4/12/20 Weekend Update - QUANTITATIVE SUMMARY

Approaching Resistance Levels & Options Expiration Week

After complete review of the entire set of internals, indexes, stocks, and ETFs the bulk of the statistical variables imply that this the first very strong counter trend bear market rally within a structural market decline. This can always change as nothing is static in life or in markets, but reviewing all the variable components below helps understand that conclusion:


Below the MSL (macro bearish overhead resistance) & waning momentum:

SPY

QQQ

SOXX

IWM

FB

AAPL

AMZN

NFLX

GOOG

HYG

JNK

BKLN

XLF

XLV

XLU

XBI

XHB

XME


Above the MSL (macro bullish support underneath) & resetting momentum:

VIX

UUP

TLT

GLD

SLV

GDX


INTERNALS - bullish exhaustion symptoms but nothing suggesting current counter trend bounce is complete just yet.


Typical leadership sectors for the 10+ year bull market have been SOXX, QQQ, XLV, and XBI. These are all showing fading momentum and distribution-like activities. This would imply a market pull back at the minimum (if MSL levels do not hold and are retaken) or a new leg down in the current bearish market structure which at this moment is still very much in place even after the week that we just had (shocking as that may be).



Options Expiration is this week - Friday, April 17. This will/always does have implications in the near term in price fluctuations. VIX OP/EX is this Wednesday, April 15 which can/does have significant market impact. It is not surprising that we are approaching significant levels around/near OP/EX. Options dealers will want options to expire in the most profitable way this week, therefor it may be latter part of the week (or even next week) before a near term indication of next steps in the market are determined. Having said that, if the implications are a continuation of the bullish trend is to retake the MSLs, historically that wouldn't wait for OP/EX to complete. Watch for clues for this early in the week.


**Not to be dismissed is that Earnings Reporting starts this week...I do not review individual stocks so I am remiss to delve into earnings (especially since Corporations regularly lower expectations to always give themselves the best chance to 'beat'). The single most important component to earnings this quarter is not performance but rather the FORWARD GUIDANCE. That should be quite interesting to hear...**


Nomura has noted that the relflexivity of this counter trend rally is predominantly been driven by short covering as the most shorted stocks have been covered rapidly and viciously. This would very much explain all the FVG support gaps that have been left behind in almost everything we reviewed. These need to and will be filled at some point. There also has not been the systematic buying into this move that we have typically seen in a new bullish phase. I would suspect that would change on a breach of 310 level in SPY. Should that level be retaken and a VIX that was pushed < 25 you could see large volume come to the buy side.


At the current time, the sell side seems to be very patient. Hence the gorpy action we are starting to see (which I could see continuing this week). 'Gorpy' action is buying that pushes to new highs for the current move every day on lower and lower volume. This precedes sell side crack backs more times than not as the sellers trap buyers with large volume sell orders when there was low volume buy orders for the last 10-15%. That is how 5-7% down days happen in a blink - sellers overwhelm recent buyers and trap them. SOXX saw that heavy volume show up at the open on Thursday. If the script is similar it would appear in the risk-on trades this week. We will have to see...but something to watch for.


Last thought: the FED moves on Thursday cannot be discounted into any analysis. The implications of the FED and Treasury merging (which is 'loosely' what happened) then the things that can be done with this new 'entity' can/may disconnect all things from reality. Having said that, the natural market forces here are quite different than anything maybe in US history as the bulk of supply and demand have both evaporated and the money they are putting into the system is replacing lost GDP...not creating volatile and unbridled asset inflation...yet. The simplest way to view in an unbiased and agnostic way is to watch the VIX and watch 310 SPY. Should those levels mentioned above be overrun, then the FED may very well have altered the Market Structure Level and reset the goal posts. If that happens then we will adjust accordingly. Until then, the MSL is bearish until proven otherwise as the systems that we operate measure the sum of the inputs (not the narrative) and produce a quantitative output that is trustworthy. If it flips, then it flips - we cannot and will not flip it for any reason other than the data. It is quite a ways from flipping yet, therefor we trust the process.


Best of luck this week - stay safe - cash is never trash.


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