Futures are trading higher on Monday morning (at new ATH's again), to kick off the second week of February. The S&P tagged a 3900 handle with the democrats $1.9 Trillion dollar stimulus proposal back in focus. We've been discussing stimulus for quite some time now, and it seems the most effective stimulus is the one that never comes, just like the best trade deal with China, was the one that never came. The buy the rumour is the trade of the decade, as traders chase perpetual narratives of hope, and optimism, over valuations, growth, and logic.
Crude is catching a bid, and is showing a 60 handle, while the 10Y yield just saw it's highest level in almost a year at 1.20%. We discussed the path that rates are on, and the 10Y yield looks poised to test the 100 MA (w) around 1.355% as early as this week. We're also seeing Bitcoin at new high's around 42k off the back of news that Elon Musk's Tesla has bought over $1 Billion worth of the asset. Gold is rebounding off it's recent low of 1785.13/oz, and as of this morning, we're trading back around 1823/oz. The dollar saw some light selling on Friday after tagging a high of 91.60. We're currently sitting at 91.20 in premarket trade, and looking strong.
The Vix is back at a 21 handle, and is seeing some support just below the ascending trendline, which was lost on Thursday last week. We saw a low of 20.90 on Friday, but we've since caught a bid, and we're trading around 21.70 as of 8:30AM. This is among the lowest post March crash lows. The daily RSI appears to be reversing around a 45 handle, but is showing room for further downside in the nearterm, as investors and traders alike, bask in their quasi-inebriated state of euphoria.
The Put/Call is showing extreme complacency among investors, as evidenced by recent price action, but we haven't been seeing as many extreme skews as we were before. We're sitting around a .50 handle, with .30 - .50 range setting a strong mold for interim trade/sentiment. Finally, the SPY is set to open around 389, with essentially no resistance overhead, except logic. If the bulls don't show up with strong demand for risk, with participation being as horrible as it is the past few weeks, we may finally be in store for a notable correction. Considering the fact that there is no value in the market, instead of taking on risk via equities, we're taking a closer look at the cryto space, as well as commodities, for near term profitable trading opportunities with a low risk profile. More on this as the week progresses...
Thanks for your time today guys! Head on over to hedgeoftheworld.com for our live analysis to begin shortly. Cheers, Michael.
*The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. I am/ we are currently holding positions in UVXY, HUV, HQD, QID.
Thanks for another great analysis, like you my long-term perspective of market is bearish. However, every wave of sellers gets dried up rather quickly. Everyone who knows what they are doing know that this market is way over bought; however, it is really hard to gauge when we will see some serious pull back in this market. As of now feds need a vehicle to control the liquidity and with all-time low interest rates and weak energy commodities, they need to contain all the cash in crypto and stock market. I am highly confident if we had the same level of cash injection 15 yrs ago when there was no crypto, stock market would sky rocket at much greater rate than what we are witnessing now. However, the longer this drags on the more catastrophic market pull back going to be.
Hedge_Of_The_World
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@alitrader007, Thank you, my friend. Very well said. I agree. This house of cards has been hollowing out for som many years. Most of the growth in earnings over the past 10 years has come from diminishing share counts via buy backs. On the revenue side, we've seen an annual growth rate of around 4% since 2010. That's terrible, yet stocks rally perpetually on dollar debasement. Lol. It's a mad world my friend... One day soon the house will come crashing down like the ponzi it is.
kretchfoop901
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Appreciate the insight. Your tone today is that of someone with much more patience lol. I see the weekend brought you a much needed breather. I'm sure I don't need to remind you but... "The markets can remain irrational longer than you can remain solvent." There are so many new investors in the market today, investor savants really who all think their geniuses over the last year buying stocks. With that in mind its actually true buying stocks has never been easier, and the confidence it has given these new investors will keep this market propped up as buying is now a "proven" method that works. The fallout is going to hurt from this one as soon as buying no longer works. So many life savings are going to be wiped out and I blame the FED. The day is coming, I just cant tell if its going to happen sooner or later. Trade safe my friend, these sure are interesting times. I have never seen so many bearish signs get ignored over and over again.
Hedge_Of_The_World
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@kretchfoop901, Thanks buddy. You're absolutely right. Lol. The weekend was a necessary breather after last week's price action. Well said, I think we need to keep our eye's peeled, and wait for the right moment. It's coming, but like you say, it's anyone's guess when. Based on the fact at we're at new ATH's again, I imagine we're close. Cheers!