7/17/20: 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:


EQUITY NIRVANA

What this means: Dealers buy the dip and sell the rip and the FEDsury (Bob) makes sure the small lots (baby deer) are feeling loved and protected.

When could this technically flip regimes: Flip is now 3190-3210 (very close) and below.


FRIDAY's ACTION:


VIX and VXX down hard all day... VIX -8.29% and VXX -3.59%


  • UUP was not bought Friday -0.42%

  • TLT was not bought Friday -0.21%

  • SPY was bought Friday +0.29%

  • QQQ was bought Friday +0.12%

  • IWM was bought Friday +0.29%

  • DIA was not bought Friday -0.27%

  • SMH was bought Friday +0.46%

  • FAANGs mixed

  • HYG +0.28% was bought Friday

  • XLF was not bought Friday -0.83%


Our 6 main things to keep watching for:

  1. COVID19 cases - Too depressing to even discuss.

  2. US/China relations - I would suggest monitoring the South China Sea situation and Taiwan...just a suggestion fwiw.

  3. $USD - RED

  4. Long bonds - meh

  5. VOLS (especially 60+ days out) - meh

  6. GEX levels - MIXED


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


No video today or jokes. Just would like to give you some perspective. This is where we are at right now currently being implemented by the FED:

  • Yield Curve Control (mentioned and probably not far off)

  • HY Bond ETF Buying (happening)

  • HY Corporate Junk Bonds Purchasing (happening)

  • Main St. Lending ($10MIL+ Corporate loans - happening)

  • $10 TRILLION fiscal and monetary stimulus (happening)

  • Most foreign market buyers exited/exiting our Treasury Market (happening)

  • Daily FEDsury speakers referencing the same words:

  • 'Tools Available'

  • 'More Facilities'

  • 'No signs of inflation'

  • 'Negative Rates'

  • 'More Stimulus'

All of this is based on the premise that if you can stifle volatility then you can levitate markets in perpetuity and create inflation. If you can levitate markets into perpetuity and create inflation then you can draw up the economy from the rear (rising tied lifts all ships so to speak).


Has it worked? Yes and No. Volatility the last 3 months versus the last 10 years = winning.


YES


They have stifled it in the last 3 months for everything except small caps.


SPY volatility is the last 3 months is lowest in last 10 years.

QQQ volatility is the last 3 months is lowest in last 10 years looks and very similar to SPY.

IWM volatility is higher than the others comparatively and higher than 10 year annualized.

DIA volatility is the last 3 months is lowest in last 10 years looks and very similar to SPY.


BUT


NO


It is not fully succeeding. Economy is still fully in the dumpster so rising tied thing is out the door with banks setting up for the worst write offs (loan loss provisions) since 2009. The only thing that has formally happened is QQQ has been chased by small lots into a final bubble because it was so concentrated in the FAANGs. The volume doesn't lie on the weekly view. Look at everything above the pink VPOC line...where is the volume supporting this move? Non-existent.

No new highs have been seen in IWM, SPY, XME, XLF, XLE, XOP, XRT, XHB and DIA (I could keep going...). The 10 yr is on a cliff, the banks had great earnings and didn't move the needle price wise (no new highs for them) and are very concerning here, the unemployment benefits expire in less than a week ($600 week extra for CARES Act), and the level of extension in the QQQ here is extremely far from any mean or average and the simplest correction could morph into something much more very quickly.


I have been wrapping my head around the short term vol reading in QQQ and the large long duration Put positions that we have seen placed in the last week. It appears the FEDsury is attempting to play their cards hard here in the conversation about YCC (yield curve control). That was/is a major play for them and one of the final plays besides all out negative rates. We seem to be approaching some sort of line in the sand - not price wise - but just in the overall story of 2020: A-Inflation or B-deflation. FEDsury wants A and the reality of the world is very much B. COVID is and has been Kryptonite to the existing business and financial infrastructure but you have to give it to the FED team on how hard they are trying to fight it off: they are organized, committed, and determined to accomplish inflation at any all costs.


This reading to me is important - as the reading is not going away...been persistent for days now.

Either this rolls off and the puts that we have seen were sales-focused on all out inflation bet that comes to fruition and the rest of the volatility term structure will collapse.


OR


We are about to see full the real deal deflation. The one that gets them even when they are fully staring it in the face with a bazooka.


Based on the all out targeting of short volatility strategies this past week, the introduction of YCC conversation way early in the game (imo), the barrage of FEDsury commentary at this point being multiple times a day now...all appears to imply (when thinking about the markets as non-linear multiple players with multiple inputs-poker vs. finite set of moves-chess) that we are seeing the major player at the table getting quite desperate with their moves (all in, all in, all in)...this is meaningful to me as it implies the life cycle of this game is expiring.


The last three months in real life have been the most volatile since World War II. The volatility of the markets the last three months has been the lowest in a decade. Compute that for a minute. Will these remain bifurcated forever? No one knows. FEDsury is trying to crush volatility for good. All in. All in. All in. All in....


