5/15/20 MARKET CLOSE & WEEKEND Update - Consolidated Analysis

This is my singular thread that encompasses all areas of review for the day in the market.

QUICK SUMMARY:


Range Expansion Lurking:


  • Volatility pretty flat after run up in the middle of the week w/ VIX -2.21% and VXX -0.85%

  • UUP unchanged on the session finished 0.00%

  • TLT consolidated a little bit after run up this week -0.26%

  • SPY finished +0.26% and pinned the $285 level for OPEX that was mid-point in options land

  • QQQ looking mixed +0.41%

  • IWM was the big gainer finished +1.17%

  • SOXX very weak after the short squeeze on Thursday -1.82% and lost the MSL for the week (3 weeks in a row failing to hold it)

  • FAANGs mixed with AAPL and GOOG both red on the day

  • HYG +0.13% on the day and still range bound

  • XLF -0.85% on the day after a solid Thursday...no follow through here.


This is one of my more serious blog posts and I suggest that you read every section thoroughly because I believe that a major range expansion could be forthcoming. I am seeing these specific things which are detailed much more in each section:


  1. VIX is approaching range expansion after 1.1 month consolidation in between 30-40 (w/ 2 day spike to 25). Momentum is coiling and appears to be gearing up for something.

  2. Absolute Breadth is in a flag/wedge that is going to break upwards at some point. That would imply very serious broad market volatility across the board

  3. The $USD is as bullish as setup as the Eurodollar trade was in 2018/2019. That has multi-asset class implications and I am not sure exactly why there is such hoarding here but it implies something is lurking out there..

  4. There was a notable deterioration in internal readings we track on indexes across the board on Thursday and Friday. I was busy so today was the first time I looked and I was shocked at what I saw. This is not what I expected on two up days that were pretty solid up days.

  5. The internal Indicators that we track are looking extremely heavy and at some poignant inflection areas. There could be bounces early week, but the broad picture deteriorated this past week - which was not what I expected after Thur/Friday action.

  6. There is range expanstion setups in all the major indexes we are watching. They are all exhibiting deteriorating internals and 1.2-1.5 month range bound trading. Could always go either way, but range expansion is a serious thing when it happens.

  7. The FAANGs are not being participated in here at the large block level. That leads me to believe that major players are sitting on the sidelines here waiting for something rather than participating at these levels (they will pile in above or pile on below)

  8. Treasuries (2o yr) are looking like they are starting a new leg up

  9. The PM space is approaching the ultimate inflection area going back to 2013 massacre and I am not sure that it will be as easy as many are thinking it will be up here. There is a great deal of left behind unfinished price discovery that may come back to haunt the sector in very short order.


All of this is discussed in detail below with each section having a little more commentary than normal. I am acknowledging that we can have another upside leg potentially to this bounce that we have been in since late March (if that happens it would be between 3-5%). That setup is there to a degree. But the opposite side of that is that the items listed above could, if we range expand down in markets and up in VOLs, have very serious implications from the lower high levels we are currently at - especially with how stretched some of these readings have become in the larger time frames.


Just be aware this week and next. Something is lurking out there (I say that a little fearful and beyond being 'bearish'). I wish that I could say what it is or put my finger on it, but I can't. Just digest the work below and know the risks.

SECTORS:

Sector Takeways: Pretty green for OPEX with major moves in Biotech, Metals, Mining and PMs. Russell was strongest index.

VOLATILITY:


VIX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: N/A

Block Volume: N/A


VXX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Neutral

Block Volume: Positive

GEX: Negative


VIX/VXX Summary: There is a range forming in VOLs. We have been been oscillating in the same reading range (between 30-40 w/ a 2 day spike down to 25) for over a month now. During this time, momentum has been tested 3 times at the zero bound and each time bouncing back up and out. Now momentum is coiling and in the VXX the internals are starting to near zero and break up and out. This really looks like a major range expansion is coming sooner than later. I cannot say that this is guaranteed to be up, but a lot of things point to that. I also think it is getting harder and harder (for whatever reason) for vol suppression/targeting to make lasting impacts and get this under 30 and keep it there. That could create a beach ball effect on this if the range expansion is upwards in the VIX causing lots of short vol trade structures to be unwound. Hopefully this resolves in the next week, so that intermediate term direction gets more clear.

