Happy New Year guys! I hope everyone had a relaxing and enjoyable holiday season. Let's get right into today's analysis:
Stocks have gone wild! We're seeing essentially every risk asset on the planet melt up as the dollar continues it's slow, and incredibly painful demise. The money supply continues to rise as investors raid their savings accounts, and banks lend their excess reserves in search of more attractive returns than 0.10%, which is the current IOER rate. Based on M1, we can see that investors are clearly raiding what little savings they have left (70% have less than $1,000), as the concept of downside risk becomes folklore, and inflation begins to rear it's ugly head. I think it goes without saying that the line between fantasy and reality has become completely blurred, and so with our hard earned money at risk, we must take this into account, and trade accordingly.
The S&P hit a new all-time high in the overnight session, kissing 3,773.38 before giving back some gains this morning. European and Asian markets are solidly in the green, apparently off the back of the media's favorite 2 suspects; hope, and optimism (around a vaccine). Nothing to do with central banks relentless obsession with parabolic debt levels, and perpetual dollar debasement, only to achieve ever-diminishing (real) returns. It now takes over $7 of debt to achieve just $1 of GDP growth, and the divergence is growing exponentially. Is this greed, fraud, stupidity, or all of the above? Mean while, Crypto, and Bitcoin in particular, are skyrocketing higher as the dollar, and fiat in general, looks increasingly like toilet paper.
Touching on SPY technicals, which we'll discuss further in today's live analysis, the bulls successfully broke us above the megaphone pattern, solidifying it's role as a key technical support going forward. This was a surprise to me, as I expected the bears to show up with a monthly rejection in the final days of December. However, instead we saw no quarter end rebalancing, no profit taking, no selling, and next to no flows into risk protection. It goes without saying, but I'll say it anyway, there's simply no fear in risk today.
Looking ahead this week, we'll be keeping an eye on the Georgia run-off elections, FOMC minutes on Wednesday (for more bedtime stories from Powell's Printer), Thursday's initial claims print, and Friday's payrolls print. As always, I appreciate your time today guys. If you enjoyed the 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
⋅
Vix is catching a solid bid here, and we're up around 9% at the moment. We've broken through the highway of MA's with conviction. Who wants risk protection right now? I'm certainly not selling mine, that's for f*ck sure:
Comment
⋅
21 period EMA on the hourly (372), is holding up as support for the time being. Volume actually looks decent on the open:
Comment
⋅
The Put/Call ratio is still looking incredibly skewed. Each time we see a breakout to .60 or so, we get hammered back to mid .30's on the open. Sentiment is more than just overly-bullish, it's clearly being held captive, similar to how rates are currently being fixed:
Comment
⋅
21 period EMA on the hourly captured, and bears are now eyeing the 50 period MA at 370.57:
Comment
⋅
Moving over to the daily, the first major support is the 21 day EMA around 368.20. This is the level I'm watching most closely. If 368 breaks, the bottom of the white channel is in play, which is sitting around 365:
Comment
⋅
Vix is now up around 13%, and gaining momentum:
Comment
⋅
Here we go, 50 period MA on the hourly kissed:
Comment
⋅
Dow, S&P, and Small Caps all down over 1% now...
Comment
⋅
Vix at a 26 handle, up 15%...
Comment
⋅
Bitcoin being bid heavily, and now up 4k since this morning's crash, back to $32,000. Seems like only Tesla and Bitcoin are immune to today's selling...
Comment
⋅
Vix now up 18%, and looking like a rocket waiting to take off:
Comment
⋅
21 day EMA just tested, let's see if it holds:
Comment
⋅
Megaphone is at 360 folks. This is escalating quickly, and I have no doubt that if the white channel at 365 breaks, it will be tested...
Comment
⋅
21 day EMA (368) is holding up for now, let's take a closer look from the 1m chart:
Comment
⋅
All the majors are now down around 1.5% as today's selling quickly spreads across the asset classes. Let's see if we get some dip buying here from those shoppers who love 1% off sales...
Comment
⋅
Comment
⋅
21 day EMA being tested here again:
Comment
⋅
21 day EMA broken, and the message from the bears is clear: game on.
Comment
⋅
Vix up over 22% and approaching a 28 handle:
Comment
⋅
Losses accelerating as we approach the bottom of the white channel at 365:
Comment
⋅
View from the hourly as we kiss the 200 period MA:
Comment
⋅
View from the daily. That white channel is toast:
Comment
⋅
Majors all down over 2% now, Vix at a 28 handle...
Comment
⋅
The Dollar looks poised to breakout:
Comment
⋅
Still waiting patiently for the 10Y yield to break above 1%, then skyrocket higher, shocking the credit markets:
Comment
⋅
Bears just captured the white channel. This is going to get ugly:
Comment
⋅
View from the hourly:
Comment
⋅
Convincing bounce off the bottom of the white channel at 365. This is perfectly expected. Let's see if we see a dead cat bounce before another leg lower to the megaphone at 360:
Comment
⋅
Vix just saw a new HOD at 29.20 before cooling off, exactly at the longer term downward trendline from the March high and the top of the October spike:
Comment
⋅
View of the bounce from the 1m:
Comment
⋅
This is usually when we might see a massive buy program, hammering Vix back to the lows of the day. Let's see if a short squeeze can save the bulls, or if the channel crumbles along with sentiment...
