Wednesday, December 23, 2015

Santa Rally?

We are in the middle of the Santa rally.  Without any share issuance this week and with the post opex selling now over with, the desperate sellers are mostly done and with an absence of sellers, you get a low volume rise higher.  This is not aggressive buying here.  Most of the big boys are done for the year and planning for 2016.

This Santa rally should last the rest of this week, but beyond that, you are hoping for greater fools to jump in.  I don't see that happening after a flat year in the market, and nervousness ahead of 2016.

There is a huge wall of worry for next year.  Unless things really get bad, such as oil going to the low 30s and staying there, we should have a strong first quarter.  The first quarter is usually a bullish quarter as investors put in allocations to stocks.  Unlike this year, I think the trends will last longer and it will be less choppy than this year.  It is almost as if dip buying is getting too easy now with every dip except the one in August being contained to no more than 6-7%, and being met with immediate buying.  Even the August dip was met with aggressive buying after the first bottom.  We've had very few dips where the market goes down and stays down.  Most have been V dips.

Expecting a grind higher for the rest of this week.  Should give back some of this week's gains next week however.

I am taking a blog break till the first trading day of January.  I may post some comments occasionally here and in Twitter.  Merry Christmas and Happy New Year.

Monday, December 21, 2015

Beginning of the End

This bull market is almost 7 years old.  It has confounded a lot of investors, with the massive divergence between the real economy and the markets.  We are at a point in the cycle where the upside is limited but the downside is huge.  But it's a what have you done for me lately market, so any sustained rallies next year will force fund managers to get into equities to keep up with the indexes even though they know its a horrible time for a long term investment.

That is where we are at now.  The driving force for a rally from these levels is stock buybacks, cash M&A, and a chase for performance to keep up with the S&P 500.  The first two are still going strong, it is the third thing that will be the ignition for an irrational rally to new all time highs.  Of course this is a speculation.  But with the way this year is ending, and with the Fed rate hike, the stage is set for underinvested fund managers to be forced to buy to keep up with the S&P, even though they aren't true believers.

There are two main scenarios that I envision can happen in the first quarter of 2016:

1) We get a sustained change in investor sentiment to bullishness as oil bottoms and rallies towards $50/barrel, and we hit new all time highs in the S&P 500 in the first quarter, and the Fed raises rates again in March.

2) We continue this trading range from around SPX 2000 to 2100 as sentiment remains the same, oil stays low, under $42/barrel, and Fed stays on the sidelines.

I am leaning towards the first scenario, although I cannot rule out a small chance of oil continuing to go lower and lower down to $30/barrel and staying there and causing massive pain in energy names leading to a retest of the August lows at SPX 1867.

As for the rest of this year, we could bounce a bit from this post Fed hike hangover, but it will very tough to get back above positive for the year above S&P 2058.

Friday, December 18, 2015

Sloppy Bottom

I am not convinced that we are in a bear market yet.  But its so close to the end of the bull market that is it really worth it to try to play for the final up move before the trend turns bearish?  The US is fine, but the Asian markets are a total mess, especially Hang Seng and H-Shares.  They are barely a stone's throw away from the lows in September.  And Europe is weak despite being loved by the investment community.

We should bottom soon, and start a short term uptrend after all the sellers have vacated the premises pre-Xmas, but with oil stuck in this rut, you can't get any kind of meaningful up move that will stick long term.  I keep checking the retail flows into USO and UWTI to see if we are finally getting some selling but all they do is buy every day.  EVERY DAY.  The shares outstanding in both USO and UWTI are at all time highs.

This market is really doing a good job of wearing out the bulls, and the bears.  With options expiration forces pressing down on the market, and fund managers looking to hedge downside exposure after their December puts expire, you are getting some pain out there.  As I write this, after an auspicious start for curude oil, it is plunging again.  It is once again holding this market hostage.

There has to be a bottom somewhere near 2000, question is, do you step in now or wait for Monday?  Either way you gotta be a buyer, even though this thing looks so sickly.

Thursday, December 17, 2015

Don't Believe the Fed

They know nothing.  Even if they do know something that's gonna spook the crowd, they aren't going to say it.  The part that Yellen said about oil prices was laughable.  Since when did she become an oil expert?

And the Fed dot plots?  They've been completely wrong ever since they first came out.  Let's not forget those claims in 2010, 2011, and 2012 about the Fed funds rate being such and such by 2015, way higher than they are now.  And these aren't all hawks either, one of them was asking for negative interest rates this year (Kocherlakota)!

4/7/2011 – Fed Governor Jeffrey Lacker – “Rate hikes by year end certainly possible

5/5/2011 – Fed Governor Narayana Kocherlakota – “Under my baseline forecast, it would be desirable for the (Fed) to raise the fed funds target interest rate by a modest amount toward the end of 2011

2/6/2012 – Fed Governor James Bullard (as reported by Reuters) – “Fed should raise rates in 2013”

Are these Fed officials fortune tellers?  More like contrarian indicators to me.

We got the sell the rumor, buy the fact reaction yesterday.  Everyone was waiting for something horrible to happen with the rate hike that when it did finally come, there were no more scare crows left holding stock.  They had already sold into the hole on Friday and Monday ahead of the FOMC meeting.  You were left with strong hands holding stock and when the expectations were met, you had vigorous buying by those holding too much cash.  The leftovers of that buying power are spilling over to today in the form of another gap up.  After the big gap down on Friday, as the market's tendency to do, you have 4 straight gap ups, one of them being a monster gap up.

When there is no clear trend in place, you have to buy the fear and sell the greed.  This trendless market will not last for much longer.  I expect there to be a last gasp rise in the first half of next year followed by a bear market.

As for now, you have to be leaning bullish in bonds and stocks for the next few months.  I am neutral on oil, and have changed my mind on gold.  Gold just looks like its stuck in a stagnant area, probably stuck in a narrow range.  Too many bears for it to go down much, and with its blood brother, oil, this weak, not enough potential gold bulls for it to go much higher.

Expecting a short term pullback in stocks over the next few days starting today or tomorrow.

Tuesday, December 15, 2015

It's a Crude World

The market is hanging on with baited breath waiting for every move in WTI.  You saw crude bottom in pre market yesterday and continued crude oil strength provided the support that the market needed to make an intraday reversal and finish near the highs.  Now with the Fed announcement just one day away, you are getting some optimism coming back as the Pavlovian response to buy on Fed days comes back to the market.

Everyone knows that the Fed will raise rates, but it still makes them nervous, just because it hasn't happened in such a long time.  Let's not forget that the UK has interest rates at 0.50%, so it doesn't mean the end of the world for that economy.  In fact, the UK is probably one of the strongest economies in Europe.

And pretty much everyone knows that the Fed will be excruciatingly reluctant to raise rates any further after tomorrow if oil stays below $50/barrel.  The benchmark, Brent crude is only trading at a slight premium to WTI, so year over year, the cost for gasoline and heating oil are much less.  That is going keep the inflation numbers low.
Crude oil usually bottoms in December, but it doesn't really start making a strong move higher till February, so there is lots of room here for crude oil to linger in the 30s, which is a horrible scenario for the energy names.  I am bullish on the market overall for the next few weeks, as the tax loss selling will be over and we'll have some new yearly inflows coming in at the beginning of January.

We need oil to get to at least $45/barrel to have a good chance to make new highs.  That is asking a lot for such a weak market.  So it is a time to be bullish, but the weakness in oil will prevent this market from breaking out strongly to the upside.

Monday, December 14, 2015


The crowd is starting to capitulate.  We are getting scare mongers act like junk bond experts now.  Who cares about the junk bond market.  There is a reason it is called junk.  These are speculative companies that raise capital at higher interest rates for a reason.  It is weak because of weak oil and nat gas, nothing more, nothing less.

I sold out of the ES long on Friday and will re-enter today as we get close to SPX 1985 support.  I will be buying intraday weakness today.  It is getting nasty out there, the best times to buy.  The Fed will be dovish as all get out and is probably one and done for good.

Stocks will love a dovish Fed and finally get the cloud of an interest rate hike out of the system.

Buy the fear.

Friday, December 11, 2015

Blood in the Water

The sharks are circling the bloody baby seal.  Gap down is just a flesh wound coming from Europe.  We got crude with another gap down today and it is starting to really affect the indices.

I can finally see the blood in the water as the pre FOMC nerves and endless bottom in oil are acting like a 1-2 punch to force a risk off.  Funny thing is, this rate hike is doing a great job of pushing down interest rates with risk off price action.

Looking to get long ES later today around SPX 2024.  This will be a long term holding.  Fed is going to be very dovish with their statement and conference call.  That will excite equities.

Wednesday, December 9, 2015

Tragedy of the Common Man

We are seeing a pile into oil ETFs like its a blue light special.  UWTI, the triple leveraged ETF, added 21M shares yesterday, to get up to 200M shares outstanding.  That is a 10% addition to the ETF, or $100M.  That is the most speculative oil ETF out there and retail is piling in like its a once in a lifetime opportunity.  USO was not far behind, and it is a combination of institutions and retail, that added 8.4M shares, or $100M as well.  The bottom pickers have not given up, and oil continues to drop.

Now, I do think oil will bottom in the short term before the year is over, and we should get a strong rally in Jan and Feb, but there are so many other better asset classes to be in for that strong rally, that I'd rather just be in ES, because it will go up with oil, anyway, and it doesn't have the negative effects from steep contango taking away from returns.

