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Shortspx

Time to go LONG VIX! The VIX is a volatility index based on the S&P 500. It has recently hit lows and is nearing the all-time low. The last few times it hit this low around 12 or so it rebounded up to 22-24. That doesn't mean that just because we hit that level we will rebound up to the highs and the S&P 500 drop. After a few rotations, we do see a pop and last time that pop brought the S&P 500 down to 2900 and this time the SPX is rolling over potentially to 3030, meaning VIX has the opportunity to pop. The more the VIX holds down at this level the more the spring will coil for the pop.
CBOE:VIXLong
by TRADEPROAcademy
SPX Market Top? The Immediate Future Looks BadLet's look at a few things here - First: Based on the last down swing we have reached the 1.272 extension which, based off the patterns taught by Larry Pesavento, is a key extension for trend reversal (the other, 1.618 I have on the chart as well, as that'd be the next target if this one fails). Second: Volume is telling us a similar story, I added my relative volume oscillator to show how volume has been below average on upswings, then above average on sell offs. These moves haven't had any confirmation volume on the way up which looks bearish for the future (looks worse on weekly and monthly charts). Third: Major RSI divergence - which is my go to for catching trend reversals. This too gets worse on the weekly and monthly charts. Fourth: the immediate pattern is an ascending broadening wedge - more bearish immediate implications. I don't think there's a question regarding IF we go down here - just how far? I am extremely bearish long term so I think you know my answer. I'd also like you to take a look at this post from @Ajion showing that the current pattern has major resemblances to the market top in 2000 during the dot com bubble, a link to his post is beneath this.
SP:SPXShort
by J-Streak
possible 5 wave structure in the S&P 500It would seem as we are about to complete the 5th wave of a 5 wave structure on the S&P500. Given that we could state we are in wave 4 of wave 5, we could expect a wave 5 of 5. This could be finished at the confluence area of the 1.27 and 1 fibonacci in 2493 - 2527. Wave 5 of 5 could also fail to make a new high and go short way before. In conclusion, it could be a good idea to stock up in gold or start getting ready for a short in the S&P 500. It could take a while though. If we follow the guideline of Equality (in which wave 1 is equal to wave 5) we could be seen this in October - November. It is possible within the Elliott Wave framework for the wave 5 to be incomplete, therefore we could be seeing it sooner.
TVC:SPX
by iSummer
SPX: BOJ MISS = BULL RUN END +2% + 2016 SAFE HAVEN TREND RESUMESEnd of the bull run Global Equity Indexes: 1. SPX/ Global Equity indexes in the past 2/3wks saw a post-brexit central bank easing induced rally, as many CB released dovish statements following the vote which spurred investor confidence in fresh easing. - IMO much of the bull run was based on BOJ easing hopes, given the size of the economy (4th largest) stimulus from the BOJ had risk sentiment increasing affects - though now in light of no new easing from the BOJ and many CBs shrugging off/ UK internalising the brexit impacts I believe this bull run is over. 2. Technically speaking we may see another week or two of sideways or +1% as the market awaits easing policy information from the BOE (6th largest economy), but past this and regardless of what the BOE does i think the upside bias will cease. BOE is only likely to inject 50bn over probably 6m+ which is a drop in the ocean relatively as the BOJ does 100bn+ in one month, so by mid august latest I expect risk-markets to turn sour and a 10% correction is likely. Confirmation the risk-rally is over: - During this bull run we have seen risk markets/ SPX make gains rather frigidly, one day up one day down has been the trend - rather than the usual breakout green green green rallies of the past - this to me indicated that the topside was cautious and reinforced my view that it was central bank driven (not equity market performance driven). Thus, Confirmation of the trend turning to risk-off will be consecutive days of risk markets falling (SPX/ global indexes) OR consecutive safe haven markets rising (Gold, UST, Yen) and the emergence of a strong negative correlation between the two assets will be a solid second indicator that the 2016 risk-off trend is back. Trading Strategy - a number of ways to play this one: 1. Short FTSE100 @6700 or 7000 (wait for BOE) - this is my favourite trade but has a few conditions. We have built some resistance at the 6700-800 level so here isn't a bad place to