5/21/20 MARKET CLOSE Update - Consolidated Analysis

Updated: May 27

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

QUICK SUMMARY:


Volatility avoided the guillotine for today...but the FED has been pretty persistent lately so tomorrow is still lingering out there...closed w/ VIX +5.50% and VXX +2.91%

  • UUP finished green after the initial ground hog day whack a mole move at 8AM EST and closed up +0.22%

  • TLT keeps base building and closed positive again +0.25%

  • SPY mixed action finishing down -0.69%

  • QQQ pretty weak with FAANGs lower today finished -1.09%

  • IWM was strongest at +0.18%

  • SOXX was weakest with a down day manic action closing -2.52%

  • FAANGs with mostly down action except for FB so most ended up closing RED

  • HYG -0.02% rangebound again

  • XLF no follow through from yesterday ramp and camp -0.32%

I am seeing that the majority (if not all) of market participants are now bought into FED/Treasury controlled market action at this point. Everyone is running in the same direction with the same narrative. The only difference now is that the narrative is just wrapped in different packaging depending on who you are getting it from - but all narratives are FED based market advances forever now. Having said that - here is what is happening under the surface:

  • $USD is accumulated on every major dip in bulk

  • $GLD and PMs are quite exhausted here (intermediate term not squiggles)

  • $BTC looks vulnerable

  • $TLT has really reset in the intermediate term

  • $QQQ $SOXX $SPY $IWM $DIA are at the top end of their ranges and really gorpy action

  • FAANGs are top end of the range

  • $VIX is pretty much neutral from all readings we track but when we were up near the ATH for QQQ in March (and lets be honest that this is the FAANGs market) we had a VIX at 14. Not a VIX at 28-30. We are at 30 level currently.

  • FED and Treasury are talking daily. I MEAN DAILY about another stimulus of some kind. Mnuchin and Powell promoted more stimulus today - both of them. That is every day for weeks now.

Some Macro Commentary: Stocks are back at highs for the most part. What are they so worried about that keeps the constant barrage of stimulus communication alive every day? Everyone is all in again on stocks and in the green. I have been asking myself this question and looking at the above inputs for like 2-3 weeks now and still racking my brain on it. Why are there FED speakers everyday? Treasury Mnuchin up in front every day or on the wires every day. A new stimulus plan/proposal every day...when stocks are within ranges of their highs.


This is not the action that people take when they are confident. This is the action people take when they are terrified. What has the FED and the Treasury terrified? Ask yourself that...b/c they are acting terrified. 40% unemployment ... ok. Defaults ... ok. Banks ... ok. I believe they are trapped in some sort of lose-lose situation that is even worse. Inflation is a lose (because of the side effects) and deflation is a lose (because of the side effects). But some sort of systemic risk isn't either of those, its worse. They are not afraid of deflation or inflation - they have tools for both of those. The one thing that they are afraid of is losing control of that reserve currency I believe which is really the source of all the US power (sans our military industrial complex might) as the SWIFT system is arguably the greatest weapon on earth because of the power it brings in currency swaps.

And yet that is the one thing that literally no one is talking about anywhere is the 'oh-shit' we are going in the wrong direction moment that a $110-120 DX ($USD) would create if for some reason that type of move is ignited and that is the one thing that if it occurs would catch 99.8% of the market flat footed.


Not saying it will happen...just that there are a multitude of reasons it could happen (too many to even list here) and it could happen so quickly people have no opportunity to act and end up looking like Kevin Hart above. A real totally caught offsides moment that we kind of saw a couple months ago but way more eye watering...I get the feeling that March was the initial shock that set something else into motion they are having trouble containing now - that is how they are acting.


I could be COMPLETELY wrong here...and it wouldn't be the first time. But my take based on what readings I am seeing is that something is really wrong with the system at the moment and you and I are not being told what that is...so we can watch the positioning and it points to smart money front running systemic risk/ultimately currency risk. Gold/Bitcoin/Silver/et al would be alternatives in this situation AFTER such a risk event but not during the event. Remember that...they are for what comes after. Sorry just been mulling this over in my head last couple weeks. No way to know if this plays out this way...

