6/18/20 MARKET CLOSE Update - Consolidated Analysis

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

PRIMARY MARKET REGIME CURRENTLY IN PLACE:


LIMBO

What this means: We are in limbo still and the pinning tomorrow for OPEX appears to be highly likely to pin this somewhere between $3100 and $3180...that is the limbo zone


When could this flip regimes: $3180 SPX is the primary flip upwards to more bullish posture (larger GEX flip as of Thursday close at 415PM) and $3165 is the warning shot. Below to drop to doom - 3100 is warning and 3085 could kick off a new dooooommm....


(currently we are in the lower range in futures but it was saved last night from 3040 and brought back to 3120 so there is no reason to believe that wouldn't happen again barring something unforeseen)


I have stated numerous times that I thought that the COVID second wave (if the first one actually ever left) would be highly problematic. It is such because it exposes our structural problems that liquidity cannot fix. This is a first hand take from me:


I live in Florida. Today cases are so bad that we are getting iWatch/iPhone emergency notifications from the state and local authorities telling us we have to have masks on effective immediately when in public. We have spikes in cases in every city and really high spikes in cases among the median ages of 19-25 because this is being spread predominantly in bars, restaurants, and night clubs. It also has been spread at the protests as I mentioned last week in the blog. The death total in my city (one of the major cities) is starting to spike for these young people (which is so terribly sad).


We have had at least 20 major restaurants and bars (major size players in the city) close ON THEIR OWN based on their STAFF being infected in the last 72-96 hours. We are witnessing a SELF IMPOSED shutdown of these businesses vs a government issued one from businesses...and then we are witnessing a panic from authorities who had, as I stated a couple weeks ago, made a major mistake letting these states open too quickly as if nothing had happened. How is this going to shake out financially?


The entire rubbish rally we have been experiencing was based on the fact that this was a liquidity issue and COVID was going to pass quickly. I have stated again and again and again that this (COVID) was predominantly a structural issue that liquidity would not solve and it wasn't going to pass quickly. I have been early in that statement...but I am not sure that I am wrong. I wish I was wrong. If a true and volatile second wave is starting, which is not unrealistic to assume here, then how is any business that cannot operate in an modified manner (specifically referring to bars, hotels, restaurants, sports, airplanes, cruise ships - i.e. the Dow and Russell) going to survive a real debt-pocalypse? Liquidity and solvency are two distinctly different things that require distinctly different approaches...one doesn't solve the other and a lack of supply/demand will cause structural problems beyond being a zombie.


I say this: MMT theoretically makes sense. COVID 19 doesn't make any sense. How do you use a standard liquidity solution to solve an non-standard, fluid, and evolving problem? I don't think you can. And not for a lack of effort...I just don't think its doable. You have to create new solutions and really address your structural issues and really think out of the box. You can't just buy ETFs or corporate debt. It is like trying to put a band-aid on a gut shot.


OPEX tomorrow is one of the largest on record. There are those that say that there are so many trillions on the sidelines waiting to come into the market its just bullish no matter what happens. JPM says that equities have 47% higher to run here in this revived bull market. Maybe they are right. Maybe after OPEX b/c of the liquidity we keep heading higher into a new dawn on the back of MMT. It can happen - I acknowledge that.


My response is quadrillion. That is the measurement of derivatives that are stacked on top of debt instruments in a fractional reserve banking world. Our entire system cannot afford to be stopped from productivity and it cannot afford lending to seize up (which both are happening RIGHT NOW) - it has to keep rolling to keep rolling debt. COVID stops it dead in its tracks. The $4 trillion on the sidelines and the $17+/- trillion in 401ks and the other trillions in the world is not a quadrillion and isn't enough dollars.


Central economic planning assumes that control over all variables can be achieved through a mix of confidence and liquidity. This assumes that all inputs are controllable and everyone wants the same outcome. Unfortunately in nature, not all inputs are controllable...and we are seeing in real life everyday lately that not everyone wants the same outcomes.


You are going to have to place your bets accordingly here shortly...OPEX is a temporary distortion before the real show starts. I genuinely believe Powell and Mnuchin will be forced to get even more creative before the COVID induced structural defaults and problems pass and whether or not they will be successful at navigating this is TBD...

No matter what...it is going to be volatile.


Vol is alive and well.

