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.

5 comments:

Sam Kang said...

Market's not going down. Dumped the UVXY. One more leg higher though and it's game on.

Market Owl said...

Just buy the dips. Better odds than selling the rips. I'm setting up to short oil soon, getting close to my sell target around 47.

Anonymous said...

No way there is a substantial downmove somewhere in this market. Unless we're down over 2 % from here, I'd rather be biased short than long. Reentered my UVXY.

Also got some VRX at 91.50! Bill Ackman still a smart dude.

Market Owl said...

This is just like fall of 2014. W bottom this time instead of a V bottom. All dips will be bought. November is an extremely bullish for equities, and the biggest stock buyback month of the year. Should grind higher for the next few weeks. No opinion on VRX.

Anonymous said...

Yeah but this is the best October in a long time. 2011 November was very bad.