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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!
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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 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! |
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