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We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Updates 1:00 AM EST - Monday 9/20/21 This coming week Here's the economic calendar for the full week. Monday: Housing Market Tuesday: Housing Starts & Permits Wednesday: Existing Home Sales; FOMC announcement Thursday: Jobless Claims Friday: New Home Sales; Powell speaks Wall of worry Market is still worrying about the same issues:
The debt ceiling issue has not been resolved yet, and one way or another it will cause some short-term sharp moves in the market. This is a wild card to keep an eye on. But the main event for this week will be FOMC announcement on Wednesday. The Fed is unlikely to start tapering right away, but their words and their tone will be carefully dissected for hints of "how soon" and "how sure". ... Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! Performance: 273% gain in the last 14 months. Click here for actual trade record.
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We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Updates 12:30 AM EST - Tuesday 9/14/21 Inflation The CPI report comes out at 8:30 AM EST on Tuesday, and the numbers will be carefully analyzed and parsed. According to the NY Fed Survey, Americans see inflation a year from now at 5.2%, up from expectations of 4.9% last month. Three years from now, it is expected to be at 4%, up from the 3.7% expected in July. Expectation is not the same as reality, but expectation can drive a lot of decisions and factors into pricing mechanism. According to Atlanta Fed President: “if businesses and families are starting to make decisions, taking on board these higher levels of inflation as something that is potentially more permanent. If those sorts of behavioral changes start to play out, then that’s something I’ll have to take on board”. The talk of inflation runs hand in had with the talk of tapering. Next Wednesday 9/22 is FOMC announcement. Here is an in-depth look at what the Feds are planning possibly. Here are some key charts that we are monitoring. They provide mixed messages right now, but keep an eye on them anyway. $VVIX: Volatility of $VIX The most important chart is $VVIX. We will rely on it for signs of capitulation as explained below. When the volatility of $VIX maxes out is when market will calm down again. Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 12 AM EST - Monday 9/13/21 This coming week Here's the economic calendar for the full week. Monday: Treasury Budget Tuesday: CPI Wednesday: Industrial Production; $VIX Expiration Thursday: Retail Sales; Jobless Claims Friday: Consumer Sentiments; Quadruple Witching Wall of worry The big three worries below are part of the reasons behind the recent analyst warnings of a slow-down in the stock market this autumn.
In addition, market is nervous about the approaching debt ceiling. Traders will be closely eyeing the Treasury Budget report on Monday. It is eye-opening to look at the numbers. Now that Congress has missed the debt-ceiling deadline, Treasury will have to start emergency cash conservation steps on Monday to avoid busting the Federal borrowing limit. (And you think you have a problem with overspending on your credit cards!) To add to the doom-and-gloom mood, don't forget it's VIX expiration and Quad Witch this week. To get an in-depth understanding of why expiration week can generate a spike in volatility, we recommend that you read this Twitter thread about the effects of the options market, gamma, vanna and charm on stocks. Good News?
Volatility The following charts track different aspects of volatility. They are all showing similar theme though. There is a high probability that $VIX $VXN $RVX will all spike higher some time this week. Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Updates 1:00 AM - Tuesday 9/7/21 This coming week The economic calendar this week is light, but there are a few reports that may move the market a bit. Wednesday: JOLTS report (job openings and offers rates on hiring and quits) Thursday: Jobless Claims Friday: PPI (Producer Price Index) This is still a bull market that's climbing a wall of worry. So let's look at the current worries and their implications. Wall of worry: slowing growth WSJ Saturday headlines read "Delta Variant Throttles Job Growth". That pretty much summarizes the current economic situation. There are traders arguing that COVID cases have peaked for this year, that bad news is good news, and that the stock market is going to melt up for the rest of this year. However, with a large population of students going back to school full time unvaccinated, and the cold weather arriving to send more people indoor, and the natural disasters putting large groups of people into enclosed and unsanitary conditions, it's unrealistic to expect COVID cases to drop from current level. If anything, they are more likely to rise. According to WSJ, hiring in August was weak in service sectors, while retailers cut jobs. The economy is losing some steam. Consumers are more cautious about spending. And business is willing to pull back on hiring. The silver lining in slowing job growth is that there is now less of a case for the Fed to immediately launch into tapering. So the easy money may still stay in the system longer. Wall of worry: inflation The PPI report this coming Friday is important. Producer prices have exceeded high estimates in each of the last five reports.