This week is the pre-FOMC meeting position squaring and crude oil collateral damage combo at work.  It will present a good BTFD opportunity later this week.  I am on the prowl to buy ES and ride it into the New Year.  Also think we'll get a good rally in bonds as well so I will add bonds into the long mix.  After thinking about it, I will hold off on gold but if gold can dip between now and Fed meeting to 1050, I will look to buy.

Friday, December 4, 2015

Bonds and Gold for 2016

Although I trade often, I always want to keep an eye on the long term moves in play.  As George Soros states, the market trades based on a perception until is proven false.  Right now, the overriding perception is that of a dovish ECB/BOJ and a hawkish Fed.  While the perception about a dovish ECB and BOJ are correct, I believe we will find out in 2016 that the market is wrong about the Fed.

I do not believe that the Fed is hawkish.  Yellen is in fact acting as if the economy is strong in order to commit to their promise of raising rates this year.  After that promise is fulfilled this month, expect your normal dovish Fed talk and actions.  The US economy peaked in 2014 and has been slowly getting weaker.  That is not being fully reflected in Treasuries because of the fear of buying ahead of the Fed tightening cycle.  If the Fed is perceived as being one(not going above 0.50% Fed funds rate) and done, which I believe is the case, there is a LOT of upside in Treasuries.  It is something I see happening in 2016.

That doesn't mean that equities will be weak.  The economy is not weak enough to signficantly affect profits, but it is weak enough to keep the Fed from raising more than once.  And lower bond yields will help corporations, all else being equal.  Also the perception of a one and done Fed will get asset managers excited about equities again.  So after the Fed meeting on December, 16, I expect equities to do very well for the first few months of 2016.  Stock buybacks and cash M&A are still rolling along like a freight train.

If the Fed is indeed one and done, then on December 16, the Fed tightening cycle would officially be over.  That is extremely bullish for bonds, especially the belly, between 5 and 10 years.  It is also bullish for gold, as gold will not have to worry about a hawkish Fed anymore.  It just happens that gold is probably the most hated asset class out there.  Also, gold tends to bottom in December and explode higher at the beginning of the year.  Bonds aren't hated, but they definitely are not liked.  There could be some seriously explosive moves happening in bonds and gold in 2016.

I can picture an S&P at 2200, 10 year yields at 2.00%, and gold at $1150 by February 2016.  Risk parity funds should also be back in style next year.

I will use any weakness in equities, bonds, or gold over the coming days ahead of the Fed meeting to put on long term positions.  The short term trading game just doesn't pay when volatility dies down.

Thursday, December 3, 2015

Widow Maker

What you are seeing in the EURUSD, the Bund, and the Treasuries are widow makers.  Six sigma moves.  You don't often see the Bund yield up 20 bps in one day.  Along with the euro up 3%.  It is rare indeed.  Treasuries are selling off to the tune of 16 bps so far, with a few hours left in today's session.  Ahead of tommorrow's nonfarm payrolls report, there are no willing buyers here.

All because Draghi didn't UPOD.  Underpromise Overdeliver.  He overpromised, got the markets all excited, and underdelivered.  That is a no-no in the QE driven world we are in.  It has crushed the European indices and the spillover is carrying over to the US.  This is an overreaction.  But so much hot money is in the short EURUSD and long European stocks trade that the hit is massive on both sides.  For a euro-hedged buyer of European stocks, you are getting the worst of both worlds.  An absolute crushing.  And that just happens to be one of the Street's favorite trades.  The unwind is extremely painful for the hedge funds.

The pain in equities should easily extend into next week, with nothing to look forward to, with Yellen intent on raising rates come hell or high water.  The market is scared to death of the Fed raising rates while crude oil is hovering around $40 and with ECB not delivering the goods.  I see ES 2020 in the cards next week.

Wednesday, December 2, 2015

Don't Ask Don't Tell Bond Buyers

Yesterday we saw something that you rarely see:  an explosive rally in bonds, without Bunds forecasting it, on NO news, with a strong stock market.  To top it all off, it happened on the 1st day of the month.  Totally out of left field.  I don't think I was the only one caught off guard.  The move was a one way freight train.  Now I know some of the amateurs will say that the Turkey bomb news caused the rally.  Gimme a break.  Then why didn't stocks selloff?  That kind of news doesn't cause a 9 bps move in the long bond.

As I've stated before, when the fund managers are comfortable and acting rationally, they make fewer mistakes.  My edge comes from taking advantage of the institutions making mistakes.  And in a bull market (applies not only for stocks, but also for bonds), fund managers are feeling no heat, and make very few emotional decisions.  In a bond bull market, you get motivated buyers stepping in out of the blue, in a strong stock market, without warning, like yesterday, ahead of a nonfarm payrolls report later this week, and there just isn't enough selling force on the other side to keep it orderly.  That kind of unpredictability doesn't happen as much in a bear market.  The best trading markets are bear markets.  Obviously, that is the worst market for the institutions, who are always long.

Believe or not, this Fed rate hike is doing nothing to scare away bond investors.  The long bond has been screaming higher and when that happens, you are not going to scare away bond buyers, even those that are buying the short end ahead of a Fed rate hike.  Eventually that long end strength spreads out to the short end.  Rarely do you get short end weakness to spread out to the long end over extended periods of time.  The long bond is the general, and the shorter maturities are the troops.

In this QE world, you can only really have a sustained weak bond market when the long end is leading the way down, not the short end.  Flattenings scare nobody in the bond space.  Why?  Because rates are going to stay low, no matter what.  That is what you saw in 2014.  A flattening that was extremely bullish for bonds.  You need a bear steepening to catch the attention of the bond investors.  It happened briefly from May to June, but that was it.  That just so happens to be the high for yields this year.
Now all the bond fund managers can't put on flatteners fast enough.  It should continue for the rest of the year, as the Fed rate hike will embolden them.

Tuesday, December 1, 2015

Mind Numbing

When you have such a tight range over the past several days, there isn't much to do.  It is tempting to attempt a short here but with Bazooka Mario on Thursday, I would rather just wait a bit longer.  It doesn't bother me too much if I don't take advantage of a mediocre short opportunity.  The shorts will always be available for the S&P skeptics, as the market spends a lot more time near the tops than near the bottoms.

The surprise move of the day is the big time rally in bonds, even with strong stock market.  I definitely didn't see that coming, not with nonfarm payrolls coming up on Friday, and the much anticipated Fed rate hike in middle of December.  Trading is a game of probabilities, no matter how certain you are that something will happen, nothing is guaranteed.

October was a good trading month, November not so good.  It is a grind out there.  Will look to short WTI on any rallies up to $42.50, with a target of $40.

Monday, November 30, 2015


Starting from today, you will see traders setting up their positions for nonfarm payrolls and the FOMC meeting in 2 weeks.  You have to think ahead of what the Street will do ahead of those events.   A risk off sentiment should persist for the next week or two, as the market prepares for a Fed rate hike.  The best set up seems to be to short crude oil and bonds.  I don't have as much interest in shorting equities due to the beginning of the month tailwind that equities usually experience.

There is a lot of speculation in small caps going on lately and it has kept me busy with some intraday trading in that space.  Nothing exciting today however.

Monday, November 23, 2015

Crude Implications

Crude oil has been a laggard compared to the S&P as many of you have noticed over the past month or two.  I have looked at the crude oil ETF flows and there are still massive amounts of retail/institutional inflows into the long and leveraged long ETFs.

As you can see above, there isn't that big of a difference considering that one was over 9 months and the other was over 50 days.  You have much greater inflows on a per day basis over the past 50 days compared to the first 9 months of the year in both the UWTI and USO, the 2 most popular oil ETFs.

It seems like traders are still too enamored with trying to pick the bottom in oil, even though it hasn't paid off for over a year now.  Eventually you will find a bottom, but I don't expect a V bottom.  It should be a messy, sloppy bottom that wears you out rather than scares you out.

On equities, I am negative this week due to how close we are to SPX 2100 strong resistance, and the weakness in oil and the strength of the dollar.  It reminds me of the earlier part of the year when you have 5 day rallies to the top of the range, and then weaken suddenly for the next 3 to 5 days.  Examples are in January and March.

On bonds, I am positive because of the above view on equities, the relentless bid in Bunds due to upcoming Draghi fireworks, and the resilience that bonds showed last week despite a strong equity market.

Thursday, November 19, 2015

Bonds Up Stocks Up

We are getting the long term investor's wet dream this week:  stocks up huge and bonds also up big.  The market seems immune for the time being with crude oil weakness, and dollar strength.  The immunity will not last for long.  What you are seeing is the inflows of the wait after Fed minutes to buy crowd.  They were substantial, judging by the price action.

The bond market is following the Bund, which has gone up for 8 straight days, the most since October 2008.  The Bund is extremely well bid, as there are lots of buyers who want to front run the ECB QE announcement in early December, and those who use the Paris terror as an excuse to buy Bunds.  Whatever the case, you cannot keep bond prices down for long when you have both ECB and BOJ with massive QE every month.  And the Fed will not spoil the party with any hawkish talk or actions.  They may raise in December, if they do, they will probably include a statement that they are on hold for a few months AT LEAST.

There is a power flattening in the 5-30 curve, seems like front running of the end of month buyers already.  The buyers are getting bolder and bolder these days with central banks who have their back.

Expecting a run up to SPX 2100 by Monday, at the latest.  We might even get there tomorrow.  With bonds this well bid, that is always a positive when equities are strong.  If bonds were selling off this week, I would be more concerned about downside in equities.

Wednesday, November 18, 2015

No Terror Attack Gap Up

We got the absurb, but high probability no terror attack gap up.  Yes, people are that scared of an overnight terror attack that they will sell stocks and or hedge with futures and unwind the hedge in the morning.  This gap up is the unwinding of the hedge/buying back what they sold yesterday afternoon.

