7/4/20: 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

What this means: All the bullshit window stuff is done now. So we wait...


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 really big early and then bounced back hard all day... VIX -3.28% and VXX -1.73%


  • UUP was not really bought Thursday +0.08%

  • TLT was not really bought Thursday +0.10%

  • SPY was bought Thursday +0.55%

  • QQQ was bought Thursday +0.68%

  • IWM was bought Thursday +0.41%

  • DIA was bought Thursday +0.43%

  • SMH was very bought Thursday +1.53%

  • FAANGs mixed bag

  • HYG +0.74% was bought Thursday

  • XLF was not really bought Thursday +0.13%


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


They left Thursday AM after the payroll successes to head to the Hamptons...left the intern to hold the fort down and he did shitty in the PM session on Thursday so they turned lights out on him (via their phone app) and left him there over the weekend in the dark:

Our six main things to keep watching for:

  1. COVID19 cases - White House gave up Friday. Said "we are all going to have to learn to live with it." EPIC. FAIL.

  2. US/China relations - US sent 2 carriers and numerous warships to South China Sea within 11 miles of where China is doing drills...totally nothing to see here move along...everything is fine. GTFO.

  3. $USD - bid

  4. Long bonds - bid

  5. VOLS (especially 60+ days out) - highest level after a rally of this magnitude ever...and they are down. Crazy times we are living in.

  6. GEX levels - limbo at the moment.


Last weekend everyone was so bearish my twitter feed was like a cheap 70s bear porno. Then 4/4 days were bullish for the most part with QQQ up 7.7% in a week. I thought that was probably going to happen as Mr. July 4th and the Window Washing Man were undoubtedly going to show up to ensure that we have green shoots to head into the holiday weekend for the of July parades (cough...protests)...which is exactly what ended up happening. We filled almost all the FVGs I was looking for BUT left a couple behind unfortunately - so not completely clear picture here now.


SPY, DIA, and XLF did not finish up their business with FVGs left behind. QQQ, IWM, and SMH are all good to go now and so is VXX. Here is my take for the week - we left behind the $318 FVG fill and the DIA fill on Friday when both were within a 0.50% move to clear out. Ugh. Then the rest of the session was muddy with the end of the day red for the most part. VXX hit the FVG low in the AM and never turned back. My very prop VXX accumulation metric was on full accumulation reading on Tues-Thurs last week with the highest reading on Thursday. So buyers of VXX were prevalent and not hiding it all week last week for the most part.


I also noticed something else on Wednesday and Thursday. Put premiums collapsed along with IV because VIX was hit hard. Puts for the first time in a long time looked cheap. But the indexes remained within the FVG ceilings for everything except tech - so it was interesting to say the least as indexes were not making new highs sans Tech. Tech puts were really cheap too which would make more sense logically. Another oddity, in running some scenarios (you can run unlimited scenarios for any security that trades in options) in our Options Lab - we were picking up that the best skew on options were March expiration with indexes HALVED. Holy shit... So I checked every index and all came back with similar reads. It was so bizarre that my partner and I opened up the code and checked it - all accurate and 100% clean calculations that the AI was running. We wrote a white paper on the inner workings and calculations of our Options Lab that we will make available in a couple weeks but the net/net is that we measure and project everything, roughly 250,000+ scenarios per strategy (40 strategies) along the entire strike and duration lines and stack them up (gets into the multi-millions of calculations per scenario). So we are incorporating executed and open interest components, all the Greeks, etc. and what the system picked up Thursday was March expirations for indexes and strikes that are halved from here as most optimal. Fascinating to say the least...have to see how it plays out but there is open interest out there at that time frame and in that price area after researching it further using our visualizer. Will that change next week and that calculation read was a one day flash in the pan? Or is that the Dollar supernova lurking? IDK. Saying anything would be total conjecture on my part, effectively drinking my own confirmation bias Kool-Aid. Therefore, I am going to refrain from saying that indexes getting halved from here is something definitive...just pointing out that the math says that's a possibility, if not a reasonable probability at this point.