Time does not heal anything. Time tells the truth. Time won't heal the economy - only structural fixes will. Time will only tell us if the FED can get inflation or if deflation is just too overwhelming. There is no doubt, what the FED is attempting (inflation in the face of a population/economy killer like COVID) is something that only a demigod would be able to obtain in Greek Mythology, with the help of Zeus. Will they succeed in their valiant mythological level efforts? Time will tell...so...


Wanna bet on it?

WINNERS:

Sector Takeways: So much winning on OPEX...


LOSERS:

Sector Takeways: So much winning even the losers are not that bad...but still Energy stonks getting donkey kicked...so much inflation out there...not.

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: Negative

Block Volume: Negative

GEX: Negative

VIX/VXX Summary: VIX and VXX both getting plunged into the pool now ... question is whether this is a beach ball getting sucked under the pool OR if they are going to smother it until it stops kicking...

INTERNALS


TRIN:

Takeaway: 4 bears....hmmmmm


ADVANCERS/DECLINERS:

Takeaway: 3 bulls and a bear but kinda meh even though bullish...


200 DMA:

Takeaway: Filled the gap...momentum burnt out...hmmm


NYSE ADVANCERS/DECLINERS:

Takeaway: up to the upper range...momentum top end of the range...


CUMULATIVE VOLUME:

Takeaway: No follow through at the inflection point and momentum is top end of the range...


ABSOLUTE BREADTH:

Takeaway: 3 straight pulsating up days and momentum with plenty of room higher. Will it bust the bull bear pivot early in the week and usher in more volatility?


MCCLELLAN OSCILLATOR:

Takeaway: Nothing here...weak reading and momentum is top end of the range.


INTERNALS Summary: Head fake at the open followed by hard downside action on Monday would finish off all these readings and bust them to the downside. ABI is pointing at pending upcoming VOL. Other coin is that we are headed much much much higher levels? Readings favor the former.

INDEXES:


SPY: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Neutral

Block Volume: Positive

GEX: Positive

Put/Call Ratio: Neutral

Volatility Metrics: SPY VOL Term Structure


SPY Summary: SPY continues to move upwards with a very positive GEX. Very thin up here at this point though...be on the lookout for thief-like move from here on out that takes your breath away.

QQQ: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Neutral

GEX: Negative

Put/Call Ratio: Neutral

Volatility Metrics: QQQ Volatility Term Structure

QQQ Summary: This is way extended on super thin volume as mentioned above. Be on the lookout for something although I am not sure what that 'something' is. Short term vol still absurd.

SMH: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Negative

GEX: Positive

SMH Summary: Seems to be running out of gas up here. But according to many 'analysts' everything is a BTFD. Not sure I agree..

DIA: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Neutral

Block Volume: Neutral

GEX: Positive

Put/Call Ratio: Neutral

Volatility Metrics: DIA Volatility Term Structure


DIA Summary: FVGs are all cleared out. Meandering action...VOLS are increasing short term and 30 day. I find the VPOC bar (pink) that popped up Friday interesting at this level. It is above price for now and just appeared meaning the bulk of the volume is now above price. Will be interesting to see what happens with this next week.

IWM: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bullish

Internals: Bearish

Block Volume: Neutral

GEX: Positive

Put/Call Ratio: Neutral

Volatility Metrics: IWM Volatility Term Structure


IWM Summary: Upside on Thursday with limited follow through on Friday. Short term and 30 day vol is still heightened. Needs to make a move to leave the moving averages and pivots behind. If it doesn't they are going to suck this down into the blue shaded areas between here and labor day. My money is on that...

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Neutral

Block Volume: Neutral

GEX: Positive

XLF Summary: Earnings are amazing and the banks are fine!...and...we got nothing but a few upwards % points. GEX really positive all the sudden, but that can change pretty quick. We have gone nowhere in 3 months - literally NO WHERE...so...tick tock banks b/c you know what is going to happen if you keep fucking around right here...and hanging at these lower levels with all the FEDsury backing you have received and then provisioning the worst losses in history...while the 10yr is about to fall of the ledge its looking pretty gnarly:

Liking the potential major setup forming here...

HYG: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Bearish

Block Volume: Negative

GEX: Negative

HYG Summary:

TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Bullish

Block Volume: Positive

GEX: Positive

TLT Summary: Pull backs are buys now based on the $165 breakout. Nothing changed.

UUP: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bearish

Internals: Neutral

Block Volume: Positive

GEX: Positive

UUP Summary: Still bouncing around the longer term pivot. One good flush to fill that lower FVG and get all the dollar bears back slapping and then ripping it higher would be about right for this insane market of the last few months.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Bullish

Block Volume: Negative

GEX: Positive

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: Positive

Block Volume: Neutral

GEX: Positive

SLV Summary: Struggling to break through this area meaningfully. One more high in the cards or no?

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Neutral

Block Volume: Negative

GEX: Positive

GDX Summary: $40 is the ceiling so far.

THE END.



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