7/10/20: MARKET CLOSE & WEEKEND 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 (may not last the overnight session Sunday)

What this means: back and forth all week last week but as of the close on Friday we are on the cusp of inflation...over 3180 and bust 3200 ES and its Nirvana time


When could this flip regimes: Above 3180 will be bullish and equity nirvana...below 3070 will be doom loop formation. (**I am still holding the 3180 level as a must take back level for bulls before we are in a nirvana cycle again even though GEX is green right now technically**)


FRIDAY's ACTION:


VIX and VXX down hard all day... VIX -6.73% and VXX -2.75%


  • UUP was not bought Friday -0.15%

  • TLT was not bought Friday -0.50%

  • SPY was bought Friday +1.02%

  • QQQ was bought Friday +0.68%

  • IWM was bought Friday +1.61%

  • DIA was bought Friday +1.39%

  • SMH was not bought Friday -0.50%

  • FAANGs ALL GREEN

  • HYG +0.34% was bought Friday

  • XLF was really bought Friday +3.44%


ECCLES BLDG housing the newly established 'FEDSURY' ZOOM CAM:


Testing out the back up printers...haven't pulled these out since Roosevelt but you never know when more printers are needed...they do it for the pensioners you know...

Our six main things to keep watching for:

  1. COVID19 cases - Florida set the highest records on Sunday and there are freezers parked outside the hospital downtime 5 min from my house. Epic fail. And they want to open schools in 6 weeks...

  2. US/China relations - quiet today...

  3. $USD - meh

  4. Long bonds - meh

  5. VOLS (especially 60+ days out) - all collapsing

  6. GEX levels - verge of nirvana cycle


Macro Thoughts on a Sunday:


There has been discussion amongst many in tech that we have been on the verge of an LAE for a while (Life Altering Event). That is the event that simply clears the way for tech to consume everything.


COVID was/is the LAE. Nothing is ever going to be the same. Tech was already positioned after the last decade's growth (in everything from profitability to weighted indexation to market place dependence of everyday humans lives) to consume everything when the time came. This LAE just kicked it all into high gear and we may be witnessing the great inflection point right now.


Right now most VCs and startups are telling their teams that they will be working remote until Jan 2021 earliest and July 2021 latest subject to further changes. This is at the same time the last 90 days has been one of the hottest early stage venture funding cycles in the history of Silicon Valley. Think about that for a second...one of the hottest periods for early stage companies ever and while you are at it...everyone stay home. Money is sloshing to start up and early stage companies at record pace while their leadership and teams are working from home...truly LAE stuff here transpiring.


IWM and XLF and DIA were smashed in March. Tech just corrected. Since then Tech has raged (that is not even incorporating the data of the Valley's investment into early stage tech the last 90 days). Tech is tomorrow. IWM, XLF, and DIA are littered with yesterday. They are not recovering as quickly this time - so are the old narratives and comparisons going to fade with the knock on effects of this LAE? Some yes and some no, but the inherent CVOID disruptions will bring max pain for sure to those models. Growth vs. value? Hate to tell folks, but AAPL and AMZN's margins are not weak, neither are GOOGL or FB. Are they just like 'tech' from 1999 or are they some hybrid model? I believe they are arguably growth and value companies combined and they are now a part of the US imperialism reach as they control the networks over which people operate everything. So they are critically important to the state as well as the marketplace.


So if you have to save a mom and pop chain of restaurants - or Google - FEDsury is going to choose Google. Even the anti-trust argument is not a good one. If they break up AMZN, Bezos will just do what Rockefeller did and maintain majority ownership of everything and then set prices. Won't work...and to think that the gov that wants to open schools and can't even mandate masks is somehow going to wrangle in Bezos is flawed logic.


