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Bubble pricked, can BEARS take it lower? Maybe NOT


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#1 dTraderB

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Posted 21 February 2021 - 02:44 PM

BEARS had a great opportunity to take the SPX below 3840 on a weekly CLOSE basis but they failed. 

NQ is weaker but still not far away from ATH. I expect a pitched battle but unless Bears can show more strength then SPX 4K before any significant decline. Always an IF or two: what external factor (not a MARKET one) can help the BEARS? 

 

This is another of those YIELD CURVE analysis:

 

The U.S. Treasury market has seen some stiff selling pressure in recent days, on the heels of stiff selling in recent months. As a result, the benchmark 2-year / 10-year yield curve is the steepest in almost 5 years.

Whether this is a good thing or a bad thing depends upon whom you ask. Bulls will say it's a sign of recovery and good for financials, the bedrock of any sustainable rally. Bears will say it's the first prick in the TINA bubble that will clobber tech stocks, which have been powering most of the gains.

Opinions are a dime a dozen, so let's just objectively look at prior instances and see how things shook out.

There is no definitive date when the Federal Reserve explicitly began targeting the Fed Funds rate but academic literature seems to point to anywhere from 1982 to late 1987. So we'll go from there. 

With the yield curve, we'll use a setup and a trigger. The setup is when it drops toward or below 0, with the trigger being when it rises to its current level over 110 basis points.

20210218-132603_1613654762556.jpg

On a chart, it looks pretty ugly for the S&P 500. The numbers don't look especially great, either.

While the 1991 recovery led to good gains for stocks going forward, the last two clearly did not. Among other assets, factors, and sectors, there was some more consistency, especially one sector in particular.

https://www.sentimen...-3-other-times/

 



#2 dTraderB

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Posted 21 February 2021 - 02:49 PM

Great second week in February with profits every day, including Monday

24 QQQ PUTS

1 NQ HEDGE LONG 13820

 

 

Tiring but profitable day, and the bulls kept fighting back. My best nq daytrading day since January, good profits in qqq purs, losses in nq hedge long

24 qqq puts
1 nq hedge long 13820
 

Fast & furious!
27 QQQ PUTS, all red at current nw

 

34 qqq puts
1 nq hedge long
 

Quite a thrilling day of battle but bulls managed to reverse early drop.
Good day for me with profits in SQQQ, QQQ PUTS, NQ DAYTRADES, and loss in na hedge long. Closed several CALLS & PUTS

44 QQQ PUTS
2 NQ HEDGE LONG
 

Profitable Tuesday
57 QQQ PUTS
2 NQ HEDGE LONG
5 SQQQ 10 calls
 

Nq hedge long 13820
Have to buy 2nd hedge long! Delayed it but must adhere to the OPTIONS SYSTEM.

59 QQQ PUTS
2 NQ HEDGE LONG
5 SQQQ
 

4 profitable days last week but a bad Friday wiped out 3 days of gains. Mainly defensive trading to maintain and build my QQQ PUTS position. Profits on NQ daytrades and NQ hedge on Sunday night, yesterday and this morning but those PUTS losses will erase that green from my weekly balance sheet at current NQ levels. However, markets are extended and I am looking forward to a day or two of big profits in NQ SHORT daytrades and PUTS.
Will continue to build QQQ PUTS position above existing ATH above NQ 14K.

57 QQQ PUTS
1 NQ HEDGE LONG 13672.5



#3 dTraderB

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Posted 21 February 2021 - 02:50 PM

Lance:

 

The Two Pins That Will Pop The Stock Market Bubble
Feb. 19, 2021 11:25 AM ETBIL, DDM, DFVL...280 Comments141 Likes
Summary
  • If market bubbles are about "psychology," as represented by investors' herding behavior, then price and valuations reflect that psychology.
  • The Federal Reserve has consistently argued that monetary policy is a function of their two mandates: full employment and price stability.
  • Excessive bullish optimism is always eventually met with disappointment.

Yes. We are in a stock market bubble. The only question is, what will be the issue that eventually pops it? We alluded to this answer in Friday's #MacroView discussing why more "Stimulus Won't Create Economic Growth."

As discussed in our previous article, if market bubbles are about "psychology," as represented by investors' herding behavior, then price and valuations reflect that psychology.

In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you an elementary example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.

saupload_image_2020-11-25_161911.png

 

Notice that except for only 1929, 2000, and 2007, every other major market crash occurred with valuations at levels lower than they are currently.

 

https://seekingalpha...k-market-bubble



#4 dTraderB

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Posted 21 February 2021 - 02:55 PM

There seems to be a developing theme with inflation, yield curve etc

 

Rising Interest Rates Don’t Trouble Equity Investors—at Least Not Yet 

 

 

 

"...The interest-rate derivatives market suggests further increases ahead, says John Brady, managing director for global institutional sales at Chicago futures and options broker R.J. O’Brien. Put options on rate futures show higher volatilities than calls, suggesting that hedgers are looking for more protection from higher yields. But even an increase in the 10-year Treasury to the 1.75%-2% area, if it were to take place gradually, wouldn’t likely upset the equity market, he adds.

Higher mortgage rates could pose a threat to the booming housing market, says Scott Anderson, chief economist at Bank of the West. Record-low mortgage rates last year led to a huge, 13.2% jump in the median price of a single-family house, to $313,700. The recent uptick in Treasury yields is beginning to push up mortgage rates, which will further hit housing affordability, potentially lowering existing-home sales by 8.4% in the fourth quarter from a year earlier. That would affect lots more folks than gyrations in meme stocks.

