareds you will ever find in the stock-market forecasting business.

https://www.marketwa...d=mw_latestnews