I see a good deal of posts on here, with legitimate observations predicting a bounce back up and break out up to ATHs. I don't agree, and I believe that these traders are missing out on a couple, very critical factors.
For the Week ending 6/19: ~3100 was max-pain for SPX option holders; notice how the futures kept jumping over ~3120 keeping it above SMAs and above the resists (which got broken every day during volumed price action)
This last week, a huge amount of buying was BELOW VWAP. Low volume retracements back to VWAP followed by high volume sell-offs. Institutions are not getting ready for a breakout up -- the have been offloading all week. (Retail is not selling 65k lots to bids in the middle of an upswing)
It would be very dangerous to see patterns mainly created by (low vol) futures pump with little follow-through during the cash market. I don't think we have had a single trading day in the last 2 weeks that have followed through with futures going up to any real noticeable extent
There is no development that will markedly 'change the market' for the upside, as the hints and hopes of even the slightest good possible news are priced in at 120% already
I'm expecting follow-through selling on Monday. I'm not sure it will be a huge drop, but we will re-test 3k. It is likely we will go sideways without a solid break but the peaks will be in the 3050-ish range will active retail getting out. Their will be short squeezes at the various major price point levels but nothing that will trigger sustained (albeit light) buying till we are at least well under 3000. Small weekly waterfalls till either we get into retesting 2850, or we get a cure/treatment, and the economy opens fully.
Its gonna be a slog, it's gonna be messy, but no, this isn't a bull flag breakout.
News is still king: is we get more store reclosures, or (unlikely) states reversing/stopping re-opening, we could major gap down.
Re-openings being questioned/reversed
China responding negatively to their planned purchases / Trump being 'tough' on China
Surprise reports questioning/discounting the V-shaped narrative
Comment
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My general sentiment for futures open is slightly down, maybe the 3045-area. Expecting a retracement to the 3080 area before coming back down.
Futures before pre-market cash: 3015 Prediction for cash open: 3065
If open is more than 1.5% down, we will likely get a replay of last Monday with an opening selloff piercing below 3000 before retracting above open then sideways/slight up trend all day.
If open is up, frankly, we will continue Friday and be profit-taking off all-day over VWAP
Trade active
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Futures got very bullish much sooner than I thought, so i closed my short from 3139 for a solid 100pt gain and rode the wave up from ~40 up to the mid-70s. Got stopped out a few times in that battleground 3080 area -- so i decide to sleep and wake up to about the same place.
Long into the open from 3089, closed that when we crossed 3100 and went short at 3113, which I closed before futures settlement.
All things considered, not a bad day, but not really the move I was looking for so I was hesitant to get aggressive.
I did, however, make some nice moves in the RUT mini, but I'm pretty sure that was more riding coattails of a big manipulation job more than market predictive analysis. Caught a nice 10pt drop with 4x short to end my lunch.
Current positions: Short from 1435 (RUT)
Trade closed: target reached
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Hit some bumps in the road, but I'm putting this one in the 'worked out mostly' bin.
You sir are correct... we’re going down to 2400-2600 range in early July though at least.
Just as many traders are predicting a bounce as you’ve noted, just as many are expecting only a small crash.
The data suggests however we’re in store for a pretty deep crash the next two months. Even decent chance we reach 2100.
oranjcrush
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@ProfitHarvest, I believe the best metaphor will be an arrested descent, like a parachute with a hole in it. Some deep cuts, but mostly a float down. With the news and all the retail activity looking for any reason to pump things back up, it will be difficult to have back to back bad days.
If we _did_ have a 'breaker' style day, then I'd say game on and Bull's will might get broken and allow a retest of Feb lows earlier than Aug/Sept, otherwise, it is gonna be a slow bleed.
ProfitHarvest
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@oranjcrush, Too much profit to be made off a faster more chaotic crash. Too much algo trading to not expect programmatic selloffs again.
But yea your analogy has decent odds although I'd def expect more of a stepdown pattern rather than a steady steeper decline in that scenario.
oranjcrush
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@ProfitHarvest, I tend to agree that once the algos get tripped, they sell off hard, BUT -- Looking at all the above VWAP selling off last week, I believe they have been lighting up their positions for a week now already. Price action will fall fast from retail, but the volume there won't be consistent throughout the day.
I would be shocked to find us in March-like environment where indexes are dropping 5%+ in a day back to back. I don't see us hitting 3k one day and hitting 2850 the next, even though I fully believe that 2650 is a legit current target
Hasuji
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Last Commitment of Traders Report had Commercials Net Long (with additional longs added, and shorts removed) and Retail overwhelmingly Net Short. We know what that usually means!
oranjcrush
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@Hasuji, please feel free to correct me, but those reports are on Tuesdays and based on current month contracts (the one that expired this last Friday), correct?
Also, many dealers/institutional futures buyers were able to get into long positions from 2200-2300, so why would then close if there was a chance for it to spike up? they are already well well well ITM with their position. It would seem silly to risk their good fortune the last week betting against the overall current trend of Bullish rallies
DaddySawbucks
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Pump & Dump has been the rule, agree Monday can go either way and useless to guess at it.
Considered straddles but premiums so high probly just lose both ways. Ty for post!
oranjcrush
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@DaddySawbucks, if you are into the intraday swing trading -- it isn't a horrible idea to buy a call and put in the peak and the trough to do some delta-neutral trading. As a general rule, I tend to look at credit spreads as better than single-leg puts in this environment, IV crush can be rough when the VIX starts falling hard in the afternoon rallies.
oranjcrush
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For people who are skeptical about 'pumps'.
Compare these two charts, same timeframe, one is the current month's contract, the other is June, expiring on Friday (yesterday)
Just as many traders are predicting a bounce as you’ve noted, just as many are expecting only a small crash.
The data suggests however we’re in store for a pretty deep crash the next two months. Even decent chance we reach 2100.