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Dj30

DOW JONES SHORT: Monthly Divergence, Fed HikeThe Dow reached as low as 17905 earlier in the day, but has since recovered somewhat to 18150. Technically: The Dow is due for a large correction to the downside. There is strong divergence on the monthly chart towards 18500. The target would be the missed monthly pivot at 16300. Fundamentally: US stocks are due for a correction to the downside, because the Fed will hike at least once this year. If they do not hike in September, this will be an opportunity to add to short positions through the election. I am short on the Dow from 18500, and added on the pullback to 18150. This index should reach 16300 given enough time, as the Fed has to hike sooner rather than later if it wants its credibility to remain intact.
FX:US30Short
by Exercise-Discipline
SELL US EQUITIES - SPX: OPTION VOLUME BREAKS +2SD & BREXIT HIGHSSPX downside to 2000 Option Volume: 1. Total CBOE -0.79% Equity option volume broke Brexit highs and 1YR +2StanDevs at 36 to trade at 38 (and 70% higher on the day) indicating we are entering an aggressive sell-off period (holders of underlying have scrambled to hedge their exposure in a fashion more aggressive than brexit! - which is particularly saying something given that we saw SPX -2.45% trade 10% lower on brexit vol 8.82% ). - Thus this imo reinforces my opinion posted a few weeks ago (attached) which highlighted perfect downside technical/ price action that we will likely reach the 2000 level/ brexit lows given the amount of brexit like correlation we are seeing. Implied Vols: 1. VIX 39.89% traded aggressively on the bid as expected but the move lagged spot developments so wasnt much of a leading signal this time however, ex post there has been a number of bearish signals: - Volatility of the VIX 39.89% reached +2SD and climbed some 30% on the day, indicating the move higher in VIX 39.89% was perhaps more than just noise that is likely to be faded as we often see with equity vols. - SPX -2.45% Bid and Ask volatility spiked 39/6% vs 40.6%, with offer vol 8.82% now outpacing bid by apprx 70bps indicating short funding is continually being squeezed a little more relatively (through higher demand) which is another sign there could be a rebalancing lower. SPX Positioning: 1. I am short from 2182 avg and will hold until downside momentum looks to fade likely somewhere near 2000. Election, Fed, Bull exhaustion risks are all the function of this downside imo, and all pretty equally distributed at that e.g. fed accommodation has to fade sooner rather than later with most members doing their best to offer hawkish tones despite poor data (though nothing shocks me as to their ability to ease markets). More certainly though, bulls at new highs for 4wks being unable to push higher despite perfect conditions (very poor data) showed they were clearly exhausted and finally the election risks particularly given the two v poor candidates can only weigh on risk markets. - Not to mention historically September is the worst month for SPX -2.45% vs August being the historically best (poor liquidity transferring to lower vol 8.82% likely the cause) so another quick stat reason to be short. Risks to the short view: 1. Potential downside views to shorts (or topside risk) are that FOMC failing to hike causes more monpol induced euphoria but at these low implied probabilities any "fed no go" topside will likely be constrained to a 2% recovery rally at best and will be heavily faded at that. Bare in mind and as above fed speakers have done their best given conditions to remain hawkish so it will likely be a hawkish "No action" which once again limits topside imo. Tactical notes: From a micro perspective Real money clients are unlikely to be behind this move lower yet, today imo will just be the algo and HF community - further given LDN and Asia session was over for the main period of losses (and half of NY), i am expecting more profit taking/ selling next week once the slow money has had time to reposition and the rest of the world accounts react to the price action. Questions, Comments and Likes appreciated!
