So the other day I posted this to StockTwits and I felt like it was actually pretty cool.
That could be my bias towards loving The Matrix trilogy, but I still found it clever (pats self on back).
More importantly, it was a very quick lesson that I wanted to expand upon. It’s an important one.
— Rishesh Singh (@androsForm) May 20, 2018
Yesterday’s markets followed more or less as what was to be expected.
That whole rhythm of the market thing.
Know why chart patterns exist? Sequences recur.
Some don’t, but the fact that some do is the fundamental basis of patterns. Be they chart patterns or otherwise. Candlestick patterns are still a very popular tool amongst chartists because those patterns are the sequences that recur the most.
And, frankly, it seems like these patterns haven’t changed much or you wouldn’t see them on any chart you can name.
Unlike nature, the Golden Mean/Fibonacci Spirals [where the Fibonacci levels come from in charting], markets don’t stick to those levels or follow them perfectly. That’s why they’re called levels in the market.
Nothing can be certain.
What To Look For Today
With that said….I think we’re going see a kinda choppy morning but an overall bullish day, with some very strong slopes up.
- -I expect $VIX to gradually chop up. Don’t forget markets can go up as $VIX does.
- As of 6:50 AM, S&P 500 Futures are trading -4.25 @ 2718.75. They’re moving up on good numbers from $WMT. Oh, now it’s 10 minutes later and I checked before posting and now $WMT trading down. Haven’t read the E.R. yet.]
- There are three big numbers out today. The Philly Fed Manufacturing Index and the initial jobless claims data come [email protected] 8:30 AM EST | Analysts are expecting solid numbers there. The third is Natural Gas Storage at 10:30 AM. If markets need another kicker after morning chop that could be it. Or it very well could start the chop. Let’s see.
- Trend-wise remain bullish on SPX watch 2680ish as a reversal to get scared about.
- Bio-techs look stronger.
- Airlines look stronger.
- Other names I’m watching today for entries/averages on.
- The trend isn’t broken.
- I noticed way more equity blocks going through than usual vs. big opening options positions. The skeptic in me wants to say that we go up today but on low volume due to that sort of action.
- One caveat; Yesterday the 30-year note briefly broke its present resistance but pulled back quickly. If you asked me, I’d say that it was probably some of a Fed taper sale. The Fed is going to want to sell bonds high, ya know. So while that bond trade happened it might not be so important…today anyway.
Sorry for not posting this last night….hence the improper date. I’ll do one tonight. At the right date
I was looking at a chart of the US Dollar and had this random thought.
Hey, some of these moves look remarkably similar to another currency’s.
Here’s the all-time dollar chart…
[source][I added the log as well because that makes the moves a bit more fair to compare].
Then I went looking for an all-time dollar volatility chart…and realized someone already had this idea and wrote a great read.
The apt beginning of the writer’s conclusion makes the point I was trying to get at.
The short answer is that Bitcoin’s biggest volatility moves are more intense than the dollar’s volatility moves historically. And that shouldn’t be surprising. Here’s a bit more detail.
First, the longest overall downward streak in the U.S. Dollar Index that led to the highest decline in the value of the U.S. dollar was between January 2002 and December 2004. That’s nearly three years. The index dropped by about 32.8 percent during that period.
By comparison, Bitcoin’s sharpest downward streak that led to the highest decline in price was between January 2014 and April 2014 — about three months. The digital currency lost about 60 percent of its value during that period. There was no time over the last three decades that the U.S. dollar lost so much of its value within months. In addition, Bitcoin’s longest downward streak lasted between November 2013 when it reached a high of about $1,242 and January 2015 when Bitcoin reached a low of about $192 — an 85 percent drop.
It’s a great read. “Bitcoin vs U.S. Dollar: Cases of Volatility
[Note: I’m essentially going to be starting a newsletter that’ll be short-form most of the time. There’ll a side-page on the blog once that kicks into gear for these notes. PDF Version is linked at the bottom]
Hell of a day.
Some solid gains on several names, but the markets as a whole have gone loco. MUY loco.
