We’re In the Endgame Now.
Updated
Bulls Weak, Bears Exhausted
Liquidity is Showing Signs of Weakness
Twitter feed last night I saw this chart, which is a decrease in Top of Book depth liquidity that is a measure of highest bid and ask prices.
What assumptions can be made?
FED is tightening and asset managers are fleeing to risk off taking all the liquidity with it.
I wouldn’t start to worry about large multi-100 point moves just yet.
VIX would need to be spiking over 40 to show signs of stress.
So far, so good with VIX holding under 30.
Negative Gamma on S&P
If you follow GEX (Gamma Exposure) of S&P 500 stocks you will know that market makers have shifted to Negative Gamma Exposure
For those not familiar with negative gamma environment, it’s when dealers (market makers) need to sell when the market sells. The easiest way to think of it as low liquidity environment.
Hedges Shifting to Negative Gamma
JHEQX is just 150 points from turning negative gamma.
The last time JHEQX went negative gamma was Jan 4th (started the year long slide) all the way to the end of June (start of bear rally)
JHQTX that recently rolled over went negative gamma (red zone) right away. Flows are not strong, but add to the selling effect.
Event VOLATILITY, VANNA and CHARM
I talk about these flows as if everyone understands them. If anything is responsible for the phrase “they are suppressing the vix” it would be the result of event volatility feeding VANNA and CHARM flows.
I’m working on a new type of chart monitor to gauge these flows better as they are key in why my predictions are as accurate as they are some times.
With it I will outline more about identifying and charting these flows to give readers a play book on what to expect and when.
Bitcoin
Crypto went through another liquidation event yesterday. You can tell they are getting tighter and smaller zones of consideration before taking the next leg down.
Never published this idea, but recently dug up this chart from when I was studying harmonic patterns. The butterfly pattern predicted 28800 for bitcoin at its second peak in Oct 21.
Here is a pattern of flags I noticed and shared privately that followed through right as markets opened on Tuesday.
S&P 500 Pinned at 3905
S&P 500 is pinned to 3905 as I predicted yesterday.
Bulls need to hold 3900 all week. Dropping below means a retest of 3637 but this time JHEQX will be adding volatility to an already liquidity strained system.
As for today, my trading plan is to watch. If 3900 fails I’ll be looking to go short. If it holds, I may take a long position into CPI and FOMC. CPI is looking like it might print lower giving a short term reprieve from Septembers Selling Pressure.
As Always, Trade Safe. Not Financial Advice.
Liquidity is Showing Signs of Weakness
Twitter feed last night I saw this chart, which is a decrease in Top of Book depth liquidity that is a measure of highest bid and ask prices.
What assumptions can be made?
FED is tightening and asset managers are fleeing to risk off taking all the liquidity with it.
I wouldn’t start to worry about large multi-100 point moves just yet.
VIX would need to be spiking over 40 to show signs of stress.
So far, so good with VIX holding under 30.
Negative Gamma on S&P
If you follow GEX (Gamma Exposure) of S&P 500 stocks you will know that market makers have shifted to Negative Gamma Exposure
For those not familiar with negative gamma environment, it’s when dealers (market makers) need to sell when the market sells. The easiest way to think of it as low liquidity environment.
Hedges Shifting to Negative Gamma
JHEQX is just 150 points from turning negative gamma.
The last time JHEQX went negative gamma was Jan 4th (started the year long slide) all the way to the end of June (start of bear rally)
JHQTX that recently rolled over went negative gamma (red zone) right away. Flows are not strong, but add to the selling effect.
Event VOLATILITY, VANNA and CHARM
I talk about these flows as if everyone understands them. If anything is responsible for the phrase “they are suppressing the vix” it would be the result of event volatility feeding VANNA and CHARM flows.
I’m working on a new type of chart monitor to gauge these flows better as they are key in why my predictions are as accurate as they are some times.
With it I will outline more about identifying and charting these flows to give readers a play book on what to expect and when.
Bitcoin
Crypto went through another liquidation event yesterday. You can tell they are getting tighter and smaller zones of consideration before taking the next leg down.