Write to Randall W. Forsyth at randall.forsyth@barrons.com"

https://www.barrons....yet-51613786125



#5 dTraderB

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Posted 21 February 2021 - 02:57 PM

Seems to be more of these "warning flags" lately

 

A Medium-term Breadth Indicator Waves the Caution Flag
Arthur Hill |  February 19, 2021 at 04:40 PM
 

The Nasdaq 100 has been on a tear the last few months with a move to new highs, but a medium-term breadth indicator is not keeping pace here in February. This indicator is simply flashing the yellow caution sign right now and we have yet to see an actual signal that would point to a correction. Here's what to look for.

The chart below shows QQQ in the top window and the percentage of Nasdaq 100 stocks above their 50-day SMA in the lower window. The blue lines show QQQ moving higher, while the yellow dashed lines show participation narrowing in February 2020, early September 2020 and now. This indicator hit 90% in early January and has yet to exceed 75% here in February. Fewer stocks made it back above their 50-day SMAs and this shows some deterioration under the surface.

709ddd22-4b39-4e7c-825e-236de35ee97b.jpg

The trouble starts when the indicator moves from less upside participation to more downside participation (less than 50% of stocks above their 50-day SMAs). The red lines show when the indicator fell below the prior low and below 50% in February 2020 and September 2020. The first signal preceded the March crash and the second preceded the September-October consolidation (corrective period).

Currently, the indicator is flashing a caution signal because fewer stocks are above their 50-day SMAs. The green zone around 50 is the level to watch going forward. A break below the late January lows (~50%) would signal that the majority of stocks broke their 50-day SMAs and this could usher in a corrective period for QQQ.

 

https://stockcharts....dicator-69.html



#6 dTraderB

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Posted 21 February 2021 - 03:22 PM

besides yield curve, inflation, etc, there is more talk about the DOLLAR:

I may go LONG USD vs EU

 

The Dollar At The Fulcrum
Feb. 21, 2021 11:18 AM ETCEW, CNY, CROC...1 Like
Summary
  • Sometimes the dollar is the key mover, and other times, it is sort of serves as a fulcrum among the major currencies.
  • The powerful reflation theme spurred by optimism over the vaccine, US fiscal stimulus, and broadening of Asia Pacific's recovery is being expressed in the foreign exchange market.
  • Although the dollar may be on the fulcrum against the majors, it is less evident among the emerging market currencies.

The US dollar had a tough week. It fell against all the majors but the Swiss franc and Japanese yen. Like the dollar, they are often used to fund the purchases of higher-yielding or more volatile assets, giving a greater appearance of safe-haven when those other assets go south, which invariably they do. Sterling and the Australian dollar recorded new nearly three-year highs.

The greenback appeared to reverse higher on February 16. There was follow-through the next day, but it proved for naught, and the dollar finished the week near its lows. Higher US yields failed to offer lasting support. The dollar fell when stocks rose and later when stocks fell. Intermarket correlations are far from stable, especially in the short-run, even in the best of times. They seem particularly volatile now.

saupload_YTD_thumb1.jpg

 

Sometimes the dollar is the key mover, and other times it is sort of serves as a fulcrum among the major currencies. This is one takeaway from the year-to-date performance of the major currencies shown in the Bloomberg table. This is not just an echo from January. The top five currencies are also the best performers here in February. The powerful reflation theme spurred by optimism over the vaccine, significant US fiscal stimulus, and the broadening of the Asia Pacific region's recovery is being expressed in the foreign exchange market. The dollar-bloc currencies and Scandis often are seen levered for growth. By shifting the funding of its reserves to domestic sources, Sweden's Riksbank has countered inflows.

https://seekingalpha...-at-the-fulcrum



#7 dTraderB

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Posted 21 February 2021 - 03:29 PM

recurring theme...

 

"It's not nice to fool Mother Nature!"

 
 

 

Carl Swenlin | 

February 16, 2021 at 01:31 PM
 
decisionpoint-alert-logo.jpg

In the venerable TV commercial from the 1970s they trick Mother Nature into thinking that Chiffon Margarine is her "sweet, creamy butter," and she wrathfully declares that, "It's not nice to fool Mother Nature!" The Fed and the politicians should take a lesson from the old gal and realize that, not only can they not make margarine taste like butter, they also cannot make a great economy by depressing interest rates and spending insane amounts of borrowed money. In fact, these actions are more likely to backfire and cause negative economic repercussions to be much worse than they would be otherwise.

While short-term rates have been flattened, longer-term rates have been responding to the probability that big-time inflation is headed our way. Note that all yields above the 2-Year Note have been rising since the August lows, and the 30-Year Bond yield has risen about +70%.

e8f56c26-25d3-47ce-af33-9fdd0c80afe0.jpg

https://stockcharts....her-na-511.html



#8 dTraderB

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Posted 21 February 2021 - 03:32 PM

Have a great weekend! Key pattern next week in #ES_F is a head & shoulders, but these can notoriously be bear traps in good trends My plan: Bullish above 3915 targeting 3940, 4020. For bears: 3877=H&S support. It fails, we finally start the sell to 3825, 3740. Details below $spx


#9 dTraderB

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Posted 21 February 2021 - 03:34 PM

Saturday Poll The next 100 points for the S&P?
 
UP
52%
 
DOWN
48%
2,614 votes·Final results


#10 dTraderB

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Posted 21 February 2021 - 03:40 PM

Simple Vs. Complex Oscillator Structures
 

mcosc_feb2021.gif

 

February 18, 2021

https://www.mcoscill...or_structcures/