Moving along, we are now entering the second half of the year. I believe that this is similar to the back half of the hurricane after the eye passes. NOTHING has been resolved domestically, re COVID19, or with China. Nothing has been resolves with debts or bankruptcies (they are increasing at an alarming rate). I have stated and firmly believe that we are entering the insolvency phase. The HERTZ phase. In the short term, we need to see what these earnings are this week and how they are absorbed before we make major plans or heavy trades. We are in the war zone area between inflation and deflation. Inflation is 3200+ SPX and new ATH and Gold to 2500. Deflation is revisiting the lows in SPX (or new lows) and gold 1450-1550 retest. These are WIDE ranges and very dangerous from current levels.


I would compare this area to the coin flip sicario from No Country for Old Men. These market coin flips will be of similar consequence, you will either be completely fine or completely dead:

The easy part for FEDSURY was printing more fun coupons to unload the bank debt from the system to its balance sheet (effectively what the Main Street lending program is - a transfer mechanism for toxic debt from banks to the Fed from my quick research). That is done now as best they could facilitate. The hard part is now = dealing with structural breakdowns and insolvency that do not respond to liquidity. They have already taken extraordinary measures to get here and inevitably they will do everything else that they can here shortly...but will it be enough? We will all find out soon enough...and as Gus says in relations to that button on your screen in the next couple weeks:


To buy or to sell? Those two very key words will have to be chosen very carefully in speaking to your broker.

SECTORS BROAD MARKET:

Sector Takeways: Finished the week with a positive day before the 4th of July parades (cough protests)...


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: Negative

GEX: Negative

Options Visualization: Max Pain


VIX/VXX Summary: VIX and VXX both slammed down on Thursday at the open. VXX filled the $31 FVG at open and did not look back. From there rallied 3.5%. I am going to say that was the bottom for this down cycle. If it is not, then we are going to head to VXX $26 or lower which implies and 3200+ (if not new ATH) for SPX and would start another equity nirvana cycle. I don't see that here.

INTERNALS


TRIN:

Takeaway: 2 bulls 2 bears. Push.


ADVANCERS/DECLINERS:

Takeaway: Bulls.


200 DMA:

Takeaway: Trying to go up and fill the gap.

Takeaway: Much less bullish picture than 200 DMA.


NYSE ADVANCERS/DECLINERS:

Takeaway: Momentum is up but weak action. Closed at lows of the day.


CUMULATIVE VOLUME:

Takeaway: Rejected two days in a row. Nobody wants to accumulate here.


ABSOLUTE BREADTH:

Takeaway: No broad market vol but we are approaching a pivot point. See what Monday brings.


MCCLELLAN OSCILLATOR:

Takeaway: Still predominantly neutral.


INTERNALS Summary: This is about right...no edge.

Based solely on what I am looking at here...could either meander up to fill gaps above or just break down. No edge that I can honestly project based off the above in the short term. Long term...playing out as suggested for the last couple of weeks.

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 bulls at this point...

$311 FVG to the upside was cleaned up and we got within 2 pts of $318 target FVG on Thursday spike off the best ever NFP since last month. Was that it? Or do we fill that FVG yet...no way to know. Thursday action left a lot to be desired on follow through but thinly traded holiday action is not trustworthy. We will know by Tuesday.

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: Nothing left to say at this point...Tech buyers right now...

VOLs are pretty elevated for being at ATHs. This is pretty drunk and could get a big hangover real quick. We are starting to stretch outside of most bands and deviation extensions where even a basic mean reversion is going to be 20-25% drop now. Good risk reward here. Short.

SMH: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Neutral

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

SMH Summary: Based on the charts, we should see a test of the 131-135 area at some point soon. This is about 10-15% lower. If we take that out, then new bear leg in motion. If we don't take that out, then VPOC and bull bear pivot hold, we will head higher. Let's see what shakes out. Short.

