Thursday, June 26, 2014

Short Term Top

I was going to take a weeklong blog break but the trading action just got interesting just as I took the break!  The battle lines have been drawn, with the bulls providing initial support at ES 1937, and the bears providing strong resistance at ES 1953 and 1959 areas.  It is no longer a one sided market, and with all the good news catalysts used up, there is not much fuel for the bulls in the near term.

That being said, I am not in a rush to try to catch a big down move by shorting.  Because I just don't see a big down move happening.  If it does, then I miss it, and move on to the next trade.  But I still am not thrilled with the odds for shorting this market.  Because I still believe in the big picture blowoff move to 2100 later this year.  

The bond bull train left me in the dust as I microtraded myself into sand pounding regret.  Now I believe that the next stop for 10 year yields is 2.40%.  Earlier this week, the 5 year bond was so hard to find short that it was a special, meaning that shorts had to pay a carry of 3% to short the 5 year, which is a sign of extreme short interest, and a lack of borrowable supply at the banks.  The Fed has bought up so much Treasury supply that it has distorted the market and caused a shortage of bonds at the big banks.

As I am writing, ES is taking a hard move lower.  This only happens when you have a lot of saturation in the stock market.  All the buyers have been satiated at these levels, in order to attract value buyers, this market has to go lower in the short term.  But longer term, supply and demand favors the bulls, as there is a continuous reduction of equity supply by stock buybacks among the large cap companies.


MM111 said...

Barely 1% dip and now we are of up again.

Market Owl said...

It's a very bullish market, its undeniable. Indicators that would signal a trend change in most markets have been useless. Shorting is so tough in this market, I have given up on it for the most part, except for quick intraday trades.

But with the indicators where they are, I am also cautious going long. Really a no man's land situation.