After a choppy day yesterday, which looked nothing like efficient price action to me, US Futures melted up from around 1AM. We saw some weakness earlier on in the session, but the losses were quickly reversed, just as they were in the cash market. We're currently trading near all-time high's once agian, as a busy earnings week continues with Microsoft and AMD reporting after the closing bell. European markets were notably higher this morning as well, after a rough day yesterday, with Asian markets trading mixed. What changed, why the reversal in sentiment today? Central Banks.
After rallying hard yesterday, and hitting a 26 handle, Vix is back in the dumps with a 22 handle this morning. The name of the game is crush volatility at all costs, and whatever happens to price action, and price discovery as a result, is nobody's problem. The dollar caught a bid yesterday and briefly broke above the longterm descending trendline, but we saw another solid rejection with conviction. We also saw the 10Y Treasury yield tank back to the 21 day EMA level (1.05%), after a strong 2Y auction saw $60 Billion in paper trade at a low yield of 0.125%. Gold remains relatively flat at $1,855/oz, and crypto is taking a beating with Bitcoin back at a 31K handle, and Ether down 10% to $1,275. We'll see Consumer Confidence roll in around 10AM, which should give us a better sense of how Main Street is feeling after what I expect was a busy and expensive Christmas shopping season.
SPY is set to open at the top of the recent range, and has yet again, blown out all of the resistance levels sitting overhead. These overnight gap ups, while everyone is asleep, seem so one sided to me. If this was a game, and everytime the other team scored, the referee sent them to the bench to sleep, so the other team could score, we simply wouldn't watch that game. Well, welcome to the markets, and let's all hope this insane ponzi ends soon so we can go back to the game we all love so much. Having said that, we are at the top of the range again, and at the ATH, so I expect to see further selling today, off the back of yesterday's negative sentiment, and volatility. Let's see how the cookie crumbles today. As I've said before, the only way to prepare for trading this market, is to expect the unexpected.
Thanks for your time today guys, I hope you enjoyed the analysis. Stay tuned for our live play-by-play 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.
Comment
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The live play-by-play is available at the Hedge of the World website. You can find the link in our profile!
@kwood0319, Potentially, but I think a more realistic target is 20 - 30 on the first leg, then if we see a second, 40-50. I'm expecting a spike in Vix to at least 35 in the near term, so that's the first leg. What are your thoughts?
The_Bitcoin_Boy
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@Hedge_Of_The_World, Given how overvalued and leveraged the market is, I could see a correction to SPX 3400-2800, which I'm not sure what UVXY level that would equate too, but those are my market targets, if not lower. Although I don't think it will crash as fast as it did in March. I just don't want to be as conservative as I was in March when holding TVIX and missed out on the excess 800% :(
Hedge_Of_The_World
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@kwood0319, If you haven't already, you should check out the website. We're chatting all day with traders about market price action, while we do live analysis. hedgeoftheworld.com/
Poetry, love your article man, I’m learning from you
Hedge_Of_The_World
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@Edulindolo, Thanks so much, my friend! I really appreciate that.
Dr_Roboto
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Great overview as always.
I really detest the overnight action. It sucks out all of the "fun" and skill out of trading. I did an analysis back in June or July on the DJI and found out that something like 75% of all major progress in the rally was after-hours/overnight (usually around 1-4am). That is how you know this whole market is BS. Trading during the day is usually just fill the gaps and chop. That is all yesterday's quick drop was. A test of support and fill the gap from last week.
Hedge_Of_The_World
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@Dr_Roboto, Thanks buddy! Yes, I completely agree. The "buy the close, sell the open," trade, now seems as institutionalized as the Fed Put. Can't wait for price action to reflect the actual market again. Hey, a man can dream!