VIX has been reluctant to selloff too much, as it was relatively strong despite the rally mid day yesterday.  It was a foreshadow of afternoon weakness.  Maybe ISIS was buying VIX futures ahead of the terrorist plot in Germany.

We get the highlight of the week, the Fed minutes at 2:00 pm ET.  I am hoping for a hawkish Fed so that bonds go down and provide a buying opportunity.  With the relentless strength of the Bund, there is limited downside for Treasuries at these levels.

Crude oil is weak as usual.  Ho hum.  Hoping for a run down to the mid 30s for a possible swing long play on the long side.  Short term bearish on crude, long term bullish.

Monday, November 16, 2015

Still Long

Seems like ISIS must have shorted stocks ahead of their terrorist attacks.  With no news, the market just got crushed on Thursday and Friday.  Now that the bad news is out, and the weak hands have been shaken out, we can finally get a good oversold bounce here.  If you took the pain in getting long, you have to ride the pain relief rally on the other side.  Otherwise you just end up riding your losers and cutting off your winners.  If you are going to ride your losers, you have to ride your losers when they become winners.

I am expecting a lot of resistance between SPX 2060 and 2080.  This looks like the market in January when it was chopping around in volatile fashion for several weeks.  We will probably repeat that chop as long as the Fed keeps the hawkish tone.  They are unusually quiet today despite the Paris attacks.  It was a total overreaction by the chicken littles and fear mongers this weekend.  Panicking over terror is always a dumb bet.

Friday, November 13, 2015

Nothing Easy in this Market

It is a market that overshoots.  Both the upside and the downside.  I got in early yesterday and am underwater on yesterday's longs, but I will hold on for the ride, since it is day 8 of the selloff and we have strong support underneath at SPX 2020.  I like the risk reward at these levels, although I should have waited a day to get in.  Another test of 2100 is in order as this market consolidates the huge up thrust, and with the derisking because of the Fed rate hike worries, it shouldn't last long as the Fed will likely be one and pause (for at least 2 meetings), which the market would rally huge on.

Don't be surprised if the Fed comes in with dovish words in the coming weeks to calm down the markets and give them room for flexibility in December.  You have your classic Friday risk off trade today, and you can tell it is getting painful as the Nasdaq is taking a big hit, much more than the S&P.  At the end of selloffs, the most beloved names are the ones that get taken out.

Crude oil continues its bear market, and I wouldn't touch it here.  But any kind of dead cat bounce would be a huge boost for stocks.

Thursday, November 12, 2015

Relentless Selling in Crude

Crude oil never gave the counter trend trader an opportunity to reload on the short.  It is weaker than I thought.  We will be going to the 30s by December.  I would guess $38 is a floor, the low from August.  It is the weakest time of the year seasonally for crude oil, and the way it cannot lift at all when equities bounces, but always falls when equities falls is a bright flashing red light.

Usually with this weak crude oil you would be getting a strong bid in Treasuries, but that hasn't been happening either.  Perhaps after all the Fed speak today you will get the bond buyers coming back in, but fear of the rate hike will be around for the next few weeks.  I still want to buy but there is not much volatility, the market hasn't gone anywhere this week.

Stocks are gapping down again today.  It is probably a sell the rumor, buy the news thing going on with Yellen and company speaking today but just not that excited about buying the dip here.  It would be more interesting if we could get down towards 2040, but I am not holding my breath in anticipation.  Just a bad trading market, overall.

Tuesday, November 10, 2015

Fed Liftoff Fears

If you were trading bonds in 2013, you know that stocks and bonds were going in the same direction, but usually only in the down direction.  The fear in the bond market was the most I have ever witnessed because of the complacency of the crowd regards to believing QE3 was forever.

Now with a much more calm Treasury market, with much lower yields, you have a mini version of the taper tantrum, this time it is the Fed liftoff tantrum.  It isn't very scary, just because with the ECB promising even more negative rates, and possible QE expansion, the Bund ain't going anywhere.  And Bund yields will not rise until we see much more strength in the Eurostoxx.  Despite a very weak euro,  Eurostoxx is still about 8% below its yearly high, with S&P only about 3% below yearly highs.  

And it is pretty much a given that the Fed is one and done, or two and done (if you see a stock market bubble), and that will not be enough to keep bond yields high.  It looks like we are coming to a great buying opportunity in bonds that will pay off for all of 2016, just like buying bonds at the end of 2013 paid off for all of 2014.

Once this little selloff passes, expect the S&P to get back above 2100.  I am not buying yet, but I see limited downside for S&P given the backdrop.  I would be a very willing buyer at 2040-2050.  

Monday, November 9, 2015

All About Bonds

Nothing else matters.  The bond market has stolen the show.  The Fed rate hike in December is getting priced into the markets.  Usually weak crude oil would help support bonds but the weakness is due to a potential Fed rate hike, so investors aren't touching bonds.  And equities don't like a Fed rate hike either.  Usually a big beat on nonfarm payrolls is good for stocks but everyone knows that zero rates is much more helpful to stocks than a marginal increase in jobs.  Plus, I don't think anyone believes the economy is as strong as Friday's NFP states.  Nobody.

When the dust settles, you will have a great buying opportunity in bonds.  This move will last as long as the Fed's resolve to keep raising rates, which means it won't last long.  The Fed is most likely one and done, or if equities squeeze higher next year, two and done, because if they dare try more than that, the stock vigilantes will crush equities and show who's boss.  There is no way this market can keep rising with rising rates.

ES is untouchable here.  Bonds will be volatile till the Fed meeting in December.  That is where the blood is being shed.  Forget equities.

Friday, November 6, 2015

Bond Rout

Well that monster nonfarm payrolls report puts a cap on a horrific week for bonds.  As I write, the 10 year is trading at 2.31%, and the 5 year is trading close to yearly highs.  This is not a quick move that will just dissipate.  The catalyst for this selling is not just the jobs report but what set up the weakness ahead of it:  Yellen saying December is live.  Well with this kind of report, and my doubts about any significant stock market weakness till year end, there are no more excuses to delay.  If they don't hike in December, they will have lost all credibility with the market, and they will be ignored until they take action.

I have little interest in trading equity index futures now, with the low volatility.  But with blood running in the bond desks, there will be some interesting action in the coming weeks.  I always prefer trading a market that is falling, because of the emotional trade that gets involved.  When everything is going up, the market is calmer, and almost emotionless and lifeless.  You need to see fear in the fund managers eyes to get good two way trade.

This dip in the bond market is not buyable yet.  I am looking at a couple of levels, 2.36% in the 10 year and 1.78% in the 5 year.  Those are big support areas and should be a good risk/reward area for dip buyers.  With the curve staying relatively steep (30 year is weaker than one would expect for such a strong jobs number), there seems to be a lot of liquidation left to go.  Probably will be weak till the 10 year note auction next Tuesday, which is ahead of Veteran's Day holiday (11/11) for bonds.

Wednesday, November 4, 2015

Lots of Resistance

As we go towards new all time highs im SPX, the resistance gets stronger.  A lot of trading took place at these price levels before the big August drop.  There will be those looking to sell at these prices.  More importantly, fund managers will be reluctant to buy aggressively at these levels at the moment.  Perhaps with a bit more consolidation we can move to new all time highs.  No strong opinion either way.

I have entered short in crude oil this morning and expect a pullback down to 44 later this month.  Also, SPX should struggle to keep blasting higher.  Bonds look attractive here as there has been a deep pullback since the FOMC meeting.  I don't expect much from Yellen testimony today.

Monday, November 2, 2015

Expressing a Bearish View

I know there are a lot of traders out there saying this one month rally in the SPX is way overdone, ridiculous, a setup for another dive. etc.  But there are other ways to express your bearishness without having to deal with the underlying strength of the S&P.

1.  Long bonds.  The ECB has upped the stakes and will do more QE.   There is a strong correlation between German Bund yields and Treasury yields.  If Bunds maintain a low yield, expect Treasuries to follow.  There is limited downside in Treasuries as long as Bunds remain strong.  And since the ECB is expected to make the announcement in Decemver, there should be a solid bid remaining for Bunds even as equities rally.  And if equities selloff, then you could get an explosive move higher in bonds.

2.  Short crude oil.  As I mentioned last week, crude oil is in a seasonally weak time period and has been weak relative to equities for most of the rally.  It caught up a bit last week, but still can't get close to $50, and is down today even though equities are strong.

3.  Short USD/JPY.  For the currency traders, this is the best way to express your bearishness.  With the BOJ failing to act last week, and with Fed rate hikes still uncertain, the bears have the upper hand.   My least favorite of the three ideas, but better than shorting ES.

Sunday, November 1, 2015

Times to Hustle

The market is a bit like the ocean.  There are long periods with nothing to catch and then suddenly a school of fish come by the boat and you can't haul the fish in fast enough.  It is also a bit like Mardi Gras, as I wrote a couple of years ago, Feast or Famine.

There are times when there is nothing out there.  A trading desert.  e.g. March to June of this year.  Low volatility, calm markets, and investor neutrality.  Now is one of those times.  The dry season.  You can't make rain when there are no clouds.

If you've traded long enough, you know when you need to hustle and make as much as you can because you know its not going to last for long.  The perverse thing is that often times, these great trading markets happen after a sudden loss in my account.   The opportunities are greatest when the market suddenly makes a big move, usually in the downward direction.  And if you are trading based on a low volatility regime, and buying dips, then you will lose a chunk when the vol explodes higher and the dip turns into a trench, like it did on August 24.

