Trust Your Analysis
Updated
It's not unreasonable to be bearish these days.
I don't have a very positive outlook for macro or vol events.
One frequent reader I chat with asked me if I could look at the market and what I thought would happen from a purely technical analysis.
I gave him this inverse head & shoulder on Mar 15th.
s3.tradingview.com/snapshots/l/Lr36RhYT.png
I was convinced the market would not survive CS but the market responded exactly how it was designed to.
A reflexive positive up & to the right vol dampening grind.
Liquidity is still a main driver of volatility but it has improved slightly.
The 20D is important because of how money is managed on a monthly basis, particularly around OPEX
Vol events tend to drift towards the 20D as event vol enters the market.
I see more hedging volume in recent days so it shouldn't be a surprise to anyone that we are at the 20D for FOMC.
There have been significant changes in premium behaviour over the past few weeks.
Notice how the opening 15m range in the chart above got really tight prior the last game of chicken at the 20D.
SPX option premium is bad. I have been bullish NQ futures for any day trades and been working out well.
I hope this isn't the new normal.
Reality of massive amounts of gov spending on climate control that bears no fruit except piles of bad debt that are start appearing like magic.
I have been preaching about this scenario for 2 damn years now.
CS ate 5B loss from Archegos and took the media storm as well.
I think it's ironic the guy they put in charge of CS Risk was named Lehmann. Might as well put a guy named Ichanbe Patsy as CEO.
Do I think the markets could breakdown for a second leg down?
Yes - The bond update I looked at last was pricing in a 75BPS cut by Q3. That only happens if equities make a correction in the next 2-3 months.
Do I think the markets could grind up and even gap up?
Yes - Jerome Powell knows if he can keep the main liquidity dealers on a tight enough leash he can keep ratcheting the tightening at 25
Jerome Powell said in Aug 22 there would be pain and this is the weakness he was looking for.
I don't have a very positive outlook for macro or vol events.
One frequent reader I chat with asked me if I could look at the market and what I thought would happen from a purely technical analysis.
I gave him this inverse head & shoulder on Mar 15th.
s3.tradingview.com/snapshots/l/Lr36RhYT.png
I was convinced the market would not survive CS but the market responded exactly how it was designed to.
A reflexive positive up & to the right vol dampening grind.
Liquidity is still a main driver of volatility but it has improved slightly.
The 20D is important because of how money is managed on a monthly basis, particularly around OPEX
Vol events tend to drift towards the 20D as event vol enters the market.
I see more hedging volume in recent days so it shouldn't be a surprise to anyone that we are at the 20D for FOMC.
There have been significant changes in premium behaviour over the past few weeks.
Notice how the opening 15m range in the chart above got really tight prior the last game of chicken at the 20D.
SPX option premium is bad. I have been bullish NQ futures for any day trades and been working out well.
I hope this isn't the new normal.
Reality of massive amounts of gov spending on climate control that bears no fruit except piles of bad debt that are start appearing like magic.
I have been preaching about this scenario for 2 damn years now.
CS ate 5B loss from Archegos and took the media storm as well.
I think it's ironic the guy they put in charge of CS Risk was named Lehmann. Might as well put a guy named Ichanbe Patsy as CEO.
Do I think the markets could breakdown for a second leg down?
Yes - The bond update I looked at last was pricing in a 75BPS cut by Q3. That only happens if equities make a correction in the next 2-3 months.
Do I think the markets could grind up and even gap up?
Yes - Jerome Powell knows if he can keep the main liquidity dealers on a tight enough leash he can keep ratcheting the tightening at 25
Jerome Powell said in Aug 22 there would be pain and this is the weakness he was looking for.
Note
Todays Opening 15m range is nearly identical to Mar8Goes to show you how well defined the liquidity branches are.
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