S&P 500 Risk Off? Watch the Put-Call Ratio and US DollarHello traders and investors!
As we all know the stock market has recovered very sharply and fast since March when we saw a strong drop following coronavirus lockdowns.
The monetary policy has quickly changed and caused a rebound on financial assets after QE, stimulus packages, and lower rates.
Stock indexes are higher, some even beyond March levels even though COVID is not anywhere near the end; in fact, we see more and more lockdowns and restrictions happening globally each day. It is clear evidence that QE is driving the markets and not the real situation of the economy. But we have to realize that the stock market does not represent the economy; stock prices are driven by supply and demand, and it looks like more money printing obviously means more buying power.
I think that stock market is a good indicator for overall market sentiment, and currently we see more and more investors trying to jump on the train despite prices printing new all-time highs.
On the put/call index ratio, we can see that investors are buying a lot of calls as they believe that prices will be higher in the future. When calls move to an extreme, it usually means the opposite as we know that the market moves from pessimism to optimism and vice-versa. So if we respect past shifts in trends on the S&P 500 due to the PUT/CALL ratio extremes then we shall also be aware of a reversal now. I think there can be a risk-off, perhaps in 2021. It can be only temporary turn or pullback before we go even higher, but I think that it will provide a much better opportunity to look for investments when PUT/CALL will be at the other end of the extreme.
We know that when there is “risk-off” that cash is king, so normally the US Dollar will rise. Some may not agree because of money printing that drives down the value of currency. However, I believe there will be pullback even if the Dollar is going to crash, and this pullback may not be far away if we consider that DXY/SP500 ratio is seen in a fifth wave of a drop from March high. Based on Elliott Wave theory, the market is in final leg of current bearish development so next reaction is a counter-trend, normally in minimum three legs. And this goes perfectly with the PUT/CALL ratio view above.
The reason why people move into cash during a stock market sell-off is because of fear; they feel much better and safer with “cash in hand” rather than invested in some stocks during volatile and uncertain times. However, some will look to hide in precious metals or bonds but this requires patience. I think Gold is very interesting from the fundamental perspective, but when looking at the price and upward potential I really love Silver.
Silver has a support here at 21/19 where current pullback can come to an end.
TLT is also one option but there have been times when even bonds and metals fell “during stock market shock” but then quickly stabilized. The TLT is looking quite interesting while it trades above the trendline support, but falling trendline shall be broken to confirm the resumption of an uptrend.
That’s it for today. If you love the analysis or you are interested in market-sentiment cycles then you may want to look at our Elliott Wave charts!
TLT
Sell GoldGold's poor performance relative to long duration Treasuries tells us it's not looking good. Gold might be best to sell in the short term. Patience is needed for gold bulls as it looks like we might be headed south to test this low support line again soon. Will be interesting to see if buyers pick up at this level.
YIELD CURVE FLATTENINGhedgopia.com
Hedgopia reports that the long 10 years and short 30 year position is starting to reverse. Short interest on a 30-year is decreasing, short interest on the 10-year is increasing. This could signal a reversal in the macro trend.
- This a bet on a raise on short term interest rates and a decline in long term interest rates. Yield curve flattening.
- A flattening yield curve may be a result of long-term interest rates falling more than short-term interest rates or short-term rates increasing more than long-term rates.
- A flat yield curve is typically an indication that investors and traders are worried about the macroeconomic outlook. One reason the yield curve may flatten is market participants may be expecting inflation to decrease or the Federal Reserve to raise the federal funds rate in the near term.
TLT H8: THE BEST investment into US Election Day (SL/TP)(NEW)Why get subbed to me on Tradingview?
-TOP author on TradingView
-15+ years experience in markets
-Professional chart break downs
-Supply/Demand Zones
-TD9 counts / combo review
-Key S/R levels
-No junk on my charts
-Frequent updates
-Covering FX/crypto/US stocks
-24/7 uptime so constant updates
TLT H8: THE BEST investment into US Election Day (SL/TP)(NEW)
IMPORTANT NOTE: speculative setup. do your own
due dill. use STOP LOSS. don't overleverage.
