timwest
Short

SPY - SPDR S&P 500 ETF - DAILY - DANGER DANGER

AMEX:SPY   SPDR S&P 500 ETF
2951 38 28
What is going on here? Where is the fear?

Each time we go down, fear rears its head as people sell their stocks and drive up the price of put options, which drives up the value of VIXY             .

The last selloff was "BARELY ANY FEAR" as noted in the small rise in VIXY             into mid-March on the last decline.

This time there is barely any noticeable lift in VIXY             to show that people are either hedging by buying puts or panicking in any way whatsoever. THIS TIME IT IS A MAJOR SIGNAL THAT I WOULD NOT IGNORE.

I don't think many signals like this come along in a period of many years. So, even if I am wrong and the market shoots up from here, I don't want to miss this signal. This is DANGER DANGER DANGER right here.

Danger, that is, if you want the market to go up. This is a great signal to go short. One of the best signals.

We are looking ahead at the end of the quarter and probably every fund is already invested up to their gills to show for quarter-end, but maybe, just maybe, they have held onto some cash for marking up their portfolios into quarter end. That is the only hope though, based on what is going on here.

I may sound confident in this setup because I am. I just want you to do your own research too and look into these setups and see how much you need to hedge and just exactly where to place your stops and when to know when this pattern isn't panning out.

Each day I will do my best to update this chart an show you what the market is telling us to do. Message me - reply to this chart - and I will see how take advantage of this very bearish setup that is in place right here.

All the best,

Tim 1:21PM EST March 25, 2015 206.59 last SPY            
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Hi Tim, how do you think a big decline in the S&P 500 would effect the US dollar? Also, where could the outflow of funds from the S&P 500 go?
Reply
timwest PRO Crinklebine
2 years ago
That's a good question - I don't know about the Dollar. I think people ought to be buying energy, gold, cash, European equities, other lagging sectors that are on the cheaper end of the valuation spectrum.
Reply
Rocketman PRO timwest
2 years ago
How about emerging markets, like EEM? Also, how do you, personally, determine ".....cheaper end of the valuation spectrum" besides looking at a chart? There can be lagging, but falling sectors, as well.
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YaKa PRO
2 years ago
Agree - The lack of vol spike is remarkable here.

Can you confirm your reading? You think that the lack of vol reaction is bearish because there's no fear?

The last 2 days feels like:
they remove their sp500 and the hedges that goes with it, hence hammering the volatility... and they buy DAX which was surprisingly resilient given the fact it is overbought and eurusd has been lifted at 5 figures at the same time.
+2 Reply
IvanLabrie TOP YaKa
2 years ago
I'm seeing a potential new down leg in the Euro now...GBPJPY is about to collapse, USDJPY probably too, but not that sure considering the USD strength in other pairs. Nikkei is topping.
Interesting scenario.
+2 Reply
timwest PRO YaKa
2 years ago
I think it could be that quarter-end hedges are already in place, so the decline will not accelerate until the beginning of the 2nd quarter. Either way, I'm looking at the quarter-end being important as I think most mutual fund managers will still want to show fully-invested at quarter end. After quarter-end is out of the way, then fund managers will want to raise cash very quickly because this is the first year that S&P500 earnings are expected to decline year-over-year AND all of the earnings this year are expected to be in the final quarter of the year, so that is a bit too much risk. I think it is going to be a rational decline. Why pay premium multiples for negative earnings. The higher dollar is hurting future prospects for earnings too. In other words, Portfolio Managers have a justifiable reason to lighten up on stocks and to move into lower-beta and lagging industries.
+2 Reply
YaKa PRO timwest
2 years ago
Agree.
I however think that 1960 may retain the market until end of september and could actually be building the neckline of a large H&S until then... if so, it could go like this:
snapshot
+1 Reply
timwest PRO YaKa
2 years ago
That looks like my annual forecast from early Feb.
Reply
YaKa PRO timwest
2 years ago
"my" :)
To be honest, sp500 being in the same area since Nov14 and being clearly pivotal, days after days we keep tweaking charts into range, crash or follow through scenarios... after a while we go through all possible scnearios... I guess what matters is to squeeze a few legs in trading.
We all know it is going to correct hard at some point... Question of money management and anchoring points until then and ideally to be in the big short when/if it happens.
Reply
IvanLabrie TOP timwest
2 years ago
Excellent!
Makes perfect sense...So dollar rally is more than likely.
Reply
YaKa PRO IvanLabrie
2 years ago
not necessarily...
eurusd could be range bound between 1.06 and 1.20 in the next few month.. and if 1.17 just before crash... eurusd could touch the bottom again without making new lows....
I am not sure honnestly but big big picture, what we just had on EURUSD could be a bottom for many moonths..
Reply
IvanLabrie TOP YaKa
2 years ago
It certainly can be. I am open to that possibility, just shorting specific *usd pairs.
Trying to balance my currency portfolio.
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Justiceisfalse IvanLabrie
2 years ago
The macro environment for the dollar is so strong and not likely to change any time soon. An SPX dump to 1600 would only support it further.
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JCrusadr
2 years ago
It is at support ; if it falls further tomorrow then the brakes are broke...
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Justiceisfalse
2 years ago
I think there is a high probability that the SPY covers that 2/2/2015 gap at 202s then the meat grinder likely resumes up...... grinding up more meat which also fits your up/down 5% buy/sell model for the year. What do you think?
+1 Reply
Justiceisfalse Justiceisfalse
2 years ago
Also follows your support/mode from
SPY S&P500 - RIGHT ON TARGET SO FAR
+1 Reply
timwest PRO Justiceisfalse
2 years ago
The 5% grind could have an 8% down wave first. Just a little larger decline given the lack of fear.
+1 Reply
IvanLabrie TOP Justiceisfalse
2 years ago
That forecast looks like it'll be fulfilled soon...Tim has some great charts!
Reply
RRose
2 years ago
tim, market falls 300 points and uvxy just moves. what is the reason.
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chartmojo PRO
2 years ago
Totally agree...less fear, let hedging and protection...pure selling (and shorting) ...because essentially under the current circumstances these levels are unprotectable. It's all about sucking in the retail investors then hitting the sell..transfering the $ from the many to the few basically. Bios starting to get hit confirms.
+1 Reply
jangseohee
2 years ago
Hi guys, do not get excited first though i am one of the big grizzly bear
Yellen might Jawbone the index up again if she want this as a support
right now, price is perching on this thin tree branch
snapshot
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chartmojo PRO jangseohee
2 years ago
Yep she may jawbone it back up ...some..Greece is coming...Yemen is coming...and Eukraine will be back...summer will bring more Furgesons....Russia/Nato high probability for some problems...after Yemen oil will drop furthur...buy backs are on hold...etc etc
Reply
LastBattle jangseohee
2 years ago
snapshot