All the regularly daily trading commentary is below. We could try for more upside tomorrow, there is no doubt about that, but big picture we are just squiggling around up here right now and oscillating 2-3% either direction now in a gorpy fashion. That always precedes elevator moves down based on our Equity Nirvana vs Doom Loop regime flip model.

SECTORS:

Sector Takeways: Red across the board but Oil was big green as was retail and ... homebuilders? What is the play here? I have seen that it is said everyone is going to move out of their city/urban building with behavior changes RE COVID-19 and social 'not-distancing' that is taking place. This is the dumbest shit I have ever heard. What are they going to buy the house with when 4/10 are unemployed? I swear narratives right now are clown show level garbage. Be careful what you start buying into...just because you are seeing a lot doesn't mean it's sane.

VOLATILITY:


VIX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Neutral

Internals: N/A

Block Volume: N/A


VXX: Chart with Detailed Levels

Market Structure: Bullish/Neutral

Momentum: Neutral

Internals: Neutral

Block Volume: Neutral

GEX: Negative/Neutral


VIX/VXX Summary: No 25.00 today for VIX. Both VIX and VXX were better than flat today but not much more than that. Internals are improving on VXX and momentum is trying to x-over back to bullish. But I can't say that these are anything more than neutral right here although there is the look of trying to turn back bullish for another attempt higher. We may not know more until next week. Have to see how it goes tomorrow - that will provide for me to add more color.

INTERNALS


TRIN:

Takeaway: Neutral to bullish is how I read these. But there was no reprieve into the close as selling carried its way until 415PM. This could imply a little bit of bounce attempt tomorrow.


ADVANCERS/DECLINERS:

Takeaway: At the open these were all green. During the course of the day these all went red. Notable that it was intraday change today.


NYSE ADVANCERS/DECLINERS:

Takeaway: Started to get up into the test area today and resistance came into play before the pink test line. Momentum is stalling. But tomorrow is a new day. We will have to see what happens.


CUMULATIVE VOLUME:

Takeaway: Setup is still there. Can leak higher tomorrow up into the kill zone. We will see what happens. If this never gets up there to test this, that will shock me and also let us know this is a lot weaker than we think.


ABSOLUTE BREADTH:

Takeaway: MONITOR. Broke up and out (as I posted on twitter earlier this AM). Not what the bulls want at all imo. This is now like toothpaste...going to be hard to put this back into the bottle after a 2 month wedge breakout.


MCCLELLAN OSCILLATOR:

Takeaway: Momentum stalled out today. Still bullish if it wants to try for higher. Everything about this is neutral now with no edge.


INTERNALS Summary: Absolute breadth is out of the box now. AD and Cumulative Volume are both in the test area for the resistance. McOs is neutral. Need to see how things play out tomorrow for next week.

INDEXES:


SPY: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Neutral

Block Volume: Negative

GEX: Positive

Put/Call Ratio: Neutral

SPY Summary: Bulls can still try to test the 300 level but the call buying is still persistent and we are still not seeing this get up and through. Look at the call buying intra-day that almost touched the pink excessive exuberance zone. That is 2nd day in a row. This is not relenting. When this does bust down, we are going to clean out everything to 270 in short order. That is where all the gorpy action has been since mid-April. Where we go from there I am not sure - we will see after that happens. If we keep leaking higher in that gorp garbage watch 300, 306, and 312.

QQQ: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Positive

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral

QQQ Summary: We are still in exploratory mode with QQQs. FAANGs were all red (sans FB that almost made it there by close). AMZN hit $2500 level today that was the round number I mentioned a few weeks ago that needed to be tagged. Maybe that was it for this index ... but we will only know in hindsight. It did make a new high at the open that was not seen the rest of the day. That is typically the termination pattern that sticks. We will see if that high is taken out the next few days.

