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Monday Morning Market BriefGlobal futures traded mixed on Monday morning to kick-off a busy earnings week, with over 100 companies in the S&P, and 13 in the DOW releasing earnings. We'll see the latest figures from Tesla, Apple, Microsoft, Caterpillar, and 3M to name a few. According to John Butters at FactSet, "In aggregate, companies are reporting earnings that are 22.4% above estimates, which is also above the 5-year average of 6.3%." Goldman's chief equity strategist, David Kostin, said, "On an absolute basis there is no doubt that valuations are extremely elevated. The index trades at the upper end of the historical range when measured using a variety of metrics, including P/E, P/B, EV/sales, EV/EBITDA, and market cap/GDP. These measures point to equity valuation ranking in the 96th historical percentile." He also mentioned that with low yields present, and the base case being no change in yields for at least a couple years, we may see continued support for higher equity valuations this year. The positive sentiment that we're seeing in the Nasdaq, which is currently trading up around 1% pre-market, hasn't yet spilled over into the S&P, Dow, or Russell, as they continue to trade flat. Asian markets were mixed, and European markets traded notably in the red, with the DAX, CAC40, and FTSE 100, trading down around 1.5%. Many european nations remain under strict lockdown, which is putting continued pressure on sentiment, and of course equity valuations. Vix caught a notable bid overnight, and is up around 7% to start the week. We're sitting at a 23 handle, and the ascending support trendline we've observed since December is maintaining it's integrity, for now. The dollar is trading off it's recent high's but is still showing strength just below the longterm descending resistance trendline - the DXY is sitting at 90.30 to start the week. The 10Y yield is breking out of it's flag formation, and to the downside. After hitting it's highest level since March 2020 a couple weeks ago, we're slowly cooling off towards the 21 day EMA, and 50 day MA sitting at 1.045%, and 0.957% respectively. Gold is looking awfully toppy ($1,864.59) on the monthy timeframe, and considering the fact that crypto is clearly the new favorite hedge on Main Street, it's no wonder why we're seeing pressure in more traditional hedges like the metals. Bitcoin is up about 6% on the day, and is back at a $34k handle. Ethereum hit a new ATH today at $1,475, but is cooling off a bit as we approach the open. The Put/Call ratio continues to look like a cruel joke. We've been at historically low levels for 8 months straight, and we're sitting around 50 as of this morning. That's not a skew in sentiment, that's manipulation, and imo it's not going to end well for greedy investors piling into risk at all-time high's. Finally, SPY is set to open near all-time high's, and is currently floating in orbit, above all technicals essentially. The upper band of the white channel is still in play, followed by a suite of MA supports between 380 and the top of the megaphone around 361. The key level I'm watching today is the 21 day EMA (376.43), for an indication of a change in the daily trend. The bears would need to recapture this level with conviction, and hold the line into the close. Having said that, we're living in La La Land right now, where price action leads sentiment, and Jerome Powell's favorite game is Ctrl + P. Expect the unexpected. Thanks for your time today guys, and I hope you enjoyed the analysis. If you'd like to follow our live play-by-play of markets, come visit us over at the Hedge of the World website. You can find the link in our profile. Cheers, Michael. *The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. I am/ we are currently holding positions in UVXY, HUV, HQD, QID.
AMEX:SPYShort
by Hedge_Of_The_World
10
Futures Soar on Inauguration EveAfter Friday's volatile options expiry, global futures are surging (after a somewhat muted MLK day), erasing most of Friday's losses as investors found more risk appetite. This was off the back of a potential dovish speech from Biden's pick for Treasury Secretary, Janet Yellen, who is scheduled to speak at 10AM this morning. Asian stocks were notably higher, while European shares traded relatively mixed. After breaking above the neckline, and seeing a strong break above the long-term descending trendline, the Dollar saw a notable rejection yesterday, and is now trading below these key resistance levels, around 90.43. The 10Y yield remains elevated this morning, and is sitting around 1.107%, with strong support at the 50 day MA (0.94%). We could see some big moves in treasuries today off the back of Yellen's remarks, asthey could help indicate the near term trajectory of the dollar, as well as rates. Gold is off it's Friday lows, and is up around half a percent. We're now sitting at $1,838, while Bitcoin hovers around 37k. Ethereum is up over 12% today, as investors continue to diversify their crypto portfolios beyond Bitcoin. SPY is back at the key 378 level in pre-market trade, which puts us just above the 21EMA (h), as we approach the cash open. The overnight gap ups have seemingly become the market's new constitution, and while we're all asleep at night, dreaming about a day when politicians and tech titans finally leave us the hell alone, markets melt higher, crushing volatility, and price discovery in the process. I expect to see resistance at the 378 level today, (green horizontal line), which is support turned resistance, as of Friday. The bears job today will be to defend the 21EMA (h), and recapture the 100MA (h) around 375.25. If the bulls take advantage of the gap and bullish sentiment, they'll be aiming to recapture the upper band of the white ascending channel, now sitting around 379.50. Vix is back at a 22 handle off the back of the irrational overnight exuberance. But, the ascending trendline just below us continues to hold up against market maker and central bank forces, dead set on crushing volatility. In other news, Goldman Sachs followed JP Morgan's lead, and smashed rev and profit expectations this morning, nearly doubling their quarterly profit vs a year ago to $4.5 Billion. Anyone still confused who the primary beneficiaries are from all this "stimulus" and "liquidity"? Hint: It's not Main Street. Lastly, will Trump pardon Assange and/or Edward Snowden in his final day in office? Needless to say, this is going to be a crazy weel folks. Buckle up! Thanks for your time today guys! If you enjoyed the analysis, please head on over to the Hedge of the World website for our live daily play-by-play. Cheers, Michael.
