S&P 500 - Correction Coming?

Mar 5, 2019

S&P 500 is off to the best start in 32 years. However, this is after experiencing the worst December since the Great Depression.

At the end of 2018, the S&P 500 plunged ~20% as investors feared that the economy was about to enter a recession, sighting; (1) global growth contraction; (2) central banks tightening; (3) escalating trade war tensions; (4) growing debt levels; and (5) geopolitical uncertainty.

So why did the S&P 500 bounce back so strong to start 2019?

For the same reason it has been going up over the past 10 years: Easy money. The tightening cycle ended before it really started.

The Fed + People's Bank of China + European Central Bank, etc. are all throwing free money around in record numbers. Now fear is gone, greed is back along with a lot of optimism.

However, it's clear that the underlying economic data is disconnected from what Wall Street is experiencing. Everywhere you look economic data is pointing to peak levels/contraction/deteriorating financial conditions (if you'd like to follow the fundamental story, welcome to follow me on Twitter where I outline a lot of data/charts/statistics: twitter.com/khokhar_ahmad/status/1102730326898442240).

The reality is, the market has moved too far too fast, and a pull-back here should be anticipated.

Let's look at the technicals.

S&P 500 has broken down/failed to rally above ~$2,818 level four times now (strong resistance). RSI is at overbought levels not seen since Sep-18 (when the market began the ~20% plunge) and MACD divergence has just turned red. It doesnt take a rocket scientist to see that the market is ready for a decent pull-back. How far we will correct is uncertain, but from what I can tell, ~$2600-$2500 level seems likely (support range).

Many assume that we are not just going correct here, but will fall much further and enter a full recession. It's possible, however, IF we continue to have a dovish Fed (might even cut interest rates), and a decent (not great) Trade War deal is in place, I suspect the S&P 500 will rally back and potentially test the ATH later this year or early next.

Remember, historically, most recessions have started and ended with the Fed. We have a Fed now that will do anything to keep this market from falling too low (they are backed in a corner by Wall Street/Trump). If this changes - the Fed moves to a more hawkish stance - then definitely, we will fall much further. But for now, a dovish Fed puts a floor under this market.

In the end, patient investors will be rewarded.

I am short via QQQ / SPY Put Options.

Cheers!

Mar 7, 2019

Note

This morning I asked @Rob.Reynolds here on Trading View to share his thoughts on a Boeing (BA). Surprisingly, within minutes he posted this:

Overall, as the S&P 500 begins this correction, I think BA is going plunge pretty hard short-term. I am short BA and added Puts today.

Just posted this to twitter: twitter.com/khokhar_ahmad/status/1103475422250000384

Currently, my biggest short positions are: QQQ + SPY + BA + AMD

Let's watch this unfold.

Mar 7, 2019

Note

This narrative/trade is working out perfectly. If SPX closes below the 200-day moving average at ~$2750, we will fall fast to the $2600-$2500 area as algos take over.

One thing I want to mention is that I actively monitor who is buying volatility on a weekly basis (COT data). Check is this commentary: twitter.com/khokhar_ahmad/status/1103687128758673409

I started to warn people to watch out for a VIX spike late last month. This VVIX chart is very important to monitor. When I gave the warning, VVIX was at ~76. Today it's at ~90. I'll have more to say on this as we continue this decline.

If you're a fan (enjoy my updates), don't forget to hit that like button :-)

Cheers!

Mar 11, 2019

Note

Good morning.

First off, condolences to the families of the crash. Not how I would have wanted to make this return.

I decided to close both my BA positions this morning at the open with the stock down ~11%.

Here is the link to when I first posted the exact positions I had opened (on Seeking Alpha - 2/27/19): seekingalpha.com/stocktalk/102311336

RE:

BA - 3/18/19 $410 Puts = total gain 591%
BA - $425 3/15 Puts = total gain 737%

Total return = 1,328%

This is by far my bests ever. Second to FB's +500% Puts (see Ideas) gain last year.

With this, I've made up any losses from 2018 + more. Very happy with these returns.

On the hunt for my next move. Welcome to follow along.

Mar 22, 2019

Note

VVIX up 12%. VIX up ~20%. One day can change everything.

For those of us who are really paying attention, this should come as no surprise. These past two weeks have been nothing more than a suckers rally based on 'hope/greed.' The Fed cannot save this market in the long-run. They are inflicting more damage than many might assume.

While markets have been going higher, I've held conviction that we are still headed much lower. If you've been following me on Twitter, you've seen some of my moves (QQQ $182 Puts - up +80% today).

I don't post my trades regulatory because I do more intraday trading now. I open positions in the morning and close at noon. I have very few long-term position open.

I think we are going to see a lot more of these type of days were we are up 1% only to fall 1.5% the next day and go back and forth. Ultimately, this is exactly the type of movement that we saw in 2007. Markets retested the ATH and we eventually began the great decline. I could see SPX at 3K before we plunge. It's going to be a battleground.

Keep an eye out on BA -- I continue to reiterate that this stock is the key to this market. As it goes down, so will the broader market.

Also, CSCO chart looks exactly like BA. I have Puts and will open more if it continues to go up. Just expecting a technical pullback.

Happy hunting. Stay patient. This market is going to roll over fast/sharp.

Would love to hear how you are playing this market. If you'd like me to review any names, mention it in the comments section below.

Cheers!