Never published this idea, but recently dug up this chart from when I was studying harmonic patterns. The butterfly pattern predicted 28800 for bitcoin at its second peak in Oct 21.
Here is a pattern of flags I noticed and shared privately that followed through right as markets opened on Tuesday.
S&P 500 Pinned at 3905
S&P 500 is pinned to 3905 as I predicted yesterday.
Bulls need to hold 3900 all week. Dropping below means a retest of 3637 but this time JHEQX will be adding volatility to an already liquidity strained system.
As for today, my trading plan is to watch. If 3900 fails I’ll be looking to go short. If it holds, I may take a long position into CPI and FOMC. CPI is looking like it might print lower giving a short term reprieve from Septembers Selling Pressure.
As Always, Trade Safe. Not Financial Advice.
Note
update in SPY. monitoring swings high, swings low.watch for a bounce in VIX here around the noon hour. There is a tennis match right now.
Note
There is the break I was watching for.Right as FEDs start speaking.
Still watching.
My only position right now is Long XLF. @ 33
Note
taking another stab at todays highs.Note
broke highs. watching VIX for bounce at 25.25 or breakdown. a breakdown would likely see a higher rally into the end of the day, overnight VANNA front running and VANNA rally in the morningNote
updated chart. new high could form an intraday H&S which are not very accurate from my past experience.watch to return to a higher low and really push to break through the VIX to the downside of 25.25
Note
25.25 broke.SPY high of day.
Next?
Maybe short squeezes as warnings that inflation is to high seem to be ignored or already priced in.
Note
Now you see an ascending triangle forming a top for the day.squeeze breaks through 396-397 or breaks down.
Note
on bookmap. liquidity brought down from 3972 and added 3940. High hanging fruit to low hanging fruitNote
entry I'm looking for a short squeeze atNote
first break out attempt. liquidity is back higherNote
breakout. now retest triangle topNote
Missed the entry =(That's why I don't trade so good.
maybe end of day squeeze but it looks like 3960 is new bar.
Note
3983 liquidity appears above =)For anyone unfamiliar with order book it basically means limit orders are placed where large dealers delta flows are adjusted to.
As volatility inc/dec, price change and time passes the dealers dynamically alter the "order book". As traders get smarter, they ride these order flows up and down.
It's what I believe causes volatility compression and short squeezes. See my post on Vol Compression for the Ascending Triangle seen as vol compresses in low liquidity environment (see top of post).
and check out vol compression footprint that triggered the biggest short squeeze in indexes in decades.
Note
FED Beige book in a few minutes. could be a break lower if news is not priced in.Note
Here is a look at a bear flag intraday the gave away the move higher earlier in vol compression cycle.Note
Beige book news triggered higher liquidity on bookmap. 4000 now.Note
more liquidity coming in higher.Note
wild swings. Expect markets to take a swing low as FOMO buyers rush to brokers.This could be a bull trap and and carpet could be pulled at anytime.
Liquidity still above at 4000.
Note
Bears need to jump on this chance to break lower.Note
As long as bulls hold this channel another squeeze is possible.A breakdown could could pick up momentum fast the other way.
Note
Triangle profit target is 4000. right where liquidity (L) is hanging.more coming L added at 3992.
Everyone drinking the cool-aid now.
Swing low bounce to confirm.
Note
and its squeezing again.could be trap though. no swing low. no re-test on last triangle.
Note
was fake out. Now swing low.Note
Bulls looking to dunk out of ichimoku cloud in 1 days trading. I would expect a couple days of consolidation above cloud for attempt at conversion and baseline.Note
L still at 4000 and 3993, 3990 added.drift higher for now.
Note
big test now.can it hold for another squeeze.
Note
more L higher. squeeze is weak though.Note
Not much of a short squeeze. Low volume on close. Not as many sellers caught offside the second time around.Note
VIX just got smashed.my "guess" is futures are bought overnight.
Some Reason for todays rally
1) Low Liquidity (dealers buy with buyers, sell with sellers)
2) International investors see USD continue to gain strength and want it.
3) 75 BP rate hike priced in with yesterdays moves (Canada leads with .75 today).
I'll do a futures update later tonight or 1st thing tomorrow morning with my ideas leading into AM trading.
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