I am rambling so let me get to my point. Net/net - tech is leaving the station imo because of this LAE. Even if we correct or even draw down more (even the resurgence of the bear market trend) I don't see tech underperforming. I see old banking models (vs. Paypal) and old restaurant chains underperforming from here (vs. a UberEats/GrubHub). I see airlines underperforming from here. Then tech will continue to eat everything on the way down. If your entire restaurant chain has to close and there is AMZN still printing money with Cloud AWS who wins? You can be like Nordstrom's and say you are paying half your rent until 2021...but will it matter if consumer behavior in 12 months is forever altered? Are you DOA right now? In 12 months AMZN may have VR that tailors your suit to your body from home effectively rendering Nordstrom's obsolete before they can make it back to any semblance of pre-LAE reality...


Markets make better decisions than managers in the long run. The market is right now (not just stocks, but capital in general RE the VC conduit) flocking to tomorrow and leaving yesterday behind. The shittiest part is we are stuck in today - in the actual LAE - that still hasn't resolved yet and may not for some time in our day to day life. But the market is going ahead and pricing tomorrow and forgetting about today even to the dismay of participants...


Look at the last decade for QQQ. The FED easy money trap they find themselves in (and is directly related to Pension crisis based on our research) went straight to the FAANGs bottom lines. They were able to grow profits, market cap, and acquire everything they wanted that might actually compete with them (FB buying WhatsApp and Instagram). World domination is in their hands. Zero interest rates contributed to this in every way.


QQQ Trends: just look at the compounding rolling returns...

QQQ Holdings: all concentrated in FAANGs based on indexation rules of the ETF

SPY Holdings: all concentrated based on indexation rules of the ETF


FAANGS CHARTS: If you look at them since March COVID lows (the LAE), they are either in a bubble...or...they are being repriced upwards with velocity (along with Gold & Gold/Silver Stocks, and PPE) to reflect a different future - a different world in a different tomorrow.


FB

AMZN - a bubble or a repricing

AAPL - a bubble or a repricing

NFLX - a bubble or a repricing

GOOGL


You can see from all the charts that tech is just sucking in capital. The Swiss National Bank is fully invested in the FAANGs. So are many others. Tech is not shale. Shale is in trouble. Tech is becoming the utility companies of tomorrow. Does that mean we won't correct? No. Does that mean that the dollar can spike and reek havoc? No. Does that mean that COVID won't continue to incinerate the best laid plans of the Fed or government or anybody else for that matter? No.


I am saying that no matter what happens with earnings this quarter or COVID fallout...that the LAE is happening and tech is best positioned to eat everything going forward. The only thing that can happen is a total shut down of society...but even then the only survivor would still be tech. I don't see this any other way at this point mid-to-long term.


I know that some will say I am flopping to a bull. I am not. I am a full blown bear on somethings. But I am a bull on others. I am bullish PPE. I am bearish fractional banks that are toast. I am bullish gold and silver and crypto long term and even bullish the dollar. I am bearish oil. I am bullish tech long term and bearish the old retail model. The time frames are all different as are the reasons.


My primary takeaway from this exercise is that this time is different. Different because COVID is an LAE that the tech innovation next chapter was waiting for to get the free pass to eat it all. The bankruptcies that are coming, the defaults that are coming, the changes to life and the way we will be forced to live are coming - all will leave things changed. This is a epic moment of darwinism that I think will be highly binary in nature. What will be used in tomorrow's existence and valuable versus what was used in yesterday's existence. Winners will be all over the former. Losers the latter. There is no precisely clear picture to what 'tomorrowland' looks like, but our team is now actively trying to assess that as it is very clear that the liquidity is as well.


As for this week, I am not going to get too early in a near term bias call. Friday's action could prove to be impactful short term, but we are OPEX this week, so I need to see Monday/Tuesday first. There are serious gamma implications at some serious inflection levels close. I need to see a major move over 3180-3200 or below 3100-3070 to get more definitive either way.


Everyone can decide what to do with their trades, but I am going to be patient and let this week unfold. VIX is nearing an inflection point where it could snap back hard and indexes are overbought in a lot of ways...but XLF and DIA are not overbought yet and could rally a little this week which could drag indexes upwards. So mixed bag setups argue for more patience short term. There are plenty of individual sectors to chase (PPE for example) that are outperforming if one wants some alpha in the interim.


All the usual stuff is below and max pain is included for the weekend.

