According to both GS and MS Prime Brokerages, long short hedge funds did a massive amount of short covering on Wednesday, the FOMC day, where everyone was expecting a dovish Fed and more rallying.
I definitely regret a great opportunity to smash this SPX pig with a short and butchered the exit, covering a day early. There will be probably at least one more push higher, so best to be ready to fire off the shorts between SPX 2950-2960. I really doubt that it will stay above 2900 for long, so best to get off the shorts quickly when you have the opportunity, with the understanding that it can go a little bit past your entry, because this market is trading unhinged, with volatility that is still intense even after 5 weeks of rallying.
There is an underlying tension between the fundamentals, and the light hedge fund positioning and upward momentum. You can sense how quickly the rallies give way to rapid selloffs, with prices not staying elevated for long. This is a definite change in character from previous V bottoms, when rallies would not be followed by selloffs, but by very shallow retracements, or just flat lining before taking the next step higher. Stair step moves higher, with very little give back. This market is the opposite. The trend is higher, but big chunks are given back after each rally.
This market just feels different, as if the up moves are fake and temporary and mostly short covering, and without the big time stock buybacks (most investment banks expect about a 50% drop in buyback dollar volume this year) to support the market on down days, you get these air pockets lower, like you saw the last 2 days.
The price action is about as bearish as you can get for such a big rally. Its always a better sign when volatility is going much lower during a rally, instead of maintaining this up and down turbulence. We are 6 weeks into the rally and the VIX is still at 39. That is ridiculous levels of volatility for such a long rally.
I am itching to short the next rally, as it probably will the last great short entry point before you get more prolonged selloffs and lower SPX levels. There is significant resistance at 2950, which is the October 2018 high, which preceded a 20% selloff, and the May 2019 high, which preceded an 8% selloff, the biggest of 2019.
Forget those looking for a December 2018 style V bottom, its just not going to happen. This is a different beast and it looks like this week was the first big flashing amber light that warned that the end of the bear market rally is almost here.
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17 comments:
I have a question.
What you meant is that it's possilbe there will be rebounce from now up to around 2950 on SPX again in a few weeks before gettimg into a big and prolonged plunge, which is due to a Redesivir issue and other additional stimulus??
It wouldn’t rebound because of news, just a continuation of the momentum FOMO rally. Hedge funds are still underinvested, so they could be the ones who jump in late to make for one last push higher in this bear mkt rally before we resume the downtrend,
Rebound is not guaranteed, which is why I don’t buy these dips.
I respect your patience to not take a short position right away, reconsidering one more step.
May I have one more question?
Do you think there is any selloff movement in Asia market more than the States especially in South Korea and Japan? Any particular things you noticed compared to the States or European market?
Many thx.
I don’t follow the Asian markets closely. South Korea and Japan companies overall have more debt than US so the Asian equities are more vulnerable to dilution and solvency risk than US companies if recession lasts a long time. Asia is also in bad shape, probably worse than US because there will be less fiscal stimulus for corporations compared to the US.
Flipped out the LUV and took a sizeable loss. I think we continue down 1 percent or more on Monday before a bounce. But any bounces from here likely should be shorted down to 2650.
But of course probably a million people think like this act like this talk like this. So will the real slim shady please stand up. And the market does the opposite what everyone thinks. Which is why the market kept going higher past 2800 when everyone and their moms was calling for a retest of the lows. hahahah
Shorted gnmk friday at 3:59 est and just covered. For a quick pop.
Now back on the LUV train and JBLU.
Let's fly the friendly skies my niggas.
Turnaround monday in full effect more or less.
Flipped out the big position in LUV because who knows Buffet sold and too much negativity
and longed LYFT. Still got a little JBLU
LYFT it!!
Whats the game plan dawg. Long and strong here or just a respite before further wreckage?
Waiting for a bigger dip to buy, but probably will just wait to short the next rally.
We going up 1.5 % tmrw.
Your anticipation is still quite right.
It's nice decision not to get in the short position yet. with this slope, SPX could re-test around 2950 with re-opening expectation.
Very interesting. Thx
It's a beautiful morning. Look at that W. HOly shiet. I have never seen a bubble like this since China.com back in 1999.
2950? I would not be long waiting till that price. I think the so-called experts and big money managers are right in saying this market could retest lows as the economy continues to weaken now that the effects of the stimulus wear off but jobs don't come back. Not sayin we will go back to 2135 but it's just one of those markets where I wouldn't press long positions too hard. We made our big move up and the easy money was to be made. From now on it's just garbage time and likely harder to make money.
Most of the money is made on the gaps. Very little intraday movement. I do think we can have one more of these week 1% move ups tomorrow, but I dont feel betting on that right now. Market feels week and dull. But you can't short a dull market as well.
See very little upside from here. Possible gap up tomorrow, and then it should fade into Thursday. May put in a small short tomorrow, we'll see.
Doing it now. Long Aug QQQ 190 puts. Half position. Going for big cheese
219 puts
Short chgg at 60
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