These numbers are certainly concerning, but the Fed is still messaging that inflation is temporary. And interestingly enough, the chart of TIP (Treasury Inflation Protected bond ETF) has formed a double top and appears ready to drop. This means the bond market isn't too concerned about spiraling inflation. Fireworks likely next week As we said above, this is still a bull market climbing a wall of worry, and participants are still buying the dip. However, as we also mentioned before, there are events coming up next week that are likely to cause some sharp moves in price. 9/15: $VIX expiration 9/17: Quadruple witching 9/22: FOMC announcement We will discuss price levels for $SPX $NDX IWM further below. Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Updates 3:30 PM EST - Sunday (for Monday 8/30/21) Events this week Here are some important reports coming out this week. Click here for full economic calendar. Tuesday: Case-Shiller Home Price Index Wednesday: ISM Manufacturing Index Thursday: Jobless Claims, Factory Orders, Productivity & Costs Friday: Employment Situation, ISM Services Index On Monday 9/6, both stock and bond markets are closed for Labor Day. Wall of worry: tapering and rate hikes In his much anticipated speech on Friday, Powell confirmed that tapering would begin later this year. Market responded by buying a lot more stocks and bonds. $SPX $NDX IWM rose. The entire bond spectrum rose: 30-yr (TLT), 10-yr (IEF), corporate (LQD), junk (JNK). Most likely, market participants are cheering the fact that there was not any mention of imminent rate hikes. Powell said "there is much ground to cover", implying that the Fed is a long way from raising rates directly. But he is keeping the options open for the Fed. WSJ discussed the following timing scenario: "if Delta begins to weaken, investors should be ready for the Fed to make that commitment when it next meets in early November, and for it to start paring back its purchases shortly thereafter." Wall of worry: inflation Market participants are clearly nervous about inflation, evident by the huge demand for TIP ETF on Friday. (TIP: Treasury Inflation Protected Bonds)
Inflation in itself does not lead to market crashes, but its trend will greatly affect the Fed's monetary policy. Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 1:00 AM EST - Monday 8/23/21 Key events this week This week's key reports focus on the strength of the economy this week. Click here for the full economic calendar. Monday: Existing Home Sales Tuesday: New Home Sales Wednesday: Durable Good Orders Thursday: GDP; Jobless Claims Friday: Personal Income & Outlays; Consumer Sentiments All eyes will be on the Fed this week as the virtual Jackson Hole Summit starts Thursday. Powell is scheduled to speak on Friday at 10 AM EST. In the big picture context, the same questions are being asked.
No one knows the precise answers, and the answers are likely to change over time. However, there are now a growing number of technical signals that indicate the stock market is getting much more nervous, more volatile, and primed for a major drop. Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Updates 12:30 AM EST - Monday 8/16/21 This week's schedule There are not as many economics reports this week as last week. (Click here for this week's schedule.) But here are a few events that are likely to move the market. Tuesday 8/17:
Bullish forces for stocks We discussed this last week, and this information is still relevant.