But the aftermath of those vol explosions is panicky trading, with more predictable and larger price movements.  The overnight futures movements get exaggerated as the fear intensifies.  During that August/September panic period, you saw quite a few big overnight moves, often times larger than the intraday movements during the regular trading hours.  A lot of that is emotional and fear based trading that produces moves that are big, but unsustainable, which often reverse during the regular trading hours.

With the craziness in the overnight futures market, I was trading more actively and getting less sleep.  Probably averaged about 4 hours/day of sleep during the heart of the volatility in August and September.  The reason was I knew I could make more by trading more during that time period.  Instinctively I knew that was the time to hustle, and pump up the score.  During those weeks, by the time Friday came around, I was heavily sleep deprived and exhausted.

Now there is no way I would sacrifice that much sleep to trade this market.  In fact, most of the time, this market actually puts me to sleep.  Even in individual stocks the action isn't all that good.  It must be the relative weakness of biotechs and the small caps that have quelled the speculative fever.  You know you have a bad trading market when the bond futures is more exciting to trade than equity index futures.

When the golden periods of the market arrive, you know you have a short period of opportunity to collect before things get tougher and return to normal.  There were a lot of good opportunities in a short period of time.  But it's over.

The time to hustle has passed.  If you didn't take advantage of these opportunities, learn from this experience.  Be prepared and stay sharp by observing the market so that when the next golden period arrives, you know to hustle and make a big score.

Friday, October 30, 2015

Upside Exhaustion

The uptrend has been amazingly strong.  Beyond most people's imagination.  But now that we are closing in on SPX 2100, the risk reward is slightly favoring the bears.  Unless we get a rocket higher and break through to new all time highs, the market should take a pause here.  I am not that interested in shorting this market yet.  If I do short, it would just be for quick trades, nothing more than a day.  And it is tough to be long up here, just because of the speed at which we've gone higher.  I am sure any pullbacks down to SPX 2060 will be bought up ravenously by those underinvested and left behind.

What is interesting is that the Fed supposedly talked hawkish and the market is still going higher.  You would think that Europe would like a hawkish Fed and a dovish ECB but Europe has been lagging all week, and is relatively weak again today versus the S&P.  Europe is still way off the yearly highs despite the EURUSD being near the year's lows.  I am not hearing anyone worried about this relative weakness in Europe lately.  Still seems that Europe is more loved than the US.

Bonds are getting interesting again, we might be headed for a repeat of May this year, when we had a bond scare with the 30 year getting destroyed, with yields going from 2.6% to 3.1% in 2 weeks.  The velocity of this down move is not so great, but something to keep an eye on.  There is decent resistance in the 10 year yield at 2.20%, so not too far from here.  I would look to buy around that area, expecting buyers to show up.  This also goes hand in hand with my view that crude oil will top out around 46-47, and SPX has limited upside.

It is back to your boring low volatility market, so I am lowering my expectations for trades, both up and down.

Wednesday, October 28, 2015

Fed: See you in 2016

The Federal Reserve might as well take a vacation till March.  They will do nothing for the rest of 2015, and depending on the stock market, could do nothing in 2016.  All that rate hike talk went down the toilet with one weak jobs report and a little scare in the stock market.  Sure, we had below expectations economic data, but if they are expecting hot economic data after 6 years of an economic expansion, they will never raise.  They are always too optimistic in their projections and always lie about inflation.  This gives them excuses to always do the easy thing: please the market.

I wouldn't short into the Fed meeting, because for some idiotic reason, people still think Fed will raise rates or say they will raise rates.  And they get surprised when the Fed is dovish.   Expectations are for the Fed to do nothing, so I don't expect a big move afterwards.  But still, if they will surprise the market, it will be to the overly dovish side, of course.

Thinking about shorting on any post FOMC euphoria, but its not that good of an opportunity.  The market is close to equilibrium, the predictable portion of the migration is complete, and any moves too far up or down should not last long.

Tuesday, October 27, 2015

Crude Oil Bear Market

Crude oil looks like it wants to test $38 again.  It has been extremely weak the past two weeks, when equities have been ripping higher.  However, since crude oil went over $50 on October 9, and its now trading around $43, you had net fund flows of $133M into UWTI, triple leveraged crude oil ETN, and $190M into USO, crude oil ETF.  Those are really big inflows for UWTI, which only has net assets of $900M, which means you had about a 20% increase in shares outstanding in just two weeks.  UWTI is the most speculative of the crude oil ETN/ETFs, being triple leveraged with massive decay from daily resets.

Now we are entering the seasonally weakest part of the year for crude oil.

It looks like a disaster waiting for crude oil for the next 2 months.  Crude oil usually follows the equity market, and it has been unable to keep up with the equity rally.  Even with all the central bank actions, crude oil can't rally.  In fact it is doing the inverse, going down while equities are going up, rare to see these days.   

This crude oil weakness will keep a very strong bid for bonds, which just loves a weak oil market, more so than a weak stock market.  Bonds are probably the most bullish thing I see right now.  

Monday, October 26, 2015

Scars from 2008

"It is not what I think that is important, it is what others are thinking that is important."

It is still there.  The memories of 2008 die hard.  For most in the investment community, avoiding being caught long in a 2008 style crash makes most overly bearish when you get a steep drop like you did in August and again in September on the retest.   This creates a market that goes into disequilibrium even though fundamentals have not changed much.  Nothing drastic happened from August 18 to August 25 to make the market drop 230 SPX points.   It was not as if China suddenly had a crisis.  It was just the fear of another 2008 that caused the selling.  As a trader, I have no fears of a 2008, because that was probably the best trading year I ever had.  In fact, I would love to be able to trade a market like 2008 again.

It is still stunning to me to see people so bearish on these big dips, because they have been such great buying opportunities for 6 years straight!  It is hard for me to understand, but it must be the scars of 2008 which run so deep that they emotionally trump the past 6 years of raging bull market action.   It is not what I think that is important, it is what others are thinking that is important.  I am not the one driving the stock market, it is the institutions and the collective psychology of the masses moving it.

For me, the biggest scars came in 2010 and 2011, when my excessive bearishness and chasing losses hurt me big time.  Unlike Twitter traders, I will admit my past defeats.  That is a part of the game that trading vendors and gurus gloss over.  If you don't study your defeats, you will repeat them.  Even if you study them, you are likely to repeat the same mistakes until you take them seriously and not just say its bad luck.  That is why I didn't fall into the trap of shorting the right side of the V this month, because I remember getting face ripped in the same situation in 2010, 2011, 2012, and 2013.  I was so hard headed and am such a natural bear, that it took 4 years of horrendous ES shorting losses before I adjusted.  Those adjustments, such as going long bonds as a substitute for shorting stocks has paid off over the past two years.

So what about the current situation?  With the kind of disequilbrium that we were in by late September, without a bearish fundamental change, the market could only go back up to where it was before the dislocation, and that is SPX 2080.  You can even argue that the current market is even more bullish than before the big drop.  We've  got a more dovish Fed, an ECB more committed to QE, and China easing more aggressively.  That easily trumps a slightly weaker credit market.

Now, we are back near 2080.  I initially thought I would love to short this level, but after reviewing what happened in 2014, and with the current investor positioning, it isn't so attractive as I once thought.  We will probably get a 2-3 day pullback after the Fed meeting in a sell the news reaction.  Beyond that, I would still rather buy weakness than sell strength.

Friday, October 23, 2015

Suppressing Volatility with CBs

The global central banks (CBs) are doing their best to support asset prices, under the veil of deflation and growth fears.  There is an interesting research report by Artemis Capital Management, a volatility fund that blames central banks for creating shadow convexity and moral hazard with their market supporting actions.  It is a fun read, but I totally disagree about shadow risks and future mayhem due to central bank intervention.

The biggest risk for financial markets is the lack of money, or liquidity.  The next biggest is high inflation, which kills the bond market, the backbone for capital investment.  That is why you had many more frequent crashes when the world was on the gold standard, when money was always tight.  Even with fiat money, without QE and artificial suppression of interest rates, you get spectacular crashes like 2008, and VIX regularly in the 20s, like the late 1990s.

What you get with constant QEs is a VIX at equilibrium around 14, where we are at right now.  The liquidity is still overflowing.  That is why the 1% keep spending like crazy, making vanity purchases driving up the art and real estate markets.  The Fed is still reinvesting assets on its balance sheet, they are not tightening anything.  Yes, 25 bps is a big deal.  Tell me how you would feel being long ZN (10 yr T-note futures) and having it move 2 against you (25 bps).  You would be down $2000 for each contract, which has an initial margin of $1500.  Wiped out if you were on full margin.

It is a goldilocks economy, not weak enough to stop stock buybacks but not strong enough to cause the Fed to raise interest rates.  It won't be like this forever, but the bar is very high for the Fed to raise rates, so the economy has to get really hot for them to act.  And this economy just doesn't have enough organic growth to get that hot.  So basically ZIRP forever.  

Draghi is the Italian Bernanke, the BOJ will buy anything, including stocks, and the PBOC will go to ZIRP policy before their crisis is over.  It is much more likely that we stay in a range bound market for a couple of years before we get a bear market.  I don't buy the argument that we will melt up to ridiculous levels, just because the demand for stocks is not that high from a demographic standpoint.  The demand for bonds is high, however.  I expect a continuation of the bond bull market and the equity bull market to turn into a range market making marginal new highs.  So basically expecting 2015 like range bound trading to repeat itself again next year, at a slightly higher level.