TODAY'S ACTION:


VIX and VXX no one is moving today again and these were pinned... VIX -1.58% and VXX -1.81%

  • UUP was purchased today +0.38%

  • TLT was purchased today +1.06%

  • SPY pinned +0.04%

  • QQQ pinned +0.27%

  • IWM pinned -0.04%

  • SMH pinned -0.14%

  • FAANGs all green except for Google

  • HYG -0.04% pinned

  • XLF pinned -0.12%


J-ROME AND THE MANUCH AT THE CLOSE ZOOM CAM:


J--Rome and The Manuch got to tuning up that digital printing press midday with the awful new COVID news about Outbreaks in most southern states...they thought they had done enough...highly doubtful that it will have been enough...



Ok so where are we today based on the weekend game plan:

  • COVID19 cases - INCREASING at very disturbing rates in AZ, CA, FL, and TX...again this is the FED and Treasury's Kryptonite

  • US/China relations - China basically said 'hey bro...you better tone it down or you will be responsible for what we do next'...not de-escalating to say the least

  • $USD - Green

  • Bonds (TLT) - Green

  • VOLS (especially 60+ days out) - Unch

  • GEX levels on a pull back/correction (IF one materializes) - Unch

From the weekend expectations for OPEX week we are 4/5 thus far:


1. Range Expansions both directions - check

2. GEX flips multiple times - accomplished this today so check

3. OPEX induced short squeeze from last week to kill bears - check (killed them overnight last night lol...again)

4. OPEX induced rally (off said short squeeze to get bulls to roll calls or even better buy fresh ones further OTM) - check this morning it happened as posted on twitter in real time

5. Close the week lower than where we start for maximum pain on both sides - unknown?


Tomorrow will probably be a pinning between $311-315 (even as high as $318) for the OPEX close. The macro environment will be held together by dealers for their interests tomorrow. By early next week everyone will be on their own.


SECTORS BROAD MARKET:

Sector Takeways: All of the strong dollar hits starting to settle in today...equities moot until OPEX clears.


SECTORS BONDS/GOV/SOME COUNTRIES:

Sector Takeways: Gov bonds in demand again and other countries hurting on dollar strength...high yield meh

SECTORS SOME MORE COUNTRIES & FEW CURRENCIES:

Sector Takeways: When the dollar is strong the other countries are red. The end.

VOLATILITY:


VIX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: N/A

Block Volume: N/A


VXX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Systematic Buying

GEX: Negative

Options Visualization: Max Pain


VIX/VXX Summary:


VIX and proxies are, when zoomed out, consolidating over the major pivot and poised to go much higher. They are bullish market structures, not bearish. They are much higher than they were when COVID started and the rest of the corporate calamity started (effectively 100% higher than February). We are about to move into the summer of mass business defaults, a second wave of COVID, China issues escalating, and a very volatile election cycle. Tuning out this week and even first couple days of next ... you will have to decide if you think we are entering a new period or low vol prosperity or if volatility is just getting started.


Place your bets accordingly to whether you think this space will be higher or lower in Q3 than it is today. You bets will be of incredible consequence, either way you place them...

INTERNALS


TRIN:

Takeaway: Pretty bullish...sans QQQ


ADVANCERS/DECLINERS:

Takeaway: Bearish except for QQQ...same as yesterday


200 DMA:

Takeaway: Stalling in the middle even more today than yesterday


NYSE ADVANCERS/DECLINERS:

Takeaway: Rejected from the resistance line cleanly...and did not get back up there today as well momentum is turning over


CUMULATIVE VOLUME:

Takeaway: Selling today again and momentum is turning over


THE DJT: This evening a barrage of tweets from DJT announcing a bunch of random fiscal stimulus awards for individual states Departments of Transportation divisions to start building roads and such...let's go to it live:


Takeaway: Fiscal stimulus to the transportation sector won't keep businesses afloat ... we will great roads and no one driving on them. MMT is what we are 100% doing now but will it be enough and/or will it work?


ABSOLUTE BREADTH:

Takeaway: High level consolidation again but momentum rolled over. Keep in mind we are in volatility levels and very close to extreme volatility ... one spark and this could explode.


MCCLELLAN OSCILLATOR:

Takeaway: This is very strange situation here...pinning it to zero line is very abnormal.


INTERNALS Summary: This is starting to look very weak. Is OPEX distorting this or is it genuinely this weak all the sudden? COVID second wave forcing businesses to shut down ON THEIR OWN will break all these readings... let's see what next week brings.


INDEXES:


SPY: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Neutral

Internals: Bullish

Block Volume: Neutral

GEX: Negative

Put/Call Ratio: Call Buying (THE MOST YET)

Options Visualization: Max Pain

Volatility Metrics: SPY VOL Term Structure


SPY Summary: Call buyers making new lows on our PC ratio system today ... they just want


Still not finished with OPEX distortions and upside FVG left unfilled. Could see this even being gorpy and messy into Monday/Tuesday.

