The most important thing I am noticing that I do not hear anyone talking about is that Utilities have been cycled into discretely over the past month.
1-Month Performance
Utilities +5.61%
Consumer Cyclical +2.18%
Financial -1.35%
Energy -6.9%
1-Week Performance
Utilities -2.28%
Consumer Cyclical -2.71%
Heathcare -3.1%
Basic Materials -6.24%
It was wise to go risk off in preparation of the election. If there is a contested election the market could sell off in the uncertainty. The market was slowly rising higher on stimulus hopes, and with stimulus not having a chance of being negotiated until the results of the election - a contested election could drag chance of fiscal policy further out with the market selling off till it finds a resolution. Just as stimulus was a catalysts for a melt up no fiscal stimulus is a catalysts for a melt down.
Keep in mind this selling volume is closing at lows of the day now, with higher than usual volume. This has all the typical signs of a bear market forming- why would volume be rising if everyone was just feeling peachy about how great there investments are doing? People adjust portfolios usually when they NEED to, not when they want to and that drums up the volume even louder.
The final point I want to make is the spike in volatility. When the VIX springs out like this you can not deny that people are willing to pay high premiums because they want bearish leverage in the options market. You do not see the VIX spring up to levels like this because #bullgang went gangbusters buying debit call spreads.
My strategy is to open a Put Vertical on /ESZ0 Futures - expiring Nov 6th (9d)
The Dow today broke the trend from the bottom of the 2018 Repo spike. Potentially could go to 26050- 26100 tomorrow
ZenMode
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@Kazparov, Terrific analysis. I agree. I think that will happen Friday by EOW.
Kazparov
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@ZenMode Wanted to follow up today with this DOW chart
IT's resting on RSI support from the DEC18 repo spike low. This was only breached once which was the selloff earlier this year. Other wise this RSI support has held up for nearly two years.
ZenMode
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@Kazparov, Yes will be interesting to see if the support holds.
Also. Would actually disagree a bit on your volume and selling comment.
The most dangerous slide happen on lower volume since that indicates a lack of buyers. The buyer "strike" progresses fast and indicates both a lack of liquidity in the market and a real lack of confidence. High volume here does mean that many people are willing to purchase here.