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"Worried about a Melt-UP"


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#1 OEXCHAOS

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Posted 18 May 2020 - 10:56 AM

From my weekend letter:

 

"...Normally, we should be heading for higher ground. I wouldn't blame anyone for doing so, but I'm looking at stuff that just makes me worry about a melt-UP. All that accumulative shorting in SH is one. Most of those traders are underwater, even if they are hedging, that has to hurt. Also, all the amateurs are Beared-up to the point of flashing Buys (TSP, AAII, and FinTwits). The Relative VIX remains quite high. Meanwhile, 2-Month AA Financial Commercial Paper is yielding just 19bp. That's a guaranteed loss net of inflation. This has to be a driver of massive sums into the market on every dip. Many of these pools of money aren't even seeking market returns, just something better than inflation. They can use the plethora of derivatives to customize those returns. Meanwhile, there is an absolute TON of money in money market funds (h/t to my colleague Callum Thomas--see chart below). There is such a Bearish lean and so much fuel for a rally, with no place else to go for a positive return, I wince at what will happen when the pain gets to be too great..."

 

MoneyMarkets05-15-20.gif


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#2 K Wave

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Posted 18 May 2020 - 11:05 AM

Today's gap up could very well be the start of it.....charts are setup perfectly for launch mode.

 

Clearing SPX 3030 would be the key to getting the potential meltup you describe under way.

 

If we go out near the highs today, that could happen as soon as tomorrow.


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#3 K Wave

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Posted 18 May 2020 - 11:07 AM

Of course, have to take this 2950 area first.....hopefully a bit more sideways, and then it pushes on through....


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#4 Dex

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Posted 18 May 2020 - 11:08 AM

12:04 pm - volume isn't confirming that at this poin.

 

 

GSPC

Previous Close 2,863.70 Open 2,913.86 Volume 1,606,549,856
Day's Range 2,913.86 - 2,957.53 52 Week Range 2,191.86 - 3,393.52 Avg. Volume 6,165,396,984

 

IWM

Volume24,046,232Avg. Volume44,648,879

 

IXIC

 

 

Previous Close 9,014.56 Open 9,177.15 Volume 1,976,701,509
Day's Range 9,154.35 - 9,252.16 52 Week Range 6,631.42 - 9,838.37 Avg. Volume 3,949,098,253

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#5 OEXCHAOS

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Posted 18 May 2020 - 11:23 AM

My comments from Friday morning:

"...I said that with the turn in trend and breadth, were this a normal market, I might think about raising cash, but with so much Bearishness, and so many shorts in the SH, and with such high options premiums, AND with AA 3-month Financial Commercial Paper yielding just 6 (!!!) basis points, I was and am legitimately afraid of a melt-UP."


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#6 Dex

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Posted 18 May 2020 - 11:33 AM

Remember that in bear markets the beginning of the week is up and the end is down - opposite in a bull.

 

We are probably in phase 3

https://www.investop...or-bear-market/

Bear Market Phases

Unlike bull markets, which are usually defined by a prolonged market rally, bear markets usually have four distinct phases to look out for:

 
  1. The first phase is characterized by high prices and high investor sentiment. Towards the end of this phase, investors begin to drop out of the markets and take in profits.
  2. In the second phase, stock prices begin to fall sharply, trading activity and corporate profits begin to drop, and economic indicators, that may have once been positive, start to become below average. Some investors begin to panic as sentiment starts to fall. This is referred to as capitulation.
  3. The third phase shows speculators start to enter the market, consequently raising some prices and trading volume.
  4. In the fourth and last phase, stock prices continue to drop, but slowly. As low prices and good news starts to attract investors again, bear markets start to lead to bull markets.

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#7 pdx5

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Posted 18 May 2020 - 11:38 AM

The $3,000,000,000,000 money inserted in circulation has to have an effect, with another $3,000,000,000,000 in works.

Also as Mark points out, 2-Month AA Financial Commercial Paper is yielding just 19bp is guaranteed loss net of inflation and is TAXABLE income.

Negative rates anyone? Is it any wonder the cash is stampeding into stocks? Myself included! I hate monopoly money giveup.gif 


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#8 Iblayz

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Posted 18 May 2020 - 11:47 AM

Worried? Afraid? Of what? You are long. The only people that are worried are the ones stuck short. Melt-up? I say, keep pumping and bring it on. We have A LOT to sell up there and we WILL do it. I told my wife from the beginning NOT to worry because we would make new highs......and we will. What worries me now is the way that it might be done and how quickly it could be done. That is, on the back of shorts. Buying to squeeze shorts is the WRONG reason to buy but the big money at the top of the food chain is doing just that. And, once again, they will get a lot of people trapped on the long side when the gappy charts that they are building give it back up.....and they will.....again. So go ahead. Get it up there so we can sell. We will have plenty of money. We don't NEED to be invested. When they put us in the ground somebody else will get it anyway and there is no telling what they might do with it.


Edited by Iblayz, 18 May 2020 - 11:50 AM.


#9 K Wave

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Posted 18 May 2020 - 12:05 PM

Thus far...looking like decent odds of a 90/10 launch day from base camp....


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#10 K Wave

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Posted 18 May 2020 - 12:08 PM

If Trannies can clear 8300, will be a Pick 6 floor recapture TD for the bulls there...


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