OShort
by QuantumLogicTrading
1
EQUITY MARKETS - SPX: OPTION VOLUME ABOVE +2SD & BREXIT HIGHSSPX downside to 2000 Option Volume: 1. Total CBOE Equity option volume broke Brexit highs and 1YR +2StanDevs at 36 to trade at 38 indicating we are entering an aggressive sell-off period (holders of underlying have scrambled to hedge their exposure in a fashion more aggressive than brexit! - which is particularly saying something given that we saw SPX trade 10% lower on brexit vol). - Thus this imo reinforces my opinion posted a few weeks ago (attached) which highlighted perfect downside technical/ price action that we will likely reach the 2000 level/ brexit lows given the amount of brexit like correlation we are seeing. Implied Vols: 1.VIX traded aggressively on the bid as expected but the move lagged spot developments so wasnt much of a leading signal this time however, ex post there has been a number of bearish signals: - Volatility of the VIX reached +2SD and climbed some 30% on the day, indicating the move higher in VIX was perhaps more than just noise that is likely to be faded as we often see with equity vols. - SPX Bid and Ask volatility spiked 39/6% vs 40.6%, with offer vol now outpacing bid by apprx 70bps indicating short funding is continually being squeezed a little more relatively (through higher demand) which is another sign there could be a rebalancing lower. SPX Positioning: 1. I am short from 2182 avg and will hold until downside momentum looks to fade likely somewhere near 2000. Election, Fed, Bull exhaustion risks are all the function of this downside imo, and all pretty equally distributed at that e.g. fed accommodation has to fade sooner rather than later with most members doing their best to offer hawkish tones despite poor data (though nothing shocks me as to their ability to ease markets). More certainly though, bulls at new highs for 4wks being unable to push higher despite perfect conditions (very poor data) showed they were clearly exhausted and finally the election risks particularly given the two v poor candidates can only weigh on risk markets. - Not to mention historically September is the worst month for SPX vs August being the historically best (poor liquidity transferring to lower vol likely the cause) so another quick stat reason to be short. Risks to the short view: 1. Potential downside views to shorts (or topside risk) are that FOMC failing to hike causes more monpol induced euphoria but at these low implied probabilities any "fed no go" topside will likely be constrained to a 2% recovery rally at best and will be heavily faded at that. Bare in mind and as above fed speakers have done their best given conditions to remain hawkish so it will likely be a hawkish "No action" which once again limits topside imo. Tactical notes: From a micro perspective Real money clients are unlikely to be behind this move lower yet, today imo will just be the algo and HF community - further given LDN and Asia session was over for the main period of losses (and half of NY), i am expecting more profit taking/ selling next week once the slow money has had time to reposition and the rest of the world accounts react to the price action. Questions, Comments and Likes appreciated!
OShort
by QuantumLogicTrading
4
CBOE EQUITY OPTION VOLUME: 40% HIGHER FRIDAY & 1SD ABOVE 3M AVRGCBOE Equity Option Volume: 1. Total Equities Option volume now trades above all moving averages and is currently 1 deviation above the 3 month and 1 month average - we moved 40% higher on Friday post yellens hawkish Jackson Hole Speech, from 1700000 to 2500000. - Though we remain about 40-50% below the "risk-off" shift levels that we usually see in a firm bear market (Brexit and Yuan deval/ Feb sell off levels trade at 3700000) 2. This is important as increasing equity options is highly correlated with risk-off markets (as investors increasingly turn to derivs to hedge their long cash exposure) - watching closely for another 40% move higher, which is easily possible given Fridays move as this will likely signal the start of the september sell-off that I have been expecting. 3. Short SPX is my view on any rallies into 2180 this week - looking to double my position here. Questions, Comments and Likes encouraged!!