INTERNALS


TRIN:

Takeaway: Closed the day quite bearish (3/4).


ADVANCERS/DECLINERS:

Takeaway: Looks like a 2/3 advancement on the day.


NYSE ADVANCERS/DECLINERS:

Takeaway: 2nd up day in a rown, but momentum not playing along. Resistance is above and that resistance nest (EMAs and pivot) are now turning over. This could be important at some point this week.


CUMULATIVE VOLUME:

Takeaway: Cumulative volume did not bounce like A/D. This is still pretty bearish. Another couple days here and those nested resistances above could start turning over on top (bearish).


ABSOLUTE BREADTH:


Takeaway: MONITOR. Provided you with the daily and the weekly views that I shared on twitter. This is the 7th week in a row that AB has tested the upper end channel resistance of the wedge. This looks like a flag setup to me that when/if broken would imply some pretty dangerous things for the market.


200 DAY MOVING AVERAGES:

Takeaway: Added this just for some perspective. This is really weak here and looks to be turning over with a momentum that is heavy as well. Not bullish here.


MCCLELLAN OSCILLATOR:

Takeaway: Range bound now between buy and sell. This is distribution trait. Momentum could mean we get bounce attempts early this week or it could get embedded down (but just remember the momentum reading on this is like 3x other stuff as it can go from oversold to overbought in 1-2 sessions).


INTERNALS Summary: These all could support an attemped bounce early in the week, but these are looking really heavy here bigger picture. I am usually sarcastic and add color but that is limited in this here this weekend. I say that b/c this really is starting to look serious now and if this does break down and range down, the setup here could get out of hand with VIX and broad market VOL opening upside range expansion from higher lows. That coupled with the dollar is so dangerous. That has to be in the back of your mind here, even if you decide to play the upside opportunity.

INDEXES:


SPY: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Negative

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral


SPY Summary: This is not what I was expecting from the readings across the board. I would have thought there was more positive tone to them after Thur/Friday action but there was not. GEX closed slightly negative, but momentum didn't turn up, money flow and velocity are on the brink of breaking down the zero line and blocks are still on the sell side. Maybe Thur/Fri were just a short squeeze for OPEX and that is it? Hard to say. There is still the setup that this can range up to 300.99 level (about 5% higher from here). That is definitely a possibility. But that would require momentum to turn, blocks to shallow out and neutralize, and money flow to come in and velocity to turn up. That is a lot to overcome. Hopefully this is something that is resolved by this time next week as we have been range bound for over 1.3 months. This means when we break out (not false break down or up) but the real thing, we could really range expand.

QQQ: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Positive

Block Volume: Negative

GEX: Neutral

Put/Call Ratio: Excessive Call Buying Range


QQQ Summary: The QQQ was very indecisive Friday. I know it was OPEX but the setup is there in AMZN and NFLX to range this higher and really with GOOG too (open FVG above). but AAPL looks wobbly and so does FB. NVDA (another top holding set new ATH) on Friday and yet still limited upside for the index. Looking at this over the weekend, there seems to be pretty substantive selling overall in QQQ on block side and major players are stepping aside here at these levels in the FAANGs. This leads me to believe near term direction is pretty in limbo. If this ranges higher, you could see it chased (blocks come in). If this breaks down, the selling could get heavy as there is a potential setup for negative gamma to come in since we are sitting at neutral. I am agnostic here (and have to be b/c of the neutral MSL reading) and prefer to wait for a break one way or the other but this appears to be setting up as major decision area where the next range should be pretty clear sooner than later. I hope we know more by next weekend. If this is broken to the downside, we will short this hard.

SOXX: Chart with Detailed Levels


Market Structure: Bearish

Momentum: Bearish

Internals: Neutral/Negative

Block Volume: Negative

GEX: Negative


SOXX Summary: Weekly chart is cleaner to understand vs. the Daily chart. So I included it. This is the 3rd time in as many weeks that SOXX failed at this inflection resistance and that included NVDA being at a new ATH on Friday. This is really starting to look terrible underneath. I really wish I had shorted it on Friday honestly, was contemplating it but wanted to review it over the weekend first. Bull Bear pivot is right under price now which is dangerous if it breaks. This whole setup screams range expansion when it breaks after 3 weeks of inside action between two major pivot extremes. If the negative readings persist, it is hard to see this being range expansion upwards. Once range expansion occurs, it should be very large (either way).