Bearish forces for stocks Fed tapering: With Powell speaking on Tuesday, FOMC minutes on Wednesday, and Jackson Hole Symposium August 26-28, a lot of attention will be on the issues of Fed tapering: when, how, and how much. This is likely to trigger some knee-jerk responses along the way. Treasury bond yields rising: US10Y chart formed a short-term double bottom at 1.127, and is likely to test this level again this week. If it forms a multi-bottom, US10Y may climb back up towards 1.6 - 1.7. When this happens, it can be bearish on $NDX. Bond volatility is on the move: The chart of $SRVIX (CBOE interest rate swap volatility index) shot from 78 up to 110 for 3 days last week before dropping back down on Friday. It's important to keep monitoring this. Market internals still weak:
Big picture: still bullish The bull market that started on 3/23/20 is still intact. Our job is to look for low-risk dips this week to enter long. With OPEX and $VIX expiration happening this week, we may see more volatility and a slightly bigger dip opportunity to take advantage of. $VIX $VXN $RVX Charts and projections are available in full post for members. $SPX $NDX IWM Charts and projections are available in full post for members. Signal Trades Click here for Signal Trades spreadsheet. ... Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Updates 1:30 AM EST - Monday 8/9/21 There are a number of Fed officials speaking this week, and a whole lot of Treasury auctions happening. Attention will be on Treasury bond yields (see more below). Forces that provide bullish tailwinds for stocks Strong earnings + fat profit margin:
Robust job growth:
Growing GDP:
Business spending likely to rise: According to WSJ: "Businesses are sitting on record amounts of unused credit from U.S. banks, another quirk in the economic recovery that bankers say could help unleash pent-up spending in the coming months." Stock buybacks: Companies are buying back stocks at pre-pandemic, which is a sign of economics optimism at the corporate level. Household spending rising: Household spending increased by 1% in June. Crypto market signal >> "risk-on": Major crypto currencies such as BTC and ETH have been steadily climbing up since their lows on 7/20. The mood in the crypto market has definitely turned bullish, reflecting a "risk-on" attitude. Forces that generate bearish headwinds for stocks Feds tapering:
Too much short-term cash - may be signaling stress: Liquidity is a good thing for stocks, but too much liquidity can yield unexpected problems. A prominent sign of perhaps too much liquidity is the fact that money market funds and banks are parking over $1 trillion of cash overnight at the Federal Reserve in exchange for securities. Analysts are warning that the markets for short-term funding appear to be vulnerable to disruption, given how much short-term cash is sloshing around. Short-term cash market is highly important to the healthy functioning of the economy and all markets. Treasury bond yields rising: US10Y chart formed a short-term double bottom last week at 1.127. In the next few weeks, it may rise back up towards 1.6 - 1.7. The last time US10Y rose like this was from early February to mid March. And as a result, $NDX dropped during this period. We may see similar market behaviors again, but it's not a guarantee. Market internals still weak:
$VIX $VXN $RVX We show on $VIX $VXN $RVX charts below the levels to expect $VIX $VXN $RVX to reach by mid-August. Charts and projections are available in full post for members. $SPX $NDX IWM Charts and projections are available in full post for members. Signal Trades Click here for Signal Trades spreadsheet. ... Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU using proprietary analysis of volatility.
Updates 1:00 AM EST - Monday 8/2/21 This coming week the market will focus on employment data, with the job report coming out on Friday, and the earlier peak at the data coming on Wednesday (ADP report). There was a lot of data that came in last week to process, and at times the data conflicts with each other. We think it's helpful to sort the current economics and market data into two buckets: forces that provide bullish tailwinds for stocks, and forces that generate bearish headwinds for stocks. Forces that provide bullish tailwinds for stocks Liquidity: Despite the Fed inching towards tapering, liquidity is still plentiful. This is most evident in the amount of cash being parked overnight in the Fed reverse repo market. It has reached over $ 1 trillion on Friday. Strong earnings: Q2 earnings has been eye-popping. The S&P growth rate for this quarter is 85%. This is likely to be peak earnings growth for this year. Still, analysts are projecting 27% rise for 3rd quarter, and 20% rise for 4th quarter (compared to a year earlier). Money flow: According to Financial Times, in the first half of 2021, inflows into global equity funds are the largest on record. And according to Bloomberg, ETF inflows are set to smash record in 2021. Corporate buybacks: Companies are buying back stocks at pre-pandemic, which is a sign of economics optimism at the corporate level. Negative real yields: According to WSJ: "Yields on government bonds in the US and Europe have dropped to records when adjusted for inflation... Analysts say that the decline in real yields is one sign that investors around the world are paring bets on rapid recovery...At current levels, they imply investors will lose money holding 10-year government bonds to maturity after factoring for inflation. That prospect can push investors to buy riskier assets such as stocks..." Strong consumer demands: Consumer demand is still rising strongly, according