SOXX: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Neutral

Internals: Neutral

Block Volume: Negative

GEX: Negative

SOXX Summary: Manic index now. Up 4% down 4%. Up 2% down 2%. This is running out of gas. Even if we go tag the FVG upside this is looking really spent here. We are starting to see this action of up/down up/down retracing entire moves because we are running out of buyers of any volume and sellers are testing the waters. This means one big sell-everything moment will unleash some serious sell side heat on this index. We won't know if this wil be a 'pull-back' that gets bought afer filling a few FVGs or if this is something worse until we see what that sell-everything elevator looks like.

DIA: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Neutral

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral

DIA Summary: Dow Jones hit the resistance trend line and backed off for the 5th time. This is gorpy and garbage action at this point. Pick a side and set a stop. That is my recommendation. Upside is worth 1-2% maybe and downside is 20+% so you know where I am...

IWM: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Positive

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral

IWM Summary: Strongest of anything today but in real irrational exuberance mode. Look at the intraday spike in PC. This is everyday now in the AM. Buyers (I am assuming new fresh stimulus cash from trading accounts) is being pushed into IWM calls. This is still meandering higher in low volume gorpy price action and you know what happens when that is done - wipe out of 1-2 months of price gains in 1-2 days. Having said that, we have no way to know when the last call is bought that will go to zero...

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Neutral

Internals: Positive

Block Volume: Positive

GEX: Negative

XLF Summary: Could not flip the GEX today and lost the little momentum that it had. Very suprised by the action this week in XLF. I expected a great deal more out of it. But there is just no buyers to follow through with this. I am getting the sense that this is in trouble. I say that because if there is no one to squeeze (heavy shorts) and there are no buyers to drive things higher...you get exactly what we have seen - range bound negative bias action. That is until there is a reason to sell it again. No one is shorting this heavy at the moment as it is close to the flip point, but this could get ugly if there is some sell-it-all event that tests those big negative strikes.

HYG: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Positive

Block Volume: Positive

GEX: Negative

HYG Summary: Hit the bottom end of the distribution box and dumped out immediately. This is exactly the playbook that we have been seeing. Internals are meh and momentum is tapping out again. GEX remains in a 'containing mode' on this for now.

TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Neutral

Internals: Neutral

Block Volume: Neutral

GEX: Neutral/Negative

TLT Summary: Sitting at the flip area of the GEX and also building some solid base dynamics as momentum has confirmed a x-over and price is up and over the trend line. Still don't have the money flow and velocity over zero line to get some new cash flowing in to chase price up but smart money is already in this at this point.

UUP: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Neutral

Internals: Neutral

Block Volume: Heavy Positive

GEX: Positive

UUP Summary: Price filled the empty FVGs left behind yesterday and was hit again on the jobs report this morning very hard. I guess bad job losses mean sell the $USD. Regardless, price ripped higher from there and is trying to build that local bottom. Blocks still being accumulated each day and momentum is about to be reset on the daily yet again. I believe this will be one of the most 'caught-offsides' trades in history if what I think is about to happens...actually happens.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Negative

Block Volume: Negative

GEX: Positive

GLD Summary: Heading lower intermediate term. Could squiggle around up here but not worth farting around with. $169.54 white line will act as premium resistance. Below is listed the first real line of support and also all of the open FVGs left behind. Remember my comment a week or so ago that I fully stand behind, I got a hunch all of those get filled in the same bearish trending move...just a hunch and not quantitative though so take it for what it's worth.

SLV: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Positive

Block Volume: Positive

GEX: Positive

SLV Summary: Got first taste of heavy resistance selling today. This could (along with GDX) make a run at some higher resistances but that would face heavy selling again. $17.31 is still up there and with this much buyers underneath (see green block bars) makes sense that it could try to run up there once more, but I wouldn't count on it. Time to ring the cash register into any strength if you haven't already.

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Negative

Block Volume: Neutral

GEX: Positive

GDX Summary: Starting to break down. Look at the GEX. $40 will be major resistance now. Could take a try at one more high but $40 will be very hard to breach and with this many negative strikes below starting to appear I would not count on a run at $40 as high probability.

THE END.


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