Comment
⋅
Here's a closer look at the Vix rejection. If we break above the green dotted line today, we could see a 33 handle before the close. Otherwise we're going to see a massive short squeeze, which would be the status quo outcome imo, and Vix will be hammered, erasing most of the days gains. Personally, I think we're going to 33:
Comment
⋅
SPY testing the channel again, look out below:
Comment
⋅
Majors now down around 2.5%...
Comment
⋅
Bulls are taking full advantage of the white channel support, and have now recaptured the 200 period MA on the hourly (366.87). Let's see if they get a rejection, or if they go for the 21 day EMA, now sitting around 367.90:
Comment
⋅
View from the 1m - RSI is back at the opening high's as you can see, and we're currently overbought on this timeframe. The downward trend has broken, and the moving averages are flattening. We could easily kiss the 21 day EMA, but then I do expect a reversal, and a continuation of the downtrend:
Comment
⋅
Just kissed the 21 day EMA (as resistance). Let's see if polarity principle holds up in the year 2021, or if the bulls, along with central banks, and corporate buy backs squeeze the hell out of everyone, bust through resistances, and Vix implodes...
Comment
⋅
First rejection:
Comment
⋅
Second rejection:
Comment
⋅
Third rejection:
Comment
⋅
I don't usually look for patterns on the 1m timeframe, because you'll drive yourself crazy trying to understand noise. But, this looks an awful lot like a head and shoulders, which would match our intraday outlook:
Comment
⋅
Vix is back at a 28 handle. Let's see if this is a topping pattern on Vix, or if we see that leg we talked about that takes us to 33:
Comment
⋅
Massive buy program just took us back to the 21 day EMA, check out volume, and then the clear (fifth) rejection once again at the 21 day EMA:
Comment
⋅
Massive rejection, look at volume. Is power hour back?
Comment
⋅
Yet another rejection. But, I would say the increase in volume with the rise in price we saw a glimpse of at the onset of power, seems suspect. Perheps the bulls are planning a move into the close, and were exercising a probe to gauge market depth. This is what I call a line in the sand:
Comment
⋅
Vix is looking awfully toppy, which suggests bulls are about to capture the 21 day EMA. Let's see what happens next:
Comment
⋅
To clarify, I meant the 21 day EMA on the SPY...
Comment
⋅
Clear view of the days price action from the hourly:
Comment
⋅
Bulls have captured the 21 day EMA, and are going for the 100 period MA on the hourly (369.44):
Comment
⋅
Just kissed it:
Comment
⋅
This is getting very interesting as we approach the close. Volume is spiking again, along with price, as we discussed was possible from the probe we saw around 3PM. Now we're seeing a rejection at the 100 period MA on the hourly at 369.44:
Comment
⋅
That's all folks! It was a formidable battle between the bulls and the bears. The bulls had a rough morning after enduring a 2.5% sell off on the majors. Vix was up over 25% at one point, and held on to a 29 handle for a few brief moments before getting smacked like a cheating boyfriend back to a 26 handle. But, the bulls staged a relentless rally from around 12:50PM, which tested the 21 day EMA about 7 times before the bulls finally broke through. All in all, it was a victory for the bears, because for the first time since the end of October, we're seeing fear of downside risk return to markets. Trade accordingly.
Next couple of days are going to be interesting - expect volatility as we go through another mini election drama with the Georgia run offs...Good Luck!
Hedge_Of_The_World
⋅
@majicktrader, Definitely, we'll see how tomorrow shapes up. Big data week as well. Payrolls on Friday should be very telling.
abigreen
⋅
yeah I jumped on tza from the second market opened and managed to hold it all the way. got greedy after another rejection and gave back some, but regardless took some nice profit. normally I would swing it, but that Fed printer working overnight really made me paranoid. love your posts !
Hedge_Of_The_World
⋅
@abigreen, Thanks so much! Great work, certainly can't fault you for selling before the close. The overnight pump fiesta is a trainwreck for price discovery, but it's real. Should be an interesting week to say the least!
WDERUVE
⋅
wheels starting to come off this one....
Hedge_Of_The_World
⋅
@WDERUVE, For sure. starting to look sketchy af. Lol. Vix is finally pricing risk accordingly. I'm expecting a 30 handle shortly.
@WDERUVE, Definitely. I guess for some reason Janet Yellen as a fiscally responsible Treasury Secretary, and the dems taking control of the senate (potentially), has investors a bit uncomfortable.
WDERUVE
⋅
@Hedge_Of_The_World, I thinkin if Republicans can hold on in GA you will see 390-400 before 320-300.. The proverbial stalemate, although frustrating for common citizens, is predictable and good for the continued market manipulation.. just an idea..
Hedge_Of_The_World
⋅
@WDERUVE, I agree. Either way, they'll find a narrative that fits the price action. Loose monetary policy as a permanent fixture has obvious consequences, not the least of which is rising prices. This infinite QE has to end or it's guaranteed to end badly for the working class.