That already broke.
+1 Reply
2use
2 years ago
Not everyday you see Tim post Danger Danger....
+2 Reply
claydoctor
2 years ago
They "shoot the messenger" when its bad news you know, right? So courage Tim, the truth is a lonely place to be. I agree 100%. Posted some charts this morning. amazing 2011 similarities to right now. History does repeat.
Reply
timwest PRO claydoctor
2 years ago
Thanks claydoctor - my advice is to "follow the fear", if there is none (as now), the market will go three times what it has done so far... as the fear builds (and VIX rises sharply), it can double the current decline. That is how to measure it.
+1 Reply
jangseohee
2 years ago
so after the "knee-jerk" reaction (attacking Yemen) has settled down, oops, they realized that they have got more oil supply and equity shoot up again?
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IvanLabrie TOP jangseohee
2 years ago
Possible...funny how that comes out now.
Reply
timwest PRO
2 years ago
Follow up -
snapshot
+2 Reply
coolingla PRO timwest
2 years ago
Tim, nice chart! You seem to be pretty conservative. For you to say Danger, Danger, Danger really means something.

I got a question for you. Right now, I am 90% invested in beat-up energy stocks, 10% cash. I suspect that the final leg down on oil (I am 90% sure it will happen within a month) could be the last straw for S&P 500. I never done any short sales before but feel pretty confident the general market can only go down (at least not up) at this point. What's the best way to short S&P 500 now? Is it buying ultra-short ETF such as SDS cost efficient? Or you have any good individual short selling ideas on any individual stocks?

Thanks in advance.
Reply
timwest PRO coolingla
2 years ago
Hello coolingla,

There are multitudes of ways to short the market. I personally just short the SPY itself. There are many options strategies too. Buying a short selling fund certainly works. I can't recommend any one of them because I personally don't use them. Over the long haul, you have to trade those short funds or they will just grind down to zero.

As for individual stocks, you can look for individual stock ideas that I post. I posted GMCR the other day and AAPL. AAPL has a nice distribution pattern right now. I will be posting more short charts in the next week or so. I think the first week of April will be when portfolio managers start going to cash or buying up the beaten down energy shares. So, I see more of a rotation out of high volatility, high-beta names, and into the beaten down or the domestic stocks that aren't hurt by a rising dollar.

I do see a down market for the balance of the year, with one intervening rally this summer. A grind-it-out sideways to down market this year.