QQQ: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Positive

Block Volume: Positive

GEX: Bullish

Put/Call Ratio: Call Buying Excess

Options Visualization: Max Pain

Volatility Metrics: QQQ Volatility Term Structure

QQQ Summary: Doubters are about to be broken (either way) as we are at some sort of inflection here...as for me, well...to the QQQ:

Eerily quiet in the market... but still room higher short short term if it wants it.

SMH: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Neutral

Internals: Bullish

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

SMH Summary: Filled the FVG and has struggled since. Max Pain won't get hit so this can float tomorrow...barring something unforeseen tomorrow, we won't know more until Monday/Tuesday.

DIA: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Negative

Internals: Positive

Block Volume: Neutral

GEX: Neutral

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: DIA Volatility Term Structure


DIA Summary: DIA going to need to phone the Treasury and start begging soon for more stimulus as the second wave breaks the gumption of people to head back out:

Looks like shit. Vol still really elevated. Momentum rolling over. That damn FVG sitting above makes me cautious for some garbage spike action Monday/Tuesday ... but maybe it doesn't happen. We will know a lot more next 48 trading hours. If second wave takes over the narrative here...it will be lights out on the DIA.

IWM: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Neutral

Internals: Positive

Block Volume: Neutral

GEX: Negative

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: IWM Volatility Term Structure

IWM Summary: Bulls keep saying...

This is really looking sick, like vomit sick, but is being pinned no doubt. This should have rolled over already and with volatility readings this high, there is something really wrong here. The second wave narrative settling in here (as mentioned for DIA) may be a widow maker for IWM as so many of these companies are zombies. Next 48 trading hours are key.

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Negative

Internals: Positive

Block Volume: Negative

GEX: Positive

Options Visualization: Max Pain

XLF Summary: I noticed today that this and IWM look exactly alike. I suspect that is because they are basically tied at the hip. IWM is the zombie and the bank is the creator. Second COVID wave would equate to mutual destruction. But we are being pinned here at the moment...so we wait.

I am not sure that there is a fix for businesses opting to close themselves (like medium size restaurant groups for example) because they simply can't remain in business. It may take a prolonged PPP program (like 6-9 months of such) in order to keep the banks and the small caps alive if what I think is coming is about to come to fruition.

HYG: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Neutral

Internals: Positive

Block Volume: Negative

GEX: Negative

Options Visualization: Max Pain

HYG Summary: Sitting right here at max pain. There is little to no room above and no room below this for error. Margin for error here is very thin.


TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Neutral

Internals: Neutral

Block Volume: Neutral

GEX: Negative

Options Visualization: Max Pain

TLT Summary: Seems like the pinning action is attempting to work here but the accumulation action is overwhelming it...just look at the GEX. I think the 'in the know' players are accumulating this now and then are done with the stealth accumulation.

UUP: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Negative

Block Volume: Negative

GEX: Positive

Options Visualization: Max Pain

UUP Summary: We are seeing heavy accumulation of $DX now all the sudden (dollar futures) and it is pushing up UUP. This has first heavy resistance about 1.5% higher which I suspect is tested shortly (next few days). If the banks and small caps and dow jones exposure to what I believe the COVID second wave can kick into motion for a default cycle, do actually get kicked into motion, I think the defaults will create a shock for dollars people are not ready for. That will catch many flat footed and wrongly positioned. I have been saying this for a month now and will gladly admit if I end up being wrong on this, but my probability measurements give this a better than 75% chance of happening and it increases daily now based on what we are starting to see.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Negative

GEX: Positive

Options Visualization: Max Pain

GLD Summary: Bad day for gold today. Price action was really ugly and lost many internals and momentum. Needs a save here or this is heading lower ... front running margin calls coming soon?

SLV: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Negative

GEX: Positive

Options Visualization: Max Pain

SLV Summary: Starting to roll over here. Watch the 15.44 level for clues ... if that goes, its meaningful to more than silver.

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Negative

Block Volume: Negative

GEX: Positive

Options Visualization: Max Pain

GDX Summary: Pretty close to max pain. May hit it tomorrow...may not. This is getting dicey here as momentum was turning back up but did a 180 ... I think this was genuinely turning bullish on liquidity excesses yesterday and could have turned up. This turn down is COVID related and it is in trouble here. This starts to break down - be aware, the deflation narrative may be coming to fruition. For the inflation narrative to take hold, this sector and ETF needs to turn up quickly.

THE END

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