Mo Money

China is getting into the money action.  This looks like classic Friday morning short panic on central bank goodies.  It is setting up the ES towards 2073 resistance, which is about SPX 2080.  Shorting the euphoric open today and looking to cover within the first hour of trade.

Today's intraday action looks very tradeable.  Short the open, buy the first 30 minute dip, cover and reverse long and sell the long at the close. However, in the coming weeks, the ES will be harder and harder to predict as the prices and number of bulls and bears are close to equilibrium now.  Bonds and other markets look dead as well.  Volatility will die out.  Opportunities will be scarce.  Its time to rest and relax from the constant action over the past 2 months.  I am considering taking a trading vacation after the Fed meeting next week.

Thursday, October 22, 2015

Missed the Rocket Ship

Just depressing to see this bull rocket ship leave without me.  I have been bulled up for most of this month and I was holding the ES looking for a move higher but thought we would have some intraday pullback volatility which would let me get back in cheaper after my premarket sales.

If you want to make the big bucks, you CANNOT try to play the intraday squiggles.  Because for every time that you are able to make a few bucks on the intraday volatility, there will be days like today where the market just goes one way the whole day and you miss out on the bigger picture move.  That is what happened to me today, I turned a great trade into a good trade by cutting it off too early.  Let this be a lesson to you the next time you want to trade around your position.

More ECB Printing?

Draghi came out again with guns blazing promising more QE and even lower rates.  This has given Europe a huge boost, and a smaller boost to the US market.  Remember that ECB's QE announcement earlier this year just made the euro weaker and caused US equity investors to worry about a stronger dollar.  So what is good for Europe is not necessarily good for the US in this case.

I have reduced my ES long into the pop premarket, but I will buy on any weakness later today or tomorrow.  Still a dip buyer's market but we are getting later into the rally phase and you will get more choppy trading behavior.

Keep an eye on the euro, a weakening euro is definitely not what the S&P wants.  Treasuries and Bunds look like they are invincible now, with all central banks dovish.  NIRP forever.

Wednesday, October 21, 2015

Macro Trumps Earnings

It seems like almost all the big earnings reports so far have been misses with the stocks tanking AH.  NFLX, WMT, JPM, GS, MS, IBM, YHOO, CMG, etc.  And the futures don't even flinch on those earnings reports.  It is all macro, all positioning now.  It is all about the need to add equity exposure for the underinvested.  The Fed's dovishness is a convenient excuse to buy equities.  Investor positioning just got too bearish and unless something really bad happens (these earnings reports haven't done it), investors need to add long exposure.  It all doesn't happen in a day, or a week, it takes several weeks, up to a few months.

When you are in the middle of that transition from overly bearish investor community positioning to more normal positioning, stocks don't stay down for long.  If it goes down, it tends to only last a few hours, or a couple of days at most.  Then you have those who need to buy, putting pressure on prices to go back up.  Considering how the broad market is acting in the face of all these bad earnings reports, it tells you that there is still a significant group of fund managers that want to buy, regardless of the circumstances.

Still long ES, and given the still relatively high levels of put activity going on, I don't feel like the migration is complete.  I see crude oil trading under 46, down 5 from several days ago, and the energy stocks hardly went down.  Its a teflon market right now, and probably will remain that way until at least the FOMC meeting next week.

Monday, October 19, 2015

Opportunities Drying Up

For the futures trader, the opportunities are quickly disappearing.  Typical equity index behavior off a bottom.  Most of the gains off the bottom are made in the first 2 weeks.  The next 2 weeks of gains are much smaller and take longer, just because the volatility dies down so much and the desperate buyers have already covered shorts or returned to their normal long exposure.  

We had a golden time period for about a month and a half when you could take advantage of panicked trading to buy the dips and ride it up as the panic died out.  When there are no big dips, there will be no big rallies.

The VIX doesn't lie.  It is a good leading indicator of near term volatility.  VIX is below 15, something I don't think anyone could have imagined even last month, even if you knew that the market would go back up to SPX 2030.  The inverse of the VIX has outperformed the S&P by quite a lot during this rally.  That is a good sign for bulls, all else being equal.

But with a lower VIX, the upside will be limited, and the trading will be boring.

Friday, October 16, 2015

Central Bank Put

The Yellen put is alive and kicking.  So are the Draghi and Kuroda puts.  The stock vigilantes got their way.  They got the Fed to cave in.  The Fed is now considering mulling negative interest rates, and QE4 shouldn't be too far behind.   A rate hike is a distant memory.  Stock vigilantes 1  Bond vigilantes 0.

The most important thing we accomplished on this recent correction is to confirm that the central banks are not going anywhere.  They are here to stay, with interventionist central bank policies at the slightest sign of economic weakness.  We aren't even close to a recession, and the central banks are already feeling antsy about needing to print more money.  This is wildly bullish for equities.  It is slightly bullish for the short end of the yield curve, and slightly bearish for the long end.

Over the coming weeks, you will see the fund managers that de-risked get aggressive on the long side as they feel invigorated by a newly dovish Fed and central bankers looking for ways to pump up asset markets at the drop of a hat.

Earnings don't matter, because if they did, S&P wouldn't be this high in the first place.  It is all about the central banks, and they love to be at the center of the action.

Middle of the Migration

If you ever watch those nature documentaries, you often see the herd of zebra and wildebeest move from north to south, and then back north.  They are following the rains, to go to where the grass is greener.  It was the start of the dry season in August, and at the peak of the drought, you could sense the fear.  The weakest animals collapsed and died.  These were the overleveraged funds and individuals.  You had the grass all chewed up and dried out by the end of September, but that was the end of the dry season.

You have started the migration back to greener pastures.  It is raining again.  But the nerves from the drought are still there, but day by day, the herd gets more comfortable.  It has been 2 1/2 weeks since the drought ended, and the migration started.  Usually these migrations last 4 to 6 weeks, so there is still time left for the herd to saturate the plain and eat up all the grass.  If the conditions are very favorable, then these migrations can last for several months and prices can continue to creep higher and higher.

That is the tricky and difficult part about shorting.  When you are short and wrong about the length of the migration, you get trampled by the herd.  It is a dangerous game, short selling.  It works much better for individual stocks than for the overall market.

Even though the S&P is down for the year, if you include dividends, it is about flat.  I don't know about others, but for me, it has been a tough shorting market even though the market is flat.  The scars and habits from the previous years are hard to get rid of.  I still find it much easier to buy dips than to try to short rallies.  Because you never know when the rally that you short is the one that goes on for months and months with no pullbacks.  The fear of that possibility keeps me from doing more than surgical strike short campaigns, where I try to stay in the trade for a few days at most, and get out even sooner if the market doesn't go down at the time that I expect it to.

Staying bullish and with the growing herd.  The FOMC meeting, BOJ meeting, and the China propaganda/central planning meeting are all coming up in the last week of October.  It should be quite a bullish climax as the herd gets excited about all the money printing that is possible.  Remember, earnings fundamentals don't matter now, it is all about the fundamentals of money.

Thursday, October 15, 2015

Earnings Fears

We have bad earnings to blame for the 2 day pullback.  Bank earnings have been weak and we got a bomb from WMT.  And NFLX disappointed with their earnings.  It has been a bunch of disappointments.  As I stated before, in the comments a couple of days back, I would be a scale down buyer between ES 1992 and 1982.  Well, I followed my own advice and got long ES.

This is a pullback you usually get to consolidate a big up move off a bottom, and these consolidations usually last about 5-6 trading days.  If you consider that we got rejected by SPX 2020 last Friday, then we are on day 5 of the consolidation.  We should get a move higher off this consolidation within 2 trading days.

We got a gap up today which seems a bit surprising considering the weak earnings after hours, but global markets remain well bid.  China seems to have enticed dip buyers as there seems to be front running ahead of possible stimulus at a big meeting near the end of the month.  They never make it feel comfortable to buy weakness, and with the weak retail sales numbers and the WMT and NFLX bombs yesterday, it felt like a mini armageddon.

Bonds are tough to game here, I am not touching it because I remain positive on equities but bonds seem like they have no worries in the world with the weak economic data and dovish Fed musings.

Tuesday, October 13, 2015

Swing Shorts Don't Pay

You have to give props to this market.  It is not letting bears cover lower, as every 10 point dip is voraciously bought.  Straight Outta 2013/2014.  Even oil dropping $3 has barely budged the oil stocks, and a weakening Europe only served as a buying opportunity at the open.

And to put the cherry on top of this bull sundae, put activity is rather high for a flat day, showing no complacency whatsoever.  We are overbought, and should be having a down day here, but so many are underinvested that any weakness is bought with reckless abandon.  This market is on a mission to squeeze every last short and make every single put expire worthless.  With this much buying power, SPX 2060 is a lay up.

Begging for a trip down to SPX sub 2K for a golden buying opportunity.

Stronger Euro

Europe just cannot handle a stronger euro.  A weak euro is the lone supporting mechanism for the European rally.  If the euro gets stronger and Draghi doesn't do anything about it, it is a free fire zone on European stocks.  The Fed has entered the currency war, surreptitiously under the guise of global worries and waiting for more inflation to raise interest rates.  With the Fed now in the currency devaluation camp, although not as blatant as Europe or Japan, or China, it is now a zero sum game.  For every winner, there will be a loser.

Last year, all the countries could prosper under a stronger dollar regime, a positive sum game, including the US.  That was because of the excess liquidity still being generated by a tapered QE, which ended at the end of 2014.  Starting from 2015, that is no longer the case.  No QE, no positive sum game.  The US stock market will not tolerate a stronger dollar any longer.  It can only tolerate that under a QE mechanism.  Which goes counter to the strong dollar theme.   If the EURUSD gets under 1.10, it will have temper tantrums and the stock vigilantes will put a gun to the Fed's head to do nothing, or if things get bad, a QE4.