Stay in touch.

Tim
+1 Reply
RRose timwest
2 years ago
Tim people are still talking about. 2200, 2500 etc. What tange do u forsee for this year. Do u think we have alreadyade high
Reply
timwest PRO RRose
2 years ago
Hello @RRose. I put my Year 2015 Forecast together and so far it is on track for the first 2 months. Have you seen that forecast? I forecast a high in the first quarter of 2112, then a drop to the 1900 area, then a bounce to the 2200 area, then a drop under 1900 at year end. See if you can find the rationale and the forecast in my chart publications. Cheers. Tim
Reply
YaKa PRO timwest
2 years ago
Tim, I share that view. thank you for sharing.
Reply
coolingla PRO timwest
2 years ago
Thanks for taking the time to reply to me!

I like your idea on GMCR the most. I have been watching GMCR for a while, believing it will fall but the idea of shorting it (or any stock) never occurred to me. Somehow my brain is wired in such a way that it automatically labels the short side of any trade with a big risk sign. Logic tells me that's not true but I guess it's just something I have to overcome. GMCR is such a good short candidate that I believe $90 is almost a given. Even $57 is possible if the market gets really ugly.

Of all of your posts, the only idea I have a different opinion on is TSLA. I think over the long term, the case for either long or short is weak. Too many variables for this stock. I'd rather trade something that I feel more certain about. There are so many better-bets on the markets that I would never even touch TSLA, long or short. So I am curious as to why you like it so much, maybe just as a great demo stock to show Tradingview readers how to setup trades?

I want to thank you again for educating tradingview readers like me. I consider myself a value/contrarian investor and not a trader. However, many of your posts presented original, thought provoking ideas that even fundamental investors should benefit greatly.

Al
Reply
timwest PRO coolingla
2 years ago
Hello Al,

Thanks for your reply.

I'd like to address your Tesla question: I guess I love to cheer for the underdog and for great products. I've been cheering on Tesla from the $30's and have made more money in Tesla than any other stock in a long time by going against the "grain" of sentiment, since Tesla had one of the largest short positions in the marketplace. I love the product and would love to own one, but at this valuation, I agree that it is going to be difficult to increase the value of the company until more visibility is there for the Model-X and the next generation car after that. I honestly think they will have sales that surpass all people's expectations. I've watched all of Elon Musk's interviews that are available and his grand view is missed by most investors that comment on public threads. Example: He wants competition. He wants competitors to make great cars to compete with Tesla. In the long run, that is how you build the market for electric cars. He feels confident in his ability to produce profits at any volume level from here into the distant future, but you need to have a mass-adoption mentality to make that happen. For now, he has an unrivaled product that has overcome every imaginable hurdle to get to where they are. What Tesla has accomplished is nothing short of a miracle. A brand new company has made a car that has matched the highest rating of all cars ever made. Unreal.

So, back to trading, because the short sellers have sold so much stock short already, then that is fuel for future repurchases of stock. Whenever short interest on any stock is high, it has terrifying drops as the shorts press their bets and try to break the stock, so it makes for EXCELLENT trading since the downdrafts are going to be more short and sharp, instead of prolonged and steady. So, technically, Tesla will be a great trading stock.

Secondly, Tesla is just a great trending stock since it has been responding so well to the methodology that I am constantly discussing and using. That is one measure of any market in general - how well does it respond to technical trading. I can say the same for Bitcoin. Bitcoin charts are fantastic for technical patterns.

Regarding your value/contrarian investor style, I feel like I am right there with you on that. Tesla isn't a "traditional value" name at all, since you are buying 10 years into the future, which will be 500,000 cars a year sold (not just 25,000). That's a big number to discount back to present value.

As for other areas of "value" - I've always focused on stocks with brand names and long histories of profitability, especially with being able to raise prices when costs go up. If you buy at the right price when there are "values", then when stocks get higher-valued you don't need to be as careful about them. The drug sector is what I'm thinking about here. There are long swings between undervalued and overvalued.

Thanks for your comments and your questions and please send more along!

Tim
+1 Reply
coolingla PRO timwest
2 years ago
Tim,

Thanks for sharing your wisdom!

I always believe a good trader/investor has to be a good philosophical thinker, while charts/data are just tools to help us gauge the situation. If seems that some charters here are too obsessed with their tools that they often forget the bigger picture and thus can't make big money at all.

I think you just showed us how to and NOT to use tradingview, and that's of mighty importance.

Al
+1 Reply
timwest PRO coolingla
a year ago
So well said @coolinga. Thanks for your reply.
Reply
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