Daily Market Brief

Candle Time

CandleThe helium party continues overnight with no participation from anybody in the US or even much in futures markets. Never have such high prices been achieved with so few buyers. Increasingly markets are becoming a rare item bidding auction at Sotheby’s. While not pretty on paper for those trying to fade this move (myself included) it nevertheless continues to present a unique opportunity in my view. We are looking at a capitulation phase that is inviting classic candle action & hence I welcome the blow-off move here for the creation of a major intermediate top.

With capitulation I expect short stops being run, traders calling for higher prices, shorts giving up, and a general sense that stocks will never go down again. I can already sense this talk on twitter and the airwaves.

Today we are looking at a major gap up that will get filled. With all major global indices overextending themselves here I look to get some $QQQ puts and scale further into volatility if the opportunity permits. Oddly enough $VIX futures no longer seems to go down and are currently actually up with this gap up:

$VIX futures

I’ve added to my futures positions on the ramps and have now positioned myself as aggressive as I have been since I started the service. I leave myself some wiggle room with my $TY short and to be clear: This is a process position, I’m not “all-in” cash wise of course. As you know from my writings I rarely like to go above a 60% position. I’ve done it before, but it is rare and rare for a reason. I did it in 2009 on the long side as people were panicking all around me and I may possibly do it here, but I see no reason yet at this stage.

I want to see how the day unfolds here. From my perspective we are well set up for a nasty reversal and I see certain signs that this may indeed happen. The $NKD has already put in a daily candle:


$VIX futures are already showing apprehension about the levitation and #DAX is getting very vertically stretched here:


So I recognize all the necessary ingredients are in place as outside of QE talk nothing of substance seems to propel this move. Commodities other than oil are getting hit again and while high oil prices on their own could indicate an expanding growth economy yields are sending a very different message. Something is not right with global markets and the ever increasing dislocation is raising red flags in my book.

As it stands the $SPY hasn’t had a real down week in 6 weeks and is coming into this Tuesday red hot overbought:

SPY weekly

Smart money appears to be covering their short positions which I view as actually good news for faders here as the stubborn bid in the market has been a likely result of large short positions in the market. And if those are finally coming off book we may consider this as part of the capitulation process:


Just in time for fundamental reality to take hold as consumers are signaling the pain that is to come:

retail sales

Draghi continues to scream QE on the airwaves and has managed to set up markets for a sell the news event when they finally announce their QE program at the beginning of June. Markets at all time highs and nothing works without continued QE any longer. It’s a sad and frankly very dangerous state of affairs and, I suspect, they know it. May you live in interesting times.


Categories: Daily Market Brief

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