SECTORS BROAD MARKET:

Sector Takeways: Front running rotation into banks for earnings this week...


SECTORS BONDS/GOV/SOME COUNTRIES:


Sector Takeways: Gov bonds bids and precious metals not bid. Other countries bid.

SECTORS SOME MORE COUNTRIES & FEW CURRENCIES:

Sector Takeways: Other countries also bid...$USD meh

VOLATILITY:


VIX: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: N/A

Block Volume: N/A


VXX: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Bullish

Block Volume: Positive

GEX: Negative

Options Visualization: Max Pain


VIX/VXX Summary: VIX and VXX both nearing momentum exhaustion and their respective bull bear pivots. I am cautious to say they are bearish medium term until those levels are taken out. Once that happens, I will say they may be bearish, but this historically is an area where we see a bounce or more.

INTERNALS


TRIN:

Takeaway: 3 bulls and a bear. Short term is a bullish read.


ADVANCERS/DECLINERS:

Takeaway: Bulls.


200 DMA:

Takeaway: Turned back up - trying to fill the gap?


NYSE ADVANCERS/DECLINERS:

Takeaway: There are no gaps above, so this could meander more than not without an impulse move.


CUMULATIVE VOLUME:

Takeaway: Turned up hard. Follow through key to breaking out.


ABSOLUTE BREADTH:

Takeaway: No volatility broad market at all at the moment.


MCCLELLAN OSCILLATOR:

Takeaway: Turned back up.


INTERNALS Summary: The picture after Friday would imply bulls have the ball. They need to press forward. Fumble here would be quite bad so they really need to bust $320 with gusto.

INDEXES:


SPY: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Bearish

Block Volume: Positive

GEX: Positive

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: SPY VOL Term Structure


SPY Summary: SPY continues to move upwards with a very positive GEX. VOLs were down on Friday. I suspect $318-320 to be tested tomorrow. We will see what that looks like and/or if there is any reaction there.

QQQ: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Positive

Block Volume: Positive

GEX: Positive

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: QQQ Volatility Term Structure

QQQ Summary: VOLs are still pretty high. Could pull back...or not. Puts were too heavy on Friday for my blood and also futures shorts are still piling on.

SMH: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Neutral

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

SMH Summary: Still inside the upwards channel. If this doesn't correct/top out soon, target is 15% higher...hard to believe but that is target I have if no pullback.

DIA: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Neutral

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: DIA Volatility Term Structure


DIA Summary: FVG higher that was left behind is the first target. Maybe that gets hit tomorrow or Tuesday before earnings start. Intermediate term I don't like this with COVID.

IWM: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Bearish

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: IWM Volatility Term Structure


IWM Summary: Still garbage. Maybe it plays catch up on upside action maybe not. VOLs still too high for sustained upside move it one materializes. I don't like this short/medium/long term with COVID.

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Negative

Block Volume: Negative

GEX: Negative

Options Visualization: Max Pain


XLF Summary: Earnings start this week. I am still 100% bearish banks. Nothing has changed here. I will not short though unless we get to the $25 level before earnings start.

HYG: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Bearish

Block Volume: Negative

GEX: Negative

Options Visualization: Max Pain


HYG Summary: This earnings and COVID data and the reactions to it next 3 weeks is critical to near term Q3 action.

TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Bullish

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain


TLT Summary: Pull backs are buys now based on the $165 breakout.

UUP: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Positive

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain


UUP Summary: Looking for a momentum reset on this in the next 2 days. We will see where we go from there once that happens. Nothing showing anything bearish here to me at the moment - opposite actually.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Bullish

Block Volume: Bullish

GEX: Positive

Options Visualization: Max Pain

GLD Summary: Starting to cool off here. Meaningful pullback? Too early to say. TBD

SLV: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

SLV Summary: Now in a much more intermediate term bullish stance after last week. This is now looking for some sort of pullback to see what's next. If no pullback, then watch $18 level.

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

GDX Summary: $40 is the ceiling so far. Starting to materialize some sort of pullback. This week seems to be important near term...so let's see what happens.

THE END.



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