to the latest PCE report. Vaccination instead of lockdown: Increasingly, the official view is that COVID is something the world will have to learn to live with, and do so with the aid of vaccination instead of drastic lockdown. While we may see certain events and places close up due to a Delta breakout, we are unlikely to see across-the-board shutdown of everything. Forces that generate bearish headwinds for stocks Delta variant scare: As the summer winds down, autumn and winter mean more time spent indoor. And with a large percentage of kids going back to school unvaccinated, we may see more Delta outbreaks. These outbreaks may cause knee-jerk responses in the market, Fed tapering sooner than promised: While the probability of this happening is low, any sudden move by the Fed is likely to freak out the market, at least in the first 24 hours. If the Fed suddenly steps on the brakes, we may see rapid exits out of stocks, followed by taper tantrums. New Fed chairman: In coming months, Biden will have major opportunities to influence the makeup of the Federal Reserve, including whether to renominate Jerome H. Powell to another term as chair. New FOMC members may bring new monetary policy and direction. Weakening market internals:
$VIX $VXN $RVX We show on $VIX $VXN $RVX charts below the levels to expect $VIX $VXN $RVX to reach by mid-August. Charts and projections are available in full post for members. $SPX $NDX IWM Charts and projections are available in full post for members. Signal Trades Click here for Signal Trades spreadsheet. ... Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! We trade 3x ETFs such as TQQQ TNA SOXL LABU using proprietary analysis of volatility. Updates 12:30 AM EST - Monday 7/26/21 Big week coming up The economic calendar for this coming week is full of important events. Mon: New Home Sales Tue: Durable Goods Orders; Case-Shiller Home Price Index Wed: FOMC announcement (2 PM EST) Thu: GDP; Jobless Claims Fri: Employment Cost Index; Personal Income & Outlays The various reports will bring forth data and discussions on two key issues:
Into this mix is the other central question: Will the Delta variant derail the economy by causing shutdown? Earnings: Hotter than July Only 25% of S&P companies have reported so far, but the data has been very impressive: "Overall earnings are now expected to grow 76% year over year for the period, the best growth since 2009." - CNBC However, market participants know that 20201 2nd quarter (Q2) is a historic quarter, and is likely to be peak earnings growth for this year. Still, analysts are projecting 27% rise for 3rd quarter, and 20% rise for 4th quarter (compared to a year earlier). Profit margins have been very impressive so far: 13% for Q1, 12.8% for Q2. But Delta chill is looming Ah yes, that pesky Delta variant. In late August, students will start to head back to school. More activities will move indoor when the cold weather arrives. That's the typical setup for flu season to start, and it will be the setup for the Delta variant to spread even more. However, market participants are not expecting the government to shut down everything like March 2020. Instead, they expect the government to keep pushing vaccination as the key to keeping COVID under control in the long term. What started out as a pandemic will most likely become endemic as time goes on. Inflation, yields and the Fed June’s inflation index jumped 5.4% from a year ago, the highest reading since August 2008. There are certainly many economists who feel that inflation going to get out of control with the Fed too-easy monetary policy. But the bond market so far is disputing that theory. Since mid-March, US10Y and US30Y have both been dropping. They may spike back up a bit, but investors are still piling into bonds with the belief that inflation likely isn’t the biggest problem facing the U.S. and global economy. Instead they are worried that growth will slow again. Interestingly enough, according to WSJ: "One possible consequence of the bond rally is that lower Treasury yields, all else being equal, can help lift stock prices by lowering borrowing costs for businesses and pushing investors to buy riskier assets in search of better returns." In the short term, we think that the economics effect of the Delta variant is still a big enough concern. This will most likely keep the Fed from raising rates, or aggressively tightening the easy money supply any time soon. Market internals: still diverging bearishly Despite the fact that equity has seen record inflow in the first half of 2021, market internals continue to trend bearish. NYSE A/D: Since early June, NYSE cumulative A/D chart have been forming triple top pattern, diverging bearishly with $SPX. This pattern has improved a bit last week. Nasdaq A/D: Since early February, Nasdaq cumulative A/D chart have been forming massive multi-top and lower high pattern, diverging bearishly with $NDX. This pattern has improved a bit last week. Percentage of NYSE stocks above 50 MA: Only 40% on the weekly chart, a huge drop from 85% at the start of the year. Percentage of Nasdaq stocks above 50 MA: 73% on the weekly chart, a big drop from 95% at the start of the year. $VIX $VXN $RVX We show on $VIX $VXN $RVX charts below the levels to expect $VIX $VXN $RVX to reach post FOMC. Charts and projections are available in full post for members. $SPX $NDX IWM Charts and projections are available in full post for members. Signal Trades Click here for Signal Trades spreadsheet. ... Subscribe now to read the rest of this post. Subscribe at our introductory low rate of only $39 per month! |
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