OShort
by QuantumLogicTrading
2
LONG APPLE: $100 BREAKOUT? LOW VOLUME, VOL DEMAND & MA CROSSApple looks poised for the $100-101 level breakout Volume: - Volume has traded below the quarterly average for the past 10 days , consistent with apples post-Brexit bull run. Low volume is a bullish signal as it indicates investors do not want to offer their apple risk at current prices and wish to hold for further upside before increasing their offering. - In particular yesterday volume traded 40% lower than the quarterly average at 23m, this bodes well for a bull run/ $100 break-out today as if new buyers with to get on the apple curve they must bid the price higher (and through the $100 level). Volatility: Whilst volatility isn't at the 12m lows that we saw at the end of may, IV has certainly came off somewhat from the Brexit highs at 30%, to trade currently at 23.77. This too, along with the low volume has been consistent with apples post-brexit bull run and continues to provide investors the assurance they need to fund further liquidity and push apple higher/ through the $100-1 breakout level. - Historical Vol trades close to implied at 20%, once again providing a close to ideal buying environment (ideally HV is higher than IV for buying conditions). Option Demand: - Apple end of week option demand looks healthy, with there being a huge skew for apple topside options e.g. the 25 delta calls (101) trade at 17,500 contracts, whilst the downside 25 delta puts (98.50) only trade at 9,000 contracts - almost half. Given this skew in upside demand, this could fuel a apple breakout at the 101 level. Even at 102 there are 20,000 demanded at 13 delta calls vs only 12,000 demanded for 13 delta downside puts - so all in all this excessive bullish option demand could have a magnet affect as these prices are reach in spot as they come in the money and are brought causing a cascade of fresh demand from the option space. Technical - Apple 2-days ago broke out its second key MA resistance, which was at 98.69 and the quarter MA, this too is a bullish sign and provides downside support if it be the case. - Apple trades in the middle of its +/-2 standard deviation channels which means there is certainly room for a topside breakout without any probability prejudice that may occur if it was close to the +2 SD channel which provides strong resistance - the +2 12m SD channel trades at approx 107 - this is a clear target for the apple breakout if it materialises. Market sentiment: - As we know the past 2wks have been strong risk-on sentiment with SP and DJ setting new highs by 1-2+%, though Nasdaq has lagged new highs but nonetheless broke-out from the 4600 resistance and has given tech stocks a fresh lease of life. - Also Microsoft outperformed earnings expectations which no doubt will help give investors confidence about adding more apple to their portfolios or adding fresh positions going into apple earnings next week, since the two have revenue streams closely linked - Microsoft traded up 4% in post market yesterday, and in pre-market trades up at new highs of 56 - 5.44% on the day. - Safe havens trade down quite aggressively today - gold, usdjpy and TNX - about 1% down on average, thus this is the perfect day for an Apple breakout as there is excess liquidity to be allocated to risk assets.
NASDAQ:AAPLLong
by QuantumLogicTrading
2
EOW SUMMARY: RISK THE OVERALL WINNER - US30 & SPX @ 2% NEW HIGHSEnd of Week Summary: 1. On the week we saw risk outperform safe havens for the first time since the brexit vote and the SPX and DJ30 set new all time highs by 2% and 1.2% respectively - somewhat encouraging given this was the longest period post-crisis that equity indexes have had since new highs, with a total time of apprx 1 year. 2. Given the articles attached, this week was also the first week where risk-on/ risk-off positive correlations broke down and went back to some degree of normalcy, with Gold, Yen and bonds ending the week down some 5 - although the TRY Military Coup did cause some risk anxiety late on friday and caused safe havens to par some of their losses by 1% to close down apprx 4%. 3. Drivers of the risk-on rally i must say did come as a surprise, given the relatively subdued economic climate post brexit, with little planned risk-on drivers in sight. However, it was JPY's surprise talk from PM Abe/ BOJ Kuroda easing/ stimulus speculations at the start of the week (speculations around y10-20trn) that gave risk markets some legs - despite the reliability of the claims being denied by much of the JPY Govt though there certainly is no smoke without fire. 4. The other winner of the week was USD , much of which was safe haven demand on Friday (TRY Coup) but $ strength had built through the week on the back of hawkish FOMC speak sentiment (see attached) and risk markets rallying, causing rates to also rally (UST 10y averaging +4-5%) where all have contributed to increased market confidence which has translated into higher projected rate hike probabilities for their Sept/ Nov/ Dec meetings - currently at 12.9%/14.4%/38%, which is pretty much a 100% increase in expectations on the week. - Once risk got going, given the severe depression, it was unsurprising that it did manage to run away higher - as safe havens needed a correction higher, if only in the short term. Next week Projections: 1. Given last week, and most of friday, the obvious expectation would be to expect risk to continue on the offer and making new highs - however, late on friday afternoon we saw risk-on/risk-off balance tip in favour of safe havens as the TRY Coup uncertainty increased risk-off demand. - Friday traditionally is a weak day for risk anyway as 1) end of week sellers/ weekend flat risk books cause a natural selling of risk, and a natural buying of safe havens as portfolios look to hedge weekend event risk over the two days that the markets are closed (especially as the session ended i the middle of the TRY coup). - That in mind, i was surprised to see risk even trading better than safe havens on mid afternoon Friday at all (until TRY) - with Yen falling to 106.3 and goldd down 0.9%, i was confident that we would enter Monday with a risk-on tone.