For an extended period of time during the day today..stocks,bonds,gold, volatility AND the dollar were ALL trading down. Even weirder, downward pressure on all of them simultaneously.
Market dynamics tend to behave in a manner that asset classes are typically forces that act against each other in some weird and twisted attempt at a contrived equilibrium.
Over the past two days, headlines have been flooding my newsfeed regarding Amazon’s decision to…wait for it…wait for it….RAISE THE PRICE OF AMAZON PRIME!
Oh no! Say it ain’t so, Bezos. Say it ain’t so.
And God said, Let there be light: and there was light.
And God saw the light, that it was good: and God divided the light from the darkness.”
- Genesis 1:3-4 KJV
Not to worry this isn’t a bible thumping lesson.
This is a quick primer on trading smaller accounts.
Quick intra-day post here…
The Power Of The First Candle(s)
Cool chart dude….so…
Look at what I drew arrows to; Those are bullish candles, right before open and after open.
Bottom line is this; until volume eclipses the nature of those initial candles, the stock is going to move in that direction. Even if it fades on lower volume, until the large opening volume bars eclipse the volume there…the stock short (for intra-day purposes) be considered as maintaining the trend of the first candle (or candles, depending on your timeframe).
More on that later, it’s intra-day so I have some trading to do.
Hop aboard the new room when you get a chance…most sections are free, including a heat map, Unusual Options Activity, Economic Data Calendars and more. Sign up over here.
A product funded and owned by the CBOE (Chicago Board of Options Exchange).
The Put to Call Ratio of Open Interest on $SPX [the S&P 500] for the next month of option expiry dates.
$VIX [$VXX / $UVXY / $SVXY / $TVIX / $VX_F / etc…]
THE FEAR INDICATOR.
Whoa whoa. Things really got out of hand there.
We went from a thirty-day forward-looking Put To Call Ratio on a basket of 500 stocks to FEAR.
The equity markets, despite a strong move up yesterday, are continuing to show signs of weakness.
As I noted in my last post, the technicals point towards some downside in the near future.
Geopolitical tensions and the whirlwind of news around the implications of these things have shoved the market violently in both directions.
Crude is pretty much running the show in terms of carrying/propping up the Dow and the S&P.
Tech looks pretty weak here and financials seem to be weakening a bit as well.
Things to Keep In Mind Today
- – Initial Claims for Unemployment was slightly higher than expected; not much to note.
- – The Philly Fed Manufacturing Activity Beat Expectations by a decent margin.
Those numbers were reported 30 minutes ago, the initial reaction was a jerk up on the indices which have since retreated. I think we push up from here into the open.
I took a look at the past few Thursdays and they all have very similar pattern…though with monthly options expiry, today could be different. That said, the pattern has been upward momentum into the open, a quick bear jerk down then a slow ascension through the day followed by selling at the end of the day that’s caught by some bullish order flow into the close.
- – $VIX had a very bullish day of options trades yesterday.
- – Most of the aggressive short-term bull plays yesterday were out to next Friday rather than this Friday, implying traders in most equity sectors are trading around a move lower today or tomorrow for the broader markets.
Some of my favorite unusual options activity from yesterday worth watching include…
- – Bearish trades against several chip manufacturers…namely $INTC and $MU
- – $QQQ MAY18 $150 Ps @ ASK
- – $IWM MAY18 $165 Cs Swept @ ASK + Opening
- – $YNDX MAY18 $40 Cs Swept Above ASK
- – $SN MAY18 $5 Cs
- – $$BEN MAY18 $37 Cs @ .05 ASK
- – $SPY 25APR18 $280 Cs @ .07 ASK
- – $VIX MAY18 $26 Cs
Watch markets at 10:30 AM [EST] for the Natural Gas Inventories numbers to decide the next direction of the major indices.
Keep an eye on the 10-year Treasury Notes and Gold as well, they’re both about testing pretty critical resistance levels.
Today In History
The first Boston Marathon was held 121 years ago today and was won by John J. McDermott. Investing should never be a sprint, particularly in these market conditions. McDermott had the right idea.