Hedge_Of_The_World

Gap Up Cocktail, With A Short Squeeze Please

Short
AMEX:SPY   SPDR S&P 500 ETF TRUST
In a seemingly massive win for the Biden Campaign, Emily Murphy at the GSA (General Services Administration), confirmed that the Trump Administration is ready to move forward with the peaceful transition of power process, in the accordance with the law. I don't know whether or not this is a move to escape the legal nightmare Trump is living each day, or whether he has a final card up his sleeve to somehow hold on to the presidency. More likely than not, Trump is moving on with his life, at least for now. What I found most interesting about the news, though, was the fact that futures spiked almost immediately after. Since when is a Biden victory good for stocks?

- If memory serves, Biden was going to raise corporate taxes on millions of small businesses at the worst possible time.
- Trump said if Biden won, we'd see the worst depression in history because he would lock down the nation, and cause another market crash.
- Biden was going to kill big oil .
- Biden was going to face stark opposition on any stimulus proposal he brought forward.
- Some experts have said they're expecting stimulus in the realm of $700 Billion; that's not quite $2.2 Trillion.

Yet, (global) markets spike on the news that Trump is essentially conceding to Biden . I guess when you can print GDP, who needs an economy?

*Takes deep breath*

Let's see what's happening over on the SPY:

We gapped up on the open to around 360.21, off the back of the GSA news, and we're sitting just above the Megaphone trendline which is now sitting around 357.50. We're also kissing the upper trendline of the triangle/weak ( volume ) bullish pennant around 361.60. Finally, we're approaching the bottom of the ascending channel formed over the past 7 months or so, now sitting around 362.50. We're outside the megaphone right now, and if we break above for the first time in 9 years, on the monthly, we could see a biblical short squeeze. Just a reminder folks, the end of the month is next Monday. As I said, until we see a clean break of the megaphone on the monthly, I ain't going anywhere...

Stay tuned for live updates throughout the day, and thank you for your time today guys. If you enjoyed today's analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
Comment: Hourly RSI is now at 69.60. Here's an hourly view of the 3 key resistance lines we discussed above:
Comment:
Comment: Vix took it on the chin in early morning trading, but has since regained most of the day's losses. We revisited one of the lowest levels since March this morning, around 21.80, and we're now sitting at a 22 handle once again...
Comment:
Comment: After $14 Trillion in global fiat currency debasement, the dow has finally hit 30,000. It's a win for central banks everywhere...
Comment: Starting to see some weakness here as we approach power hour. We just tested the 50 period MA on the 5 minute. Tomorrow is an extreme data dump so let's see how investors are positioning into the close for an indication of broader sentiment.

Key prints to look out for tomorrow:

- Q3 GDP
- Durable goods
- Jobless claims
- Home sales
- Personal spending
- PCE
- Consumer sentiment
- FOMC minutes
Comment:
Comment: Solid rejection at the 50 period MA on the hourly (362.73). We're back at the ascending trendline again, and it looks like we're about to see a rejection...
Comment:
Comment: Just looking at the current cash market price action on the indexes, it looks an awful lot like the good ole' QE 1, 2, and 3 days, when the market was basically on autopilot, and drunk on liquidity. Almost no volatility whatsoever on the shorter time-frames.
Comment: Okay, so it was a fantastic day for the bulls, and quite cyclically historic, actually. Today was among a handful of days since 2011, that we closed above the "megaphone" trendline on the daily. Today was also the highest ever daily close for the SPY. Well done to the bulls.

The next challenge for the bulls is to close us above the megaphone on the weekly, and then on Monday, to close us above on the monthly. That would, according to polarity principle, which imo applies with far greater weight to long-term time-frames, would completely end the bearish thesis.

As we discussed earlier, tomorrow is data heavy, and could result in increased volatility. Hopefully that presents us with some new and interesting trading opportunities.

I hope you guys had a great day, the weather in Canada is terrible right now, and people don't want to go out because of Covid. I've heard from friends all over that are struggling with lockdowns, that life is hard right now. I think we're all in the same boat, but remember, when things are terrible, they can only get better.

To the bulls: No one ever went broke taking profits.

To the bears: The first goal of a trader should be to make the best trade. As Alex Elder said, money is secondary.

Cheers guys, have a great night. Michael
If you enjoyed our analysis today, please hit the Like button and subscribe to our profile so you don't miss any new updates. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research.

Comments

Well, I havent entered my positions yet, but are we still seeing 300 as a target?
Im not too confident with 300, probably 330, what do you think?
+3 Reply
@Rose_Edge, If it were me, I would wait for a clear monthly rejection of the megaphone line (357.50). No need to enter before that. I got in way earlier and held because I thought the high's were in. I never thought we'd see 360 again after the June correction. But, here we are. Back then it looked like a head and shoulders, then a triple top, now it's all about the megaphone.
Reply
Rose_Edge Hedge_Of_The_World
@Hedge_Of_The_World, well i love this quote "when things are terrible, they can only get better."
+1 Reply
@Rose_Edge, I've been some low places in my past, and those words helped me get through. Appreciate the love!
Reply
expecting a corrction to come some time in december as well. maybe mid december. hopefully i did not jump the gun but got 7 put contracts for dec. OTM of course just in case the correction comes sooner then expected. however still waiting to see what happens.
+1 Reply
miguelsique miguelsique
@Hedge_Of_The_World great post though.
+1 Reply
@miguelsique, I appreciate that, it means a lot. Thanks for sharing some valuable insights today. If you're in the US, happy thanksgiving!
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@miguelsique, I think you're right. By mid-Dec, we should see more carnage in the jobs market for sure. We've seen rising jobless claims two weeks in a row now. I imagine it's only going to get worse as the winter weather sets in. I'll be here waiting with you. It's high time we see some efficient price action, my friend.
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How much of this run up is Black Friday anticipation? Market was heading for a correction and this week reversed course so beginning December should be and even more drastic correction right?
+1 Reply
@Kuma06, That's a good point. Based on the Vix term structure it looks like all the election risk was pushed to the Dec and Jan contracts. If we actually do see a correction in Dec/Jan, after this historic rally, it could be of biblical proportions. The Treasury is limiting the FED's firepower by year end, so that's a potential catalyst. COVID lockdowns another, and then of course, there's the actual economy which is in shambles. At some point, something's got to give. That's my 2 cents anyway. Thanks for the comment, my friend. Cheers!
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