sell however i think we will get a better selling vantage point next week, assuming the BOE cut the bank rate 25bps. - The BOE easing should move FTSE100 up 3-4% in a few days into the 7000 ATH key level as easing boosts business conditions and a lower GBP increases FTSE company international competitiveness. The 7000 level is where I am aiming for FTSE shorts with sell-limit orders as 1) its all time high levels; 2) I like to fade central bank action since it is artifical; 3) the broader risk-run is over so FTSE will suffer with the rest of the market 2. Short US Indexes @Market - SPX is perhaps the best short ATM given it trades right at its newly set all time high levels and on the backdrop of the BOJ miss we should see some downside soon. 3. Long Yen @mrkt - in the immediate term my favourite trade I like long Yen (for 200-400pips) against USD and GBP, given the BOJ backdrop is most related to JPY markets. We have already we seen the risk-off transmission taking place in here as Nikkei sold off 2% after the result and JPY grew 3% but i still think in the immediate term e.g. 1wk we can see more JPY topside and Nikkei weakness - me prefering to trade the FX strength over the equity as the equity often follows as a function of FX strength. 4. Long Bonds or Gold @mrkt - for the medium/ longer term I like buying govt debt, particularly UK gilts (BOE QE increases demand) or Gold - Gold we saw move higher on Friday in reaction to the BOJ so it will be interesting to see if we can get risk-off confirmation run from this next week (look for 3/4 green days). Risks to the view: 1. US Earnings have outperformed imo on average this Q, so the risk-run may be sustained for longer than the 2wk window that I expect. Nonetheless, i think even this is capped at 4wks e.g. we should be in full bear mode by the start of September - look out for the confirmation, a run of 3/4+ days of consecutive safe haven gains is often all the markets have to signal to show
TVC:SPXShort
by QuantumLogicTrading
6
RISK-ON RISK-OFF POSITIVE CORRELATION? SPX VS GOLD, JPY & UST P1The Paradoxical Risk-on/ Risk-off Asset positive correlation: 1. Risk off assets have outperformed to date, with Gold leading the gains at 28%, JPY following at 18% and US 10y treasuries Trading 16% up in 2016 - average at 20.5%. 2. Meanwhile, SPX trades 5% up since 4.1.2016 but more importantly, since 20th January lows SPX is up 15%. 3. this is significantly paradoxical, as fundamentally, Risk-on assets shouldnt trade well when safe havens do and the reverse can be said about Risk-off bull markets - Equities shouldn't trade higher. - the reason this positive correlation of both risk and safe haven assets rallying at the same is problematic is that in the long-run it is not sustainable - one MUST adjust to the downside as markets in the short-run trade as a zero sum game, liquidity is inelastic and non-infinite i.e. they cannot both keep gaining capital as there is a limit when all available liquidity is allocated. Consequently, at this point investors then have to forgo investing in one asset, if they want to speculate on another, as they dont have any new cash to invest - this is why we normally see safe havens and risk assets trade negatively correlated and price action is "seesaw" like most of the time as investors take money out of risk, for example, so they can allocate it to risk-off, as perceptions and market environment changes. Cause of the paradox: 1. An Unusual even split in investor risk sentiment e.g. in the immediate term, some believe the environment is stable enough to offer risk higher (CB easing/ support driven views), whilst others believe global risks are heightened enough to offer safe havens higher (Brexit, US election, China). Hence we see both SPX and Risk-off grow. Normally, the markets trade like herds e.g. behaviours skew to risk on or off, grouping with a strong bias to one side at the same time. This more "evenly distributed" sentiment we are experiencing rarely materialises as usually there is consensus on market risk e.g. all investors rationally agree that "now" is a highly uncertain time or the other way, given the same information is available. 2. Most likely imo , however, is that there is a short-term imbalance/ artificial risk inflation, where risk assets yet again are buoyed by central bank impetus. Following the brexit result a cascade of global CB dovishness/ support was injected into the markets providing the perfect artificial rise in equities - whilst the underlying market sentiment continues to follow the 2016 risk-off trend (as is shown by the 2016 outperformance of off (+21%) vs on (+5%), CBs have provided sufficient support to mask the risk-off bias - however it is unlikely to continue for long.