Of course, the Fed is filled with cowards and will bow to the demands of the stock vigilantes, with no rate hikes if SPX stays below 2050, and another QE if SPX goes below 1800.

I am looking for a pullback today, with SPX 1990 in the cross hairs.

Bonds are a no play, rallying strongly on Friday and Monday, leaving no edge.

Friday, October 9, 2015

Relentless Rally

We never got the sell the news reaction on FOMC minutes.  But I am short term bearish now that we got the good news pop on a dovish Fed.  As if that's really a surprise anymore.  I will wait to short on Monday morning but expecting a trip back to SPX 1990 next week.

This is to just to play a short term pullback next week, I am expecting more rallying to come in the weeks ahead, so not going to stick around for long on any shorts next week.  The markets are getting boring again as the VIX is a teenager again.  Will trade less in weeks ahead.   Saving my bullets for a better opportunity down the line.

Thursday, October 8, 2015

Looking for a Pullback

The market has rallied for 7 trading days from the bottom last week.  This is the initial thrust higher, and it has been powerful.  But the internals of the rally, when I look at how the leaders are doing, is poor.  The Nasdaq favorites, the FANG, like FB, AMZN, NFLX, and GOOG have been lagging.  So have biotech stocks.  The leaders have been the laggards, like energy stocks.

Usually when you see the laggards leading the bounce, it is unsustainable, because those laggards are usually bouncing not because of fundamentals but because of poor investor positioning.  I would be more bullish if the leaders were coming from the stocks near 52 week highs.

Plus we have resistance around 2000, and the intraday price action the last couple of days seem to show that the market is tired here.  I am looking for a pullback down to 1970 to consolidate the move.  I would also look for the 10 year to get back under 2.0% in that move lower in equities.  Fed minutes should be dovish, but that is pretty much expected, so perhaps a sell the news reaction later today into tomorrow.

Wednesday, October 7, 2015

Buying Thrust

This is a powerful bounce off a panic selloff.  Like summer 2010, fall 2011, and fall 2014, you get the strongest point gains at the beginning stage of the buying thrust.  Officially we hit bottom for this down leg last Tuesday, so we are only 1 week into the rally.  Usually the biggest gains happen during the first 2 weeks of the rally, and then it gets choppier as the rally matures and more people jump on board.  On average, these type of rallies last around 4-6 weeks.  And they retrace at least 2/3 of the losses from the initial drop, which would be SPX 2100, so if you consider 1870 to the be floor, then we should go up at least till 2020, but more likely till at least 2040.

Of course, we could have a fake out buying thrust like we did on December 2014, but that is unlikely here.  This bottom had a lot more panic involved, and the sentiment got so bad and fearful that this one has high odds that it is the real deal buying thrust.  Based on this scenario, you cannot be short.  You have to be long here and use any 1 day dips to add long exposure.  This rally probably has till the beginning of November, with the target area around 2040-2060.  If we do get to that area, the risk/reward for staying long would not be worthwhile and I would consider a small short at that time.

We have a long ways to go, time wise, but not point wise.  It is a bit depressing for latecomers to know that 120 of the likely potential 170 points gain from 1870 to 2040 has already happened.  Really only about 50 points of upside left from 1990.  But I still like the risk/reward here being long just because all the ingredients for a good bottom were established last week, and the market is acting very strong even though we are overbought.

The past week's jump just emphasizes the extreme importance of catching these bottoms and being long when the initial thrust begins.  That is where most of the reward is in being long.  As you hold for longer into the rally, the rewards get smaller and the risk slowly rises.  That being said, it is still only a week into the thrust.  Still plenty of time left in this one.  Expecting more strength in the coming days.

Monday, October 5, 2015

Stairs Down Elevator Up?

It is an atypical stock market.  The rallies come quicker and swifter than the selloffs.  The Friday reversal was mythical.  Like a phoenix rising from the ashes.  Actually, it was just a lot of shorts caught offsides and panicking out of their positions.  The most heavily shorted stocks went up the most on Friday.

We are getting more short squeeze today, and the market went straight up off a gap up open, giving shorts no opportunities to cover lower.  What is so frustrating about these type of markets is that you go straight up, flat line for a bit, and then go straight down.  Good for trend followers, but horrible for counter trend traders.   And the rallies are quicker than the selloffs!  It is not normal, as stocks usually should go down faster than they go up.  What this type of activity tells you is that most of the  selloff was caused by a lot of hedging and short selling, not real cash selling.

What you are seeing is the unhedging and short covering, and it happens quickly, because the fund managers can't lag the averages, and FOMO plays a big part in their actions.

We are close to resistance here around SPX 1980-1990.  I would be surprised if we kept going up, but am not interested in testing that gut feeling by shorting. I have gotten out of longs and will wait for the next pitch.  The easy part of the post crash trading is now over.  As traders get more comfortable and less emotional, the trading becomes more unpredictable.

Friday, October 2, 2015

It's a V

How dare I doubt this bull market.  This morning was a giant fakeout.  About the biggest fake out I have ever seen in the market.  If we had rallied strongly straight from the opening bell, it would be more plausible, but after an hour of trading, we were actually down from the gap down open.  The scared money has already sold.  We are on the right side of the V.  I do have some long exposure, but I am not as long as I want to be.

I expect a test of SPX 1990 by next week.  But ultimately, we are on a mission towards 2040.  I expect that to happen by the end of the month.  The market got everything it wanted, lower interest rates, a higher stock market, and the Fed now likely on hold till 2016.  The nonfarm payrolls report will be forgotten by next week as the under invested hedge funds need to get long to catch up.  It will be a mad scramble for stocks in the coming days, do NOT fade the rally.

Choppy Bottom

It is not going to be a clean V bottom where FOMO plays a big part in motivating investors to buy stocks.  The psychological damage along with the still high valuations make this bottom much different than previous bottoms that you saw in 2010 or 2011.  Back then, you had the potential of the Fed increasing their balance sheet to suppress bond yields and pump more liquidity into the system, but this time, they are clearly waiting for much lower stock prices before even hinting at another QE.  That means the Fed put is way out of the money, unlike previous bottoms, when they were pretty much at the money puts.  Plus, valuations were much lower and the bull market much younger back then.  You cannot compare 2011 with 2015.  2015 is a much riskier market, although seemingly less scary.

This nonfarm payroll report isn't that bad, 142K jobs, which is within the margin of error of consensus at 200K, but the reaction is much more important.  This is a very fragile market, and any slight signs of a weakening economy worry investors that a possible recession is coming, or at least slowing growth.  I wouldn't overreact to this report, but clearly this is not going to be a V bottom like the past, where you didn't even have to get sentiment too bearish before the market made a V and rocketed higher.  I initially thought we would get a V bottom after seeing Wednesday's price action, but Thursday wasn't as strong as the close would indicate, and you had too many daytraders looking for a gap up today, for what reason, I don't know.

In any case, I would still look to buy deep selloffs, but this is still not a market where you can chase strength and get paid on swing trades.  Perhaps a dip buy if we get to SPX 1870-1880 range.

As for bonds, I expect us to get to 1.80% on this upswing.  Remember, bonds trade like tankers, once they get going, they are hard to stop, even if equities strenghthen again.  Bonds usually top significantly later than when stocks bottom.

Wednesday, September 30, 2015

Ride the Bull

Only in hindsight will we know if we had a successful retest of the lows on August 24, but if you wait for confirmation, you miss most of the move, as these bottoms usually are V bottoms, with the biggest gains happening in the first 2 weeks after the bottom.  In order to make the big gains in the market, you have to visualize and anticipate what will likely happen, based on recent trading.

Most of the evidence that we have seen over the past week, and looking at the bigger time frame since the crash on August 24, shows a market that has transferred stocks from weak hands to strong hands, is excessively bearish as shown by the extremely high put-call ratios, sentiment surveys, social media, etc.

I am long stocks and will ride the bull for several days.  I don't want to lose my position, so there will be minimal daytrading, although I expect some strong resistance around SPX 1945-1950.

Tuesday, September 29, 2015

Bounce Due

The decline is in the 9th inning.  Time is now on the bull's side.  You are on day 8 of the selloff that started on Friday September 18, after the sell the news reaction to the dovish Fed.  The bears have used up most of their ammo.  The odds favor the bull side starting today.

We got the rout in biotechs, the favorites: Facebook, Amazon, etc. got hit hard yesterday, and we are close enough to the August 24 lows that you will get retest buyers coming out to buy.  You have crude oil much higher now than on August 24, and you have very few signs of FX stress as indicated by a strong euro or yen.  The VIX has also been quite tame, which tells you that the hedging demand for volatility has been satiated over the past several weeks.  The put/call ratios were at extreme highs yesterday as well.  It wasn't a perfect capitulation, but it is about as close as you will get in this liquidity overflowing market.

The market should be strong supported at SPX 1875-1880.  The overnight ES lows of 1861 should hold intraday.

Monday, September 28, 2015

Release the Wolves

It is a full moon.  Time to release the wolves.  With the wolves on the prowl, looking for blood, the sheep are beginning to panic.  You saw the signs on Friday when the big gap up was faded midday, led by tech stocks, in particular, biotech.  You can tell it is not hedging or derivatives selling driving stocks down Friday afternoon.  It was cash selling, as the small caps and the biotechs took most of the beating.

This is usually the final stage of the selloff when the wolves come out and the sheep dump their favorites.  We have a gap down as the fear is becoming more palpable.  It is morphing from a sleepy range bound chop fest to a last gasp panic.  The extent of the panic is hard to predict, but it usually doesn't last more than a couple of days.  So we should see the panic low this week.

