Another day, another short squeeze. Stocks are surging to new all-time highs this morning, off the back of positive vaccine results from Pfizer's latest trial. "Dr. Jansen said the outside board did not say how many of those cases came from participants who had been vaccinated. But with a rate of more than 90% effectiveness, most had to have been in the placebo group.” That doesn't sound like very exciting news to me. But, I digress...
SPY gapped up this morning (again), and is now up a cool 3% to start the week, because everything is awesome! Technical resistance levels, be it long-term, or short-term, don't seem to matter to investors, with this new level of panic FOMO that's gripping markets. Price action during trading hours is muted at best imo, while all the action seemingly happens in the overnight session. Gap up, after gap up, after gap up, after gap up. Can anything stop this never ending debt binge, and risk free-for-all? Will stock prices ever accurately reflect the value of the underlying asset, again? The logical answer is yes, but it sure doesn't feel like it's going to happen anytime soon.
FB and AMZN are getting hammered, while MSFT and AAPL are flat on the day. Vix continues to get clubbed, in one of the most vicious corrections I've seen in a while. But, we're holding up relatively well as investors digest this "WTF" moment.
Good luck out there today guys, and trade safe. If you enjoyed today's analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research.
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Seeing headlines that most major brokerages are experiencing "outages" this morning. I guess you're allowed to buy, but you're not allowed to sell...
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WTF chart of the day, Vix went from a 40 handle, to a 22 handle in 7 days...
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Look at the sheer magnitude of the November rally compared with the April rebound after a 35% sell-off. It's only November 9th...
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US 10Y yield breaking out again. Up 17% on the day, to the highest level since March (.97). We're now up 87% since the beginning of August. SPY is up 9% over the same timeframe...
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We appear to be erasing some of the mornings losses. Vix is catching a bid here. We're now back to a 24 handle...
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On the monthly timeframe, SPY looks like it may get a rejection at the long-term resistance line, around 355. Volume has become anemic and this is multi-year resistance. It's going to be very difficult for the bulls to break. The bulls may play at these levels until the end of the month, but come December it's likely we'll be trading under this resistance line again. The Vix term structure is notably elevated into December/January, so I do expect to see a correction over that period, or potentially sooner. All of Novembers risk appears to have been systematically pushed to December/January...
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Great article here from ZeroHedge discussing the possibility of rate hikes in the near term. We've talked about this in recent posts, and it appears the reality is starting to set in for traders. "While stocks are delighted by today's newsflow, the surge higher in yields - and inflation expectations - may have sowed the seeds of the market's next destruction once the realization that the Fed's next rate hike may come much sooner than expected, starts spreading across trading desks."
Vix is now down over 9% on the day. Hourly RSI is sitting at 21 today, after a hitting a two and a half year low of 16 last week...
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Now seeing headlines that Janet Yellen (former FED chair) and Lael Brainard, the head of basically every committee at the FED, are being considered for Biden's new Treasury Secretary. The FED is now on both sides of the isle, and they really must be laughing at the 99% now. Anyone think there's a bit of a conflict of interest here?
Lol. Me too...
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Losing some steam here as we approach power hour. Note that the lower Bollinger Band on the 15 minute has come up to meet the price today. Each time this has happened over the past week or so, we've found support, and at the very least we've traded sideways preceding another overnight short squeeze. Let's see if we break the trend today or if we levitate again on top of the lower BB...
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The 50 period MA on the 15 minute (354.70) would be the next key support level. If the bulls (somehow) lose that level, we could also find support at the 21 period EMA on the hourly around 353, and the top of the triangle around 349, which would fill the overnight gap. The bulls have a million supports, so to speak, that the bears will have to battle through if they want to see a correction. There are forces here driving prices higher regardless of sentiment, so it's going to take something major to bring the house down...
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Losses accelerating into the close:
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50 period MA on the 15 minute (now at 355.40) was almost kissed, but not quite. Short-term trend is still bullish. But, volume is increasing rapidly into the close, and it looks like the bears finally showed up...
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Lost the 50 period MA on the 15 minute. We're now racing toward the 21 period EMA on the hourly around 353.10. The long-term green trendline is at 355, so this is fairly strong support. If we lose 355, things could get ugly quick...
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Well, that escalated quickly! Ugly close across the majors after a massive gap up overnight on Vaccine 'hopes'.
SPY lost the important 355 level. 355 is at a resistance line that hasn't been breached on the monthly since 2011. If this is a rejection of long-term resistance, we could see massive downside in the near term. This entire rally over the past week was off the back of nothing imo. It looked like a bull trap from the beginning, but it quickly evolved into a lethal bear killer. The few bears that remain are loving the price action into the close, and I can only speak for myself, but based on what I'm seeing, this is the final song. I remain short nasdaq, and long Vix.
Thanks for your time today guys, I really appreciate it. I hope you enjoyed the analysis and I look forward to seeing you guys tomorrow. Have a great night! Cheers, Michael.
Batter bruised and bloodied I refuse to go back to my cave. Snagged 150 shares of UVXY and a 12/18 350 put. It’s gonna be the last song for someone here and so it felt silly to close my shorts now... someone needs to make me close them
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@horacejunior, Thanks for sharing! I agree. It's definitely been a tough week or so for the bears, but, I've suffered larger drawdowns in the past, and came back. We're still seeing a megaphone pattern play out, and we just got a clear rejection at the top band. The downside on the monthly looks plain ugly. Let's see how things shake up this week.
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Great work! Time to regroup after last week. I jumped into $365 11/13 put's the second the market opened. Cheers to another wild week!
Hedge_Of_The_World
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@dustinmerryman, Thank you my friend! Great job, that's an incredible grab. I'm excited to hear how it turns out (I think I have a good idea). Those puts must have been cheap af. Best of luck this week, it's the final showdown!
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@Hedge_Of_The_World, They were incredibly cheap. But, I won't be satisfied until I sell them for a profit. I haven't made any money yet :)
poister198
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Nice update! Why still short though, every resistance broken should indicate long?
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@poister198, Thanks, I appreciate that! We're at long-term resistance right now, so as I mentioned in some of my previous posts, my bearish thesis won't change until we break above, and hold above the 355 level on the monthly. No monthly candle has closed above this resistance line since we broke below in 2011. If we break it this month, then I'll probably close out my positions, and move onto the next trade. But, this looks like the final test of long-term resistance preceding a major correction. We'll find out soon enough...