DIA: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Negative

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Excessive Put Buying


DIA Summary: Dow Jones I would have assumed to have different readings after the move on Thur/Friday. But it continued to pursue negative setups internally. There is an argument to be made that this can still proceed to the upside to fill a small FVG gap above (about 4% from current price). That would coincide with a turn up in momentum as well. The thing that is different now than the last few weeks where this happend is that velocity is starting to really turn down under the zero line. This has to turn around if the 4% upside move is to play out. Otherwise, this could fizzle and collapse early in the week.

IWM: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Neutral

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral/Bearish


IWM Summary: I was actually surprised to see these readings after yesterday and Thursday relative strength. It looks like there is resistance here a little above current price, but if this does rally next week, it could test the Blue bullish trend line that has been resistance before. That is about 5% higher. Having said that, there are a lot of things weighing on this after Friday's close. GEX negative, P/C still on the lower end (call buyers persisting), momentum didn't turn positive and stayed negative, money flow is negative, velocity kept dropping Thur/Friday and blocks were sell side and sizable. These are tough readings to chop through. Doesn't mean we can't move higher like I mentioned, but a lot of working against that here.

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Negative

Block Volume: Positive

GEX: Negative


XLF Summary: Banks bounced off the support during the week and could go higher to test 22-23 level this coming week, but there is some negatives that make me question that. The velocity is now dropping harder and is below zero (very bearish sign when it perpetuates) and money flow is dropping too. If a momentum reset provides for a bounce, unless the GEX changes and the internals turn up this could be dead meat here. I know that the banks are in a tough spot RE debt here (not really reserves this time) but the debts are enormous after the debt writing binge between 2017-2020 (and lots of it is sub-prime across multi-asset classes) so there are some unknown unkowns here in banks that make hesistant to think that anything more than a bounce to 22-23 can happen. My favorite short here is AXP. I think they are going to get cooked here if COVID-19 reopenings flop (as their exposure to service/hospitality/retail spending) is large.

HYG: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Negative

Block Volume: Neutral

GEX: HEAVY Negative

HYG Summary: This is just range bound for the time being. GEX is so negative that it will keep it range bound on any upside attempts. It may make sense to sell calls on this if it can get back into the box somehow or near it. Not a recommendation, just thinking out loud, as it is highly unlikely with a GEX like this that it will be allowed to get up and through that box. Stop would be the top of the box.

TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Neutral

Block Volume: Neutral

GEX: Positive

TLT Summary: TLT looks to be in the early stages of another bullish advance. Support levels are underneath current price (as this usually leaves FVGs from overnight action). GEX is back to neutral/positive and money and velocity are either over or at the zero line (getting more bullish). I expect more clarity for this to be in place by next week's update.

UUP: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Bullish

Block Volume: Heavy Positive

GEX: Positive

UUP Summary: Been trying to put my finger on it lately and I think I am now. This is reminding me of the Eurodollar trade last year (second best trade we had last year behind PMs). It was clear that the FED had to drop rates. So it was clear the Eurodollar contracts were going higher. We bought in early and sold towards the end. Pretty straight forward quantitative and qualititative play. This is the same setup. Quantitatively the components we track look just like the Eurodollar did (accumulation, GEX, all facets of momentum etc. all looking bullish) but price was moving steady. Qualititatively there is a mass $USD shortage (which cannot be underestimated here in Emergings), the FED has to and is using Swap Lines more with Emergings/Developed partners (bullish $USD), and the risk of deflation in banks is completely underestimated here (bullish $USD). This is as straight forward an if/then proposition as the Eurodollar trade. We are placing our $USD where our mouth is and this is now the largest position in our prop fund. I am not sure what the 'trigger' is on all this and ultimately it doesn't matter. But if this does play out, then it will have repurcussions across multiple asset classes in different ways. Be cognizant of that here.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Positive