The ultimate low all depends on how much it goes down today.  Today should be the day where the bulk of the point losses occur this week.  Below SPX 1900 and you have forced selling come out.  There will be value dip buyers waiting at 1867.  So if I were to guess, we should bottom around 1870-1880, which also happens to be where a lot of support rests from the trading in early 2014.

Friday, September 25, 2015

Terminal Portion of Decline

We are approaching the end game for this correction.  This is when the rallies don't hold for more than a day, if that.  And you grind lower and lower until you make a sharp drop to finish off the selloff and form the V.  These selloffs usually last 7 to 10 trading days.  We are on trading day 6 of the selloff, so the final plunge should happen sometime next week.

Near the end of the selloffs, the favorites, like biotech, get thrown out with reckless abandon in an effort to de-risk high beta names.  Should be an interesting Monday.

Fully Invested Bears

It has been one month since we got the panic crash in equities.  I wanted to see how investors have reacted to the sharp down turn, and it seems like business as usual.  You would think from all the bears parading on TV and social media that you would have outflows, but instead, there has been net inflows since the crash, even though we've just been going sideways during that time period.  To me, it seems like the bears are fully invested, or at least the bulls are active but keeping quiet.

It makes you wonder what made the market suddenly crater like it did.  So I compared the 5 days when the market cratered in August with the past month.  You can't tell the difference.  The largest ETFs just didn't have many outflows.

The only way I can interpret this is that there is not that much pent up demand to buy equities, because there wasn't that much selling in the first place.  Now when corporate buybacks start up again after earnings season, then it is a different story, but during this light buyback portion of the season, I don't see where the money will be flowing from.

We've got a big gap up working here, Europe seems to love it when Yellen talks tough, but hates it when she does nothing.  Anyway, I give this rally about 1 or 2 days maximum before it peters out and we get back to selling.

Thursday, September 24, 2015

Retest and Marginal Break

The market is not giving the dip buyers a graceful exit here.  It has been 1 week since we hit the highs of this post crash bounce.  Usually you would have already bounced after such a fall.  If a down move of this magnitude in a post crash market doesn't bounce within 5 trading days from when it starts, usually you go down for 2 to 3 more days to cause a panic waterfall and form the V bottom.  That is the most likely scenario here.

You cannot blame China for this one.  I guess you can blame Europe for this selloff, because that is where a lot of the fast money is parked.  And when the fast money leaves, Europe will feel the blow.

I know it seems almost consensus, but I think we will retest the August 24 lows.  Not the cash index, of 1867, but the futures, which went down to ES 1823, which would put it about SPX 1835.  There is a lot of support in that SPX 1840 to 1850 area, so I would look to buy around there.  Once we make a marginal break of the level everyone is looking at 1867, we should get the final panic flush which would form the V bottom.

As absurd as it seems with all this bearish price action, the selloff is on borrowed time.  I go back to a dovish Fed which gives the bulls the edge after the dust settles.  I would feel differently if the Fed had raised rates or looked eager to raise rates.  With this Fed, it's still a bull market in my eyes.

Wednesday, September 23, 2015

Sticky Dip Buyers

The dip buyers are lurking the shadows, preventing a clean flush down to SPX 1910.  Lots of bears out there, and they are the weak hands, triggering big short squeezes before the close, now 3 days in a row, afraid of the monster gap up out of the blue potential that always lurks in a downtrending market.

We got the sum of all fears after the China PMI came in weak, but that was pretty much the low, and we have rocketed higher since.  I am not interested in shorting here, but still looking for that one last flush out to buy.  I am ruling out a retest of SPX 1867 anytime soon, because this is not the type of price action that causes a waterfall.  Perhaps late next week.

Not interested in trading bonds here, it's in no man's land.

Tuesday, September 22, 2015

Deadly Market

They will dump this market on air.  That is what happened in the European session, as Europe suddenly hit the panic button and handed off deep red futures to the US.  Normally these big gap downs are screaming buys at the open to sell an hour later but since we had an up day on Monday, and the equity put/call ratios were fairly low, I didn't bite on the tempting gap down play.

It is too late to short, but too early to buy.  I am eyeing SPX 1915, or ES 1905 as a spot to look for some dip buys.  If I do buy at 1905, I will not hold for more than 2 trading days.  Not interested in shorting unless we can get a bounce towards SPX 1970.  Ultimately, I expect a retest of 1867, within 2 weeks, and a marginal break of that level, causing weak longs to puke out their positions to the strong hands.

Monday, September 21, 2015


Friday's action was a bit surprising.  Didn't expect that kind of selloff on triple witching, but the Friday selloff basically front ran the post options expiration selloff that you normally get post triple witching.  The fund managers are so eager to get protection, that they are willing to be double protected, that is, they will buy October out of the money puts to protect themselves ahead of the weekend even though they already own September puts expiring that day.  That is how nervous they are.

I doubt any rally gets any traction this week, so I am looking to short this market.  Perhaps a gap fill from Thursday's close would be a good spot, around SPX 1985.  Not much edge yet, although if I had to hold a position for a week, I would much rather be short than long here.

Friday, September 18, 2015

Fear and Loathing

That breakout above 2000 didn't last long.  All of one hour after the FOMC meeting.  Europe's big selloff comes after Yellen threw her hat in the ring in the currency wars.  The Fed will not tolerate a strong dollar, or a weak US stock market, so there were dovish words thrown all over the place.  Now the crowd feels suckered for believing the Fed might raise rates or at least talk hawkish.  They did neither.  You can never underestimate the dovishness of this Fed.  Never.

But we got a big selloff after the pop on the news and it is back to your fear and loathing market.  Stocks are hated out there, but that is not enough to get me to buy.  I want to see a longer pullback before I commit capital to this market.   We just had a long rally leading up into the FOMC meeting.  It takes time for the bears to get fully loaded with shorts.

The market still favors the dip buyer, but now is not the time to be aggressive on the long side.  In fact, I think there is a short term opportunity to short the market, but the post opex selloff was moved up a day into opex Friday, so I am just watching for now.  I am interested in buying bonds again as there should be a lot of pent up demand now that the Fed is out of the way and those fearing a rate hike will come back in to the safety of US Treasuries.

Thursday, September 17, 2015

Fed Gameplan

The gameplan for today depends on one very unlikely scenario and one likely scenario.

1.  About a 5% chance of raising rates today.  It could happen, but extremely unlikely.  Under this scenario, you just short and hold short and watch the delta hedgers gonna  go nuts as the market plummets for the rest of today and into the open on triple witching Friday.  Just remember what happened after the June 2013 FOMC meeting, when the market just got crushed.  There is no fade of the dip here.

2. 95% chance of no rate hike.  The 30 year bond is telling you all that you need to know about what the smart money thinks about the likelihood of a rate hike.  Long bond weakness is a hint that bond traders don't expect a rate hike.  Besides that, just the history of Fed dovishness, slow to tighten financial conditions, markets having been crushed in August, low oil prices and no inflation, and fear of spooking the markets.  Since this is what most of the smart money is expecting, most of the smart  money will be prepared for this outcome and were the ones buying this week ahead of the meeting.

After the announcement of no rate hike, we could just shoot higher and don't look back, or we could have a volatile 15-30 minutes where we chop in a volatile range, and then eventually rally higher into the close.  If we have that volatile chop, I would be buying any 5-10 SPX point dips.  Extremely unlikely that you selloff and sustain a selloff under the no rate hike scenario.  The fear of a Fed rate hike is removed and the sideline money waiting to act after the Fed gives the green light will be significant.  Don't believe the Fast Money gurus on CNBC who say we selloff on the Fed doing nothing.  That is exactly what this market wants and needs to go higher.

Bonds will be tougher to game as it often does its own thing and doesn't necessarily do the opposite of the S&P on Fed days.  A dovish Fed is usually good for bonds, but we are at a point in the cycle where the bond market wants a rate hike to weaken the economy, and a failure to raise rates would be deemed as building a stronger stock market and economy which is bad for bonds.  Thus, I am expecting a selloff (less conviction than a stock rally) when the dust settles today in bonds, especially the long end, if the Fed does nothing.

Wednesday, September 16, 2015

Fed Will Be Doves

The big Fed decision is on Thursday.  Yesterday, the highlight was not the stock market strength but the notable bond market weakness.  10 year yields hit 2.28% and the 30 year yield hit 3.07%.  Contrary to what many believe, the bond market wants a Fed rate hike to slow down the economy.  So if as expected, the Fed doesn't raise rates, the bond market will counter intuitively selloff.  This is why you had such weakness in the bond market yesterday, especially the long end.

I am hearing a lot of opinions on what the market will do if the Fed raises or doesn't raise rates.  First of all, on the slim chance that the Fed raises rates, no, the market will not go up on that.  If it does, it would be a slam dunk short.  That would be the worst thing possible for the market to have a hawkish Fed with a weakening emerging markets.  No, a rate hike and dovish words will not be what the market wants.  The markets wants no hike and could care less about the wording because the Fed will backtrack on whatever hawkish things they say anyway.

There are many right now who believe no rate hike is bad for the markets, because it continues the uncertainty.  What is so uncertain about ZIRP and delaying rate hikes?  It is what has been happening for 7 years!  The more uncertain scenario is how the financial markets handles higher short term interest rates.

I don't think this choppiness is over but I get a feeling that there are a lot of bears now.  We had a big rally yesterday and the put/call ratios stayed high.   It doesn't mean that we will go up, but any down move will likely be short and quick.