🔸 Summary and potential trade setup
::: TLT D1 market overview/outlook
::: revised/updated outlook
::: accumulation in progress right now
::: expecting more short term losses
::: going into US Election Day
::: HOWEVER buying LOW is THE BEST
::: INVESTMENT into US Election Day
::: 150/155 best reload zone BULLS
::: BULLS should get ready to BUY LOW
::: from range lows / premium level
::: we are setting up for 15%+ PUMP
::: it's a slow process into US election
::: currently stay out / wait for better price
::: then get ready to SHIFT to BULL MODE
::: SWING trade setup do not expect
::: BUY/HOLD setup for patient traders
::: fast/miracle overnights gains here
::: good luck traders
🔸 Supply/Demand Zones
::: N/A
::: N/A
🔸 Other noteworthy technicals/fundies
::: TD9 /Combo update: N/A
::: Sentiment short-term: BEARS/downside
::: Sentiment outlook mid-term: BULLS/15% GAINS
TBT - Next Big Mover?Without too much noise, interest rates appear to be creeping up. In comparing with other trading instruments I watch, it appears to have the biggest potential for a move. As the rising rates indicate an increase in inflation, I've also had my eyes on a few commodities. Inflation has too long been downplayed but we all know the reality of inflation because we are exposed to the reality, not the engineered inflation figures that show there is none. Soybeans have looked interesting (SOYB). Also watching DBA for a broader commodity play. Oil as well. Started taking positions in some like XOM. Could be testing a long term low. Politically, the oil industry appears toxic but such fears often prove to be great buying opportunities. I'm taking some shots here across the inflation spectrum.
TLT Channel Surfing? Wishful Thinking...Still holding onto hope the appetite for bonds is insatiable
Thinking I've taken the heat for now...danger danger
Maybe it finds support here in this makeshift channel
Already long calls
Looking for a little life above 158 to add to position for a run back to up channel
TLT D1: THE BEST investment into US Election Day (SL/TP(NEW)Why get subbed to me on Tradingview?
-TOP author on TradingView
-15+ years experience in markets
-Professional chart break downs
-Supply/Demand Zones
-TD9 counts / combo review
-Key S/R levels
-No junk on my charts
-Frequent updates
-Covering FX/crypto/US stocks
-24/7 uptime so constant updates
TLT D1: THE BEST investment into US Election Day (SL/TP(NEW)
IMPORTANT NOTE: speculative setup. do your own
due dill. use STOP LOSS. don't overleverage.
Tagged as SHORT because short-term I expect
more losses before reversal (BULLS) at 150/155.
🔸 Summary and potential trade setup
::: TLT D1 market overview/outlook
::: revised/updated outlook
::: accumulation in progress right now
::: expecting more short term losses
::: going into US Election Day
::: HOWEVER buying LOW is THE BEST
::: INVESTMENT into US Election Day
::: 150/155 best reload zone BULLS
::: BULLS should get ready to BUY LOW
::: from range lows / premium level
::: we are setting up for 15%+ PUMP
::: it's a slow process into US election
::: currently stay out / wait for better price
::: then get ready to SHIFT to BULL MODE
::: SWING trade setup do not expect
::: BUY/HOLD setup for patient traders
::: fast/miracle overnights gains here
::: good luck traders
🔸 Supply/Demand Zones
::: N/A
::: N/A
🔸 Other noteworthy technicals/fundies
::: TD9/Combo update: N/A
::: Sentiment short-term: BEARS/downside
::: Sentiment outlook mid-term: BULLS/15% GAINS
Regional Banks On the Move!Regional banks have been an absolute dog as of late. They lag almost everything, other than energy. This sector has shown some strength since the “Tech Wreck”. So why do we focus on this group? Well it is part of a larger story…. interest rates. Let’s hop on the chart.
So here we have the charts of KRE. We have seen a downward sloping trendline that was intact for months break. Now we are going to test an area of overhead supply. If we break through at that area, that is bullish for stocks. If we break down at that level, we would be looking for a higher low to confirm the trend reversal. We are also seeing the RSI break through some overhead resistance which is bullish. We want to see participation from financials, even the small ones! Now this is also part of a larger story of interest rates. If KRE is rising, we can assume rates will rise as well. At least in the short term during reversals, these two trend together. We are seeing utilities break out too, which is another leading indicator of rates increasing.
Happy Trading!