Block Volume: Neutral

GEX: Positive

GLD Summary: Couple ppl asked me this week why I am not more bullish PMs with the price action. I am glad to see them bullish, don't get me wrong, but something smells to me. This is too easy here all the sudden. I have a 'hunch' and this is not quantitative 'hunch' here, just a tea leaves read, that Gold is terminating (or in the process of terminating) a measured move up from $1200 level starting in early 2019. To me this hunch is that we will revisit around the $1400 level in Gold *($128-136 in GLD). Don't mistake me for being bearish Gold, b/c I am not. I am super bullish intermediate/long term and own lots of physical (so this run has truly been in my favor especially last year where our funds biggest gains were in PMs). But based on several different things that I am seeing this could culminate in a sharp and scary move down that could make people doubt their convictions. That would be the wrong play to doubt conviction in a clear bull market, but if we terminate this section of the bull, a swift shock would not be out of the possibilities that could make levered bulls do just that. Not saying it WILL HAPPEN just saying it CAN HAPPEN. So don't be surprised if sooner than later, this sector is tested hard, fast, and mercilessly.

SLV: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Positive

Block Volume: Positive

GEX: Positive

SLV Summary: Silver made the run at 15.54 and tagged it on the nose on Friday. Will it continue now to test the MSL area and flip the charts? Maybe. It is feasible that this can get to 16.43 here and even 17.31. Same thoughts I shared for Gold apply here. There are too many FVGs down below left unresolved for longer term sustained advance just yet, although I do think that is coming after we resolve the below areas. Just remember that silver is a merciless mofo so it could very easily breach 17.31 to take every bear stop and get bulls real frothy and instantly reverse down to $11-13 level in a week. Just be on your toes now...not going to be as easy as it may appear with this is the sense that I get...

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Positive

Block Volume: Neutral

GEX: Positive

GDX Summary: This appears to want to head straight for the do or die level at 39.81. That level goes back to 2013. That is the last resistance before meaningful move higher. I have made notes on the chart and will summarize here. For a prolonged move up (intermediate to longer term) bulls want these FVGs below to get filled. That is not a bad thing at all as it would clean the slate for a sustained move up to $80+. This is bullish now overall but there is are just too many gaps below left behind. My notes RE gold above are relevant here too. I would monitor that $40 level (and really anything from here to there) to see if there is an indication of intermediate term direction to come.

FB: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Positive

Block Volume: Neutral

GEX: Positive

FB Summary: Parabola is broken and like GOOG it is back testing resistances after that. There is one more FVG up at 221.48 that is not filled, but not sure that happens. Momentum = bearish trend in place for now, money flow is way below velocity and they are both dropping, and there is neutral volume. Same thing applies here across the board with the below FAANGs...seems like major players are waiting to see what happens here and don't mind sitting this area of the price chart out...worth noting.

AAPL: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Positive

Block Volume: Negative

GEX: Neutral

AAPL Summary: Back tested the MSL turning the week and held. Up trend is broken, selling heavy in blocks underneath (and growing), momentum = bearish trend in place. There are huge gaps in this one because of the one way price action from 242 up to 315. That is a major price range. Bulls holding this need to be aware that if this turns over, that 242 is very likely to get tagged if the 265 Bull Bear pivot level gives way. FVGs at 228 and 242 are concerning for prolonged price advance from here (intermediate/long term) without being resolved.

AMZN: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Positive

Block Volume: Negative

GEX: Neutral

AMZN Summary: This has filled the left behind FVG and former T1 at 2530 is still out there. Momentum turned up Friday and GEX is neutral so this could/can reach for that target if market is bullish early in the week. Buyers not stepping up as blocks are still negative, so there is selling into this high price area. Above T1, maybe buyers step in. Failure there or below and you could see much more selling.

NFLX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Positive

Block Volume: Neutral

GEX: Neutral

NFLX Summary: Up a little on the week even though Friday very strong. Testing the upper Target 1 again. Still bullish in structure, this can extend if it gets through the T1 level. Little to no volume in blocks is indicator of disinterest at this level. Seems major players not sure about this up here. You could see them come in on break up and out of T1 or failure and hard drop could result in selling picking up.

GOOG: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Positive

Block Volume: Neutral

GEX: Neutral

GOOG Summary: This has broken the parabola now after last week and we are back testing MSL. Momentum is bearish and velocity is dropping with money flow already negative. This looks weak, but the upside can't be ruled out to fill the FVG left behind at 1479. That is the resistance and below support is found at 1286.72 left behind FVG.

The End.


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