Friday, September 11, 2015

Tepper and Hedgies

I see that David Tepper came out yesterday morning and talked bearish.  I didn't know who this guy was until he made a famous call on CNBC in 2010 that stocks would rally because of the Fed and QE.  His bearishness just confirms that he is probably heavily in cash and waiting to deploy it.  I am not going to say he is like the rest of the hedge fund managers, but he is a good representative of what the average hedgie is thinking.  What I noticed was that he said he would get more constructive if he heard the right things from the Fed.

And guess what?  The odds favor the Fed being dovish next week.  Since their last press conference meeting in June, oil has dropped from $60 to $45.  The SPX has dropped from 2100 to 1950.  And there have been no blowout jobs numbers.  You think they are going to raise rates into that?  Really?  The crew that is painfully slow to tighten monetary conditions despite a raging bull market and a strong labor market is going to suddenly raise now because people expected September as a time to raise rates?  I don't see that as being likely.

So you have a mountain of hedge fund fast money ready to be deployed as soon as Yellen confirms that yes, she is a dove and will not rock the markets at a vulnerable time.  Thus, I am playing the long side into the FOMC meeting next week.

Wednesday, September 9, 2015

Ranking the Indices

Since the big drop on August 24, I would have to rank them as follows:

1. Europe.  Surprisingly Europe has shown the most strength even though Germany depends on China for many of its exports and heavy long hedge fund exposure.  Draghi's dovishness a bullish factor again.
2. US.  Not as strong as one would expect with the limited China exposure in US equities and the less bullish exposure among hedgies compared to Europe and Japan. 3. China/Emerging markets.   There are too many outflows and the fundamentals are too weak to support much of a bounce despite extreme bearish sentiment.
4. Japan.  Lots of China exposure, heavily long positioning among hedgies, and vulnerable with USDJPY weakness to continue with a dovish Fed coming soon.  Abe also less committed to his failed experiment.

If you are going to short, short the weakest, and get long the strongest.  Despite Europe being the strongest lately, I still prefer US over Europe for a bounce trade.

Tuesday, September 8, 2015

Classic Long Weekend Gap Up

Just classic.  Just your typical post long weekend monster gap up after chicken littles sell their equities on a down Friday because of the fear that global markets will crash.  The put-call ratios were out of this world on Friday despite the market staying above last Tuesday's "scary" lows.  We got all kinds of fear talk, fear of the Fed hiking rates in two weeks, fear of China re-opening their markets after their holiday.  Fear of a new bear market.

The fear itself is a greater depressant of stock prices than the actual cause of the fear.  You had China basically flat over the past two trading sessions, Japan was quite weak,  yet you have S&P futures up huge.  The only thing really supporting this huge surge higher is Europe, and that's not necessarily a good thing for US equities because it is based on a weak euro/strong dollar.

You have to have a long bias for the next several days.  As long as the markets are volatile, the Fed has your back.  It has been a proven winning formula for almost 30 years.  I would be shocked if they raised rates in September.  Absolutely stunned.  Since Greenspan ignited the Fed put, anytime you have a weak stock market, the Fed will do whatever it takes to soothe the market.  It doesn't always work over the long term, but over the short term, it works a high percentage of the time.  I will make that bullish bet again on the Fed, and history is on my side.

Thursday, September 3, 2015


We are through the rough patch of this correction, and volatility will go down as traders and investors get more comfortable with the new trading range and lessening volatility.  There should be a choppy up move over the next two weeks all the way up to the FOMC meeting on September 17, where the Fed will sound as dovish as ever.  Draghi and his intense dovishness this morning was the preview of things to come for the Fed.  There is no way they hike rates here, and the market knows this, so they will rally into the meeting expecting soothing words from Yellen.

Draghi is helping the cause by dropping Bund yields, which in turn help to drop Treasury yields, which is bullish for equities, all else being equal.

Crude oil should follow equities higher now that it has reset to be more in lockstep with S&P movements.  BTFD for the next two weeks.  Yesterday's lows of SPX 1920 are a raging buy anytime over the next few trading sessions.

Tuesday, September 1, 2015

Eyeing SPX 1900

The market has shown it cards.  And it's no full house.  I heard on CNBC last Thursday that traders were eyeing 2040 for a rebound, when the market was at 1990.  I thought that was insane.  Apparently, I am not the one who lost his mind on the bounce back last week, it was the others who thought we could shrug off a VIX 50+ event like it was just some HFT computer glitch.

I am not going to regurgitate worries about China or global growth or the other excuses that you hear in the media about the reasons for weakness.  It is a simple look at the chart of the broader market.  You are negative on the year, by about 6%, you are at levels that haven't traded regularly since last summer, so you have a mountain of overhead resistance, while the market is overvalued, while there is no positive catalyst.   The key is this: the Fed is not on the bull's side this time.  There is no QE.  They were there the whole time from 2008 to 2014.  When you see bonds selling off with stocks, the market has problems.   

I still view this market as a chop fest at a lower range.  We have established the lower boundary, around SPX 1870, with a higher boundarry of SPX 1990.  SPX 1900 is a good level to put on longs, for a trade.  Perhaps we can get to that level later this week.  Crude oil is also a short, with the biggest short squeeze I have seen ever in the product.  I would short anything above $48, and cover around $44-45.  The downtrend is not over, and commodity downtrends last a lot longer than equity downtrends.  

Monday, August 31, 2015

S&P Looking Heavy

The S&P is trading like it wants to take another peek at last week's lows.  I don't think we can get that low, but I do think a pullback to 1900 is very possible this week.  ES 1990 acted like a lid for this bounce and the last two trading days has shown the lack of V bounce power that you saw in October 2014 and previous V bottoms over the years.  I can't overemphasize the extent of the carnage that we went through last week, it was 2011-esque, not 2014-esque.

You have VIX trading extremely strong here, much stronger than one would expect for just a 1% down day.  Add to the weakness in stocks is the weakness in bonds, a horrible situation for the market because a lot of fund managers use fixed income to hedge their equity exposure.  If both are weak, they have to sell a bit of both to reduce risk.

The Fed put is obviously lower than most market participants think, because Stanley Fischer sounded super hawkish despite the turbulence last week in the markets.  If the Fed put is much lower, then this market has to trade lower to reflect that reality.  Looking for lower prices for the rest of the week.

Thursday, August 27, 2015

Another V Bottom?

It would be quite shocking to this trader if we got an October 2014 V bounce.  The market participants have seen so many of those V bottoms that many jump in at the first sign of a bounce.  That is why you got so many fake out V bottoms in the first 6 months of the year.  The market lacked buying power to extend the V bounces beyond the first few days.

The market will do what it wants to do, regardless of news.  Unless it is something central bank related, the news is meaningless.  And China's central bank is not going to cause a sustained bounce unless they do something totally unexpected like a QE and buy US Treasuries with it.  In fact, there are rumors that they are doing the opposite and selling Treasuries.

By the way, the VIX got as high as 31 in October 2014.  This past Monday, VIX hit a high of 53, and has sustained levels above 30 for the past 2 days despite rally attempts.  This is not the same market.  This selloff is much more insidious and something that will take time to resolve itself.  It doesn't help that all those corporate buybacks couldn't get this market higher.  The value buyers will not step in at these levels because we are still overvalued.  Low single digit corporate profit growth with P/E of 18 will not get value buyers excited.

The best thing this market has going for it is that there are a bunch of bears out there, but it would only be shocking if there weren't after such a fall over the past 5 days.  This is a counter trend trader's market.  Basic strategy is this:  Sell after stocks rally for 3 days.  And buy after they selloff for 2 days.

Wednesday, August 26, 2015

Hopeful Opens and Scary Closes

We are now in the looking for a bottom market.  You get an awful close like you had on Monday and Tuesday, and you get monster gap ups the following morning.  The bottom pickers eschew risk overnight, but are more than willing to take risk during the day, even with a 50 SPX point gap up open!

This is a fear based market now, you have crushed the market so that the fund managers are well into the red on the year.  And when fund managers are negative on the year, this far into 2015, they get nervous.  They fear for their jobs.  So they go into shell mode, and try to minimize losses at the risk of minimizing gains.  Even though the market is only down about 8% on the year, that is a big number in the land of relentless bull markets and short memories.  It is now the land of panicky irrationality.  How else do you explain a dump down to ES 1850 and a run up to ES 1914 in the overnight session?

This is a tough market, I didn't expect this big drop over the past few days but with it comes opportunities to trade the volatility.  You have to buy the fear and sell the hope.  It will be a choppy market over the next 2 months.  Do not expect a repeat of earlier selloffs in 2012, 2013, and 2014.  I see no V bottom here.  The technical damage has just been too great, similar to what happened in 2011.

Monday and Tuesday did a lot into forming the boundaries of the new trading range.  No, I don't think we will pull off a V bottom like October 2014, or even in July this year.  There is a real fundamental scapegoat here in China, not some scary Ebola headlines or Greece in July.  That being said, you have gotten to a level where you will get bottom picking and it is still a bull market, although it doesn't feel like it at the moment.  Hedge funds were underexposed to US equities, before the panic, so I don't expect that much unwinding.  I am looking to be a buyer on any dips today down to the lower end of the trading range, SPX 1860-1870.  The rips should be sold near SPX 1940-1950.  We may get a run higher to 1970-1980 by the end of the week/early next week, but that would be a selling spot, not a point to look for a continued V move higher.

P.S. - These are the markets that ES traders live for.  Take advantage of the opportunity while it is here.  Sell the hope and buy the fear.  That is the mantra to live by for the next two months.