TVC:DXYShort
by QuantumLogicTrading
2
The US30 break down break downSo after yesterday's pullback from the highs, I believe it has a long way to go yet before we see some price stability. Here are a my reasons. 1. MACD showing crossover. 2. Close below upward trending line. 3. Extremely low volatility which may lead to spike in volatility as price picks up rocks on its roll down. 5. Not oversold. 6. Price bounding off contuously from Moving average Low 50.. A break below this and the price movement will start to pick up pace. If you are long here, I'd be considering closing positions as brexit worries continue to increase.
FX:US30Short
by maccabean
APPLE: BULLISH VOL CROSS AND SUPPLY SIDE; BUT DEMAND DEFICIENCYVolume Apple Volume traded up for the first time in 4 days on thursday, increasing 25% from 20m to 26m, whilst this may be considered bearish - as increased selling, it is important to not 26m is still 35%-40% below the 4wk and 6month average. Volume cannot fall forever and we have been trading at extremely low volumes all week, so given these facts, a modest rise from 20m-26m is still bullish IMO given that apple traded at 46m last week, so even at 26m now we are still significantly depressed on the supply side - though the demand deficient problem of the recent times remained rife in the stock yesterday, where the stock fails to attract new liquidity, which is all the stock needs to ask the price up given the perfect, low supply environment apple is currently in. Historical and Implied Vols We continue to have a bullish view from a vols perspective as implied traded flat yesterday, up only 10bps at 21.02. Also, a bullish cross pattern emerged between HV and IV, where HV is crossing lower then IV. The shorter period 5/10 HVs are already trading below IV, but yesterday the 20/30 period HV also made a bid to make a move below IV in the coming days. As i have highlighted from the last bull cycle on the graph, when the 4 HVs traded bid and started falling (to eventually trade below IV), Apples price was bullish, rising over 10usd, such interactions between HV and IV is historically highly correlated bullish behaviour. In april as you can see it was Earnings uncertainty that caused the relationship to unnaturally break down - in previous bulls, the HV < IV has allowed bull runs to continue for several months before. Vol correlation with apples price also traded flat remained above the -90% and maintaining my bullish view with the indicator. Evaluation Much of same from apple, where we are witnessing a perfect "bull run" environment (low all round vols, low volume, low price) but the demand side remains the issue - likely due to apples poor mirco-econ environment of poor confidence/ fear regarding their future performance and the ever looming July Earnings, which is artificially keeping demand low for apple. I dont expect any significant upside today from apple, given fridays are normally the worst day for stocks due to the "end of week" sell-off that occurs as some money managers cannot hold open risk on their books over the weekend. IMO i expect apple to close 99.2, higher if we are lucky. If we dont have a bull run soon, we may not see one until august, given that i expect apples price to trade low/ down in the 3 weeks before earnings as investors remember Aprils tragic sell-off and try to avoid a similar event (even if it is unlikely).
NASDAQ:AAPLLong
by QuantumLogicTrading