TVC:SPXShort
by QuantumLogicTrading
2
RISK ON/ OFF PARADOX CORRECTION - SHORT SPX/ FTSE & USDJPY P2 Post Brexit SPX vs USDJPY 1. One had expected risk to sell off post brexit as global uncertainty increases, given the amount of volatility in the FX markets in the lead up, this was the rational expectation (whilst VIX traded subdued). However, instead, SPX recovered 6% whilst Yen also rallied 7% higher in the days following the vote. 2. This risk-on risk-off positive correlation rally is almost unseen in markets (especially not at the 75% correlation level) as JPY and SPX positively correlate for the first time in 4 years (as below). 3. As discussed previously this is either 1) because markets are unusually evenly split on sentiment, going against herd behaviour with the marco outlook trading as a non-consensus between participants; 2) CBs have given risk an artificial boost based on supportive statements/ measures. Trade the paradox 1. Short FTSE100 @6600-6800 resistance with a 5700TP (January lows) - once artificial BOE easing rally is finished, likely near 66-800 FTSE will plummet in the medium term as 1) This underlying risk-off bias which has gone un-priced as yet (safe havens up 21% in 2016) prices - not to mention reaching near ATHs, with 10y resistance.; 2) brexit (still not priced in equities)/ Political uncertainty drags on economy and stocks - especially financials, which has a knock-on effect of corp credit tightening; 3) this structural CNH deval prices and hits UK export stocks as it did in Jan 2. Short SPX @2100 with a 1985TP - SPX at these levels looks an attractive short 1) as discussed CNH depreciation which is a macro issue for all stock Exporters to China (biggest market/ growth market) hasnt priced any revenue downside yet like they did in January (-8-13% previously). 2) underlying risk-off bias is still yet to reprice risk lower (2016 safe havens up 21% av. Gold 28%) + only 2% away from ATH - favourable short lvls; 3) Earnings sell-off likely around the corner as investors derisk/ hedge against "shocks"; 4) Brexit induced CB easing/ dovish rally likely to fade soon as it isnt structural growth and FOMC rates are recovering in the back-end (Dec Hike looms). SPX has a more conservative target vs FTSE as less brexit downside & its a structurally stronger index with growth stocks 3. Id also suggest dynamically hedging these positions with 1) Long high growth and low China revenue individual stocks e.g. Goog, FB and/ or 2) shorting GBP index or a GBP cross , lower GBP hedges any potential BOE easing rallies that the FTSE short may negative experience, and also short GBP is a solid trade to have regardless of any FTSE risk you have on the table. *See part 1 for more information "RISK-ON RISK-OFF POSITIVE CORRELATION? SPX VS GOLD, JPY & UST P1"
TVC:SPXShort
by QuantumLogicTrading
BREXIT YUAN DEVALU: USDCNH - SNEAKY FX FIXING? SELL SPX & FTSEAt the start of 2016 the PBOC began aggressively devaluing the off-shore Yuan against the USD, imo in an attempt to start the year with a competitive export:import advantage - with the aim of making 2016 a headline "come back" year for China amid the growing GDP growth and Credit bubble worries. As a result Equities across the board sold-off (-8.5% in a few days) as non-chinese Exporters globally feared that their biggest market/ growth market was coming under pressure, as the relative value of their USD exports soared, as Chinese import demand would fall significantly and as a function of the depreciation relative to the USD. Whilst the initial highly correlated move hit equities by -8.5% (7 days), however when fully priced, the CNH devaluation fears took the SPX down 13% to 1808 lows in just 12 trading days. The PBOC Deval intervention took CNH to lows of 6.7550 and low-closes of 6.6900. Brexit - Under the radar and sneaky PBOC FX Intervention? 1. Fast forward 6 months - the Days going into Brexit USDCNH traded at almost exactly the same fix as the pre-deval January level at 6.58 (blue line), then on the most volatile brexit days, the 24th and 29th, PBOC fixed the Yuan 1000pips lower to 6.6850, just above the extreme January lows at 6.6900 - Since then CNH has continued drifting lower, and now has eclipsed the shock January low closes of 6.6900, currently at 6.6960, which is now a new 6 year low. - This begs the question, did the PBOC plan this as a way to get their goal of competitive depreciation achieved WITHOUT the negative press/ market impacts that were seen in January? The answer is unknown but by looking at the Yuan prices on brexit day and the day after, it certainly looks like it - 1000pip devaluation in 2 days, thats bigger than any deval in CNH's previous history (even from January). How to trade it? 1. Imo this trade is a no brainer, given the PBOC seem happy to keep fixing CNH higher and have shown no signs of stabilising/ appreciating - with the last 6 daily candles in the green, my bets are that the PBOC in the near-term think they have gotten away with the deval, in the midst of all of the brexit effects e.g. Central Bank information flows are high, the brexit news itself and general market volatility are all acting as distractions - thus the SPX hasnt priced any of this deval YET despite it being more extreme than what caused the 8-13% equities sell off in January? - I have to admit, it has taken even me until now to realise this sly depreciation, nonetheless this trade (short Equities) is a one up on the market currently as most still havent noticed and continue to focus on central bank action.
Short
by QuantumLogicTrading