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: Who is holding the hoola-hoop? Bulls or bears?...tbd as we still don't know yet...

There is an FVG right above and right below. Which one gets filled first? Idk. But I think in the next week or so both get filled before we head much lower this summer...which we will. IF the upside does not fill that makes it a break away gap and that would be devastating to the bull continuation case and usher in much more bearish outlook for the remainder of 2020.

IWM: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Neutral

Internals: Bearish

Block Volume: Negative

GEX: Negative

Put/Call Ratio: Neutral

Options Visualization: Max Pain

Volatility Metrics: IWM Volatility Term Structure


IWM Summary: Small cap CEOs talking to the board on Thursday last week after the PPP ended...should be awesome payroll numbers in July that are reported in August.

This is the cleanest chart. No FVGs and you can see how lost the algos get. We should have much more clarity for IWM this coming week. VOLs above are still very hot even after 3 months of rallying. FVGs are way above and way below. Imo = Short.

BANKS & HIGH YIELD CREDIT:


XLF: Chart with Detailed Levels

Market Structure: Bearish

Momentum: Bearish

Internals: Negative

Block Volume: Negative

GEX: Negative

Options Visualization: Max Pain


XLF Summary: Waiting for those worst of all time earnings eh Jared....


Banks are murky. Either they rally on 'not as bad as we expected' earnings this week and fill the upside FVGs left behind or they are all done for. No edge here for me so no positions beside some very long term shorts in case it breaks down now. Otherwise I will put on the bazooka shorts once the FVGs to the upside are cleared out.

HYG: Chart with Detailed Levels

Market Structure: Neutral

Momentum: Bullish

Internals: Bearish

Block Volume: Negative

GEX: Negative

Options Visualization: Max Pain


HYG Summary: Very ugly internals now. This is going to be the most interesting thing to watch in Q3 imo. Lots of rot inside this tower...just stinking up the place. Renewed COVID debacle into July and August will effectively make this a walking dead character.

TREASURIES, $USD, and PRECIOUS METALS


TLT: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Bullish

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain


TLT Summary: Starting to look quite bullish long term. Major move will happen to the upside over 165 area and very explosive over 170.

UUP: Chart with Detailed Levels

Market Structure: Neutral (sitting at the pivot)

Momentum: Bullish

Internals: Positive

Block Volume: Neutral

GEX: Positive

Options Visualization: Max Pain


UUP Summary: The dollar did nothing but build internal strength all week last week even when the indexes were up 3/4 days. This is beginning to look more long term bullish, but it has to break up and over 27 in order to get really froggy. We will see what happens this coming week. I suspect, as I have been saying for some time now, that the dollar has a supernova like move in back half of 2020.

GLD: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bullish

Internals: Bullish

Block Volume: Bullish

GEX: Positive

Options Visualization: Max Pain

GLD Summary: Still meandering up here in the upper end of the price range aimlessly. No real direction yet. Over 169 will go a lot higher. Below 169 it should correct and fill at least some of those FVGs. This will trade with equities from here on out because they are both bullish only with the hyperinflation based narrative as the base investing case.

SLV: Chart with Detailed Levels

Market Structure: Bullish (neutral more like it)

Momentum: Bearish

Internals: Negative

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

SLV Summary: Just cannot get through 17.30-40 level with $10 trillion in new debasement. What is it going to take? This is a very heavy volume profile level here. IF it chews through it will instantly turn into support so very key level here still. Patience here as new positions either side are straight dice rolls.

GDX: Chart with Detailed Levels

Market Structure: Bullish

Momentum: Bearish

Internals: Neutral

Block Volume: Positive

GEX: Positive

Options Visualization: Max Pain

GDX Summary: Did not breach the previous high from weeks back and then dropped hard on Thursday. This is bearish. Also GEX flip is very close. If $36 goes watch $34.50. If that goes watch all the FVG levels below for more information as to when/if it is bottoming out. I am a buyer at $27 area.

THE END.



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