AMEX:SPYShort
by Hedge_Of_The_World
5
10Y Yield Under Pressure From Strong Auction DemandThe risk free rate took a breather yesterday, and then again today, as (yesterday) the 10Y auction was a smash success, followed by a near record 30Y auction today. We saw $38 Billion in demand in the 10Y auction, driving yields lower, toward the 1.11% level. Then after the 30Y auction today, the 10Y yield was hammered back to 1.08%. Members of the FED made their rounds in the MSM, convincing market participants that the FED had no intention of tapering asset purchases, nor did they see the need to hike rates in the near term. Let's see how things progress as the YCC (yield curve control) conversation becomes the focus on trading desks everywhere. When will the FED institutionalize YCC? Could be as early as the next meeting on Jan 26th. But, I highly doubt they'll admit, yet again, to the world, that everything they've done, hasn't worked. Then again, I've been wrong before. who knew you could just simply change every rule in the book. I digress. Thanks for your time today guys! If you enjoyed the analysis, please like and subscribe our profile, and also visit us at the Hedge of the World website (link in profile), where we do, in-depth, live daily analysis of markets.
TVC:US10YLong
by Hedge_Of_The_World
7
Futures Trade Sideways, FED in FocusIt's impeachment day 2.0! US futures continue to drift sideways as Vix and the dollar hold on to a 23, and 90 handle respectively. CPI came in at 0.4%, with Core CPI rising 0.1%. Investors will be on the look out for the FED's Beige Book at 2PM, which should give an indication on future monetary policy, and may even firm up some rumours of future rate hikes off the back of rising yields. YCC could be in focus as the 10Y yield rips higher, however, we did see a strong auction yesterday with $38 Billion in demand, which sent the yield back toward the 1.11% level. We'll be watching the 30Y bond auction today for indications of long dated bond demand, which could also have an immediate impact on rates. With the US potentially planning on going even deeper in debt with the incoming Biden Administration, supply is also in focus, as increased auction frequency and size, could also drive yields higher. Gold continues to show weakness, but is nearing overbought levels, like most all assets on the planet, with a monthly RSI of 64. Bitcoin and the crypto space bounced back notably from the weekly low, but Bitcoin caught some resistance around 36k. We're now sitting around 35k. The US House of Representatives will vote to impeach Trump, again, with the "debate" set to begin shortly, and voting to be wrapped up by 5PM this afternoon. It would then need to go to the senate for approval. SPY is trading in a relatively tight range, between 378 and 380. Barring a breach of the upper band of the white channel, we're going to continue to trade sideways. If we see a break above 380 again, the bulls may use the momentum to take us back to the ascending trendline in green, which is now sitting around 383.50. Trade accordingly. Thanks for you time today guys, if you're interested in our live daily play-by-play, please join us over at the Hedge of the World website. You can find the link on my profile. Cheers, Michael.
AMEX:SPYShort
by Hedge_Of_The_World
2
Next Stop on the 10Y Yield Train: 1.41%I've been hearing from many of my colleagues, most of whom are experienced traders, that rates are not going to rise anytime soon. 2023, 2024, 2025, all common projections for when rates will rise. Yet, we've observed the 10Y yield rising a whopping 120% since the beginning of August, to 1.13% today. Morgan Stanley said in a recent report, which I've mentioned in some of my other analysis, that the Nasdaq could be in for a 22% correction if the 10Y hits 2%. If the prospect of rising rates doesn't have traders and investors hedging their risk, nothing will. Trade accordingly.
TVC:US10YLong
by Hedge_Of_The_World
24
10 yrTreasuries look to be signaling that yesterday & today are in fact buy the dip we have risk on sentiment coming next couple weeks. If we check the weekly RSI 10 yr yields r very overbought, coincidentally so are all major indices RSI weekly indicators. Conclusion is we are in the final chapters of the bull market since March and another crash is imminent. But will likely be another opportunity to buy the best dip before another massive bull market over the next few years.
TVC:US10YLong
by Big_Mike716