Stocks Gone Wild
Updated
Happy New Year guys! I hope everyone had a relaxing and enjoyable holiday season. Let's get right into today's analysis:
Stocks have gone wild! We're seeing essentially every risk asset on the planet melt up as the dollar continues it's slow, and incredibly painful demise. The money supply continues to rise as investors raid their savings accounts, and banks lend their excess reserves in search of more attractive returns than 0.10%, which is the current IOER rate. Based on M1, we can see that investors are clearly raiding what little savings they have left (70% have less than $1,000), as the concept of downside risk becomes folklore, and inflation begins to rear it's ugly head. I think it goes without saying that the line between fantasy and reality has become completely blurred, and so with our hard earned money at risk, we must take this into account, and trade accordingly.
The S&P hit a new all-time high in the overnight session, kissing 3,773.38 before giving back some gains this morning. European and Asian markets are solidly in the green, apparently off the back of the media's favorite 2 suspects; hope, and optimism (around a vaccine). Nothing to do with central banks relentless obsession with parabolic debt levels, and perpetual dollar debasement, only to achieve ever-diminishing (real) returns. It now takes over $7 of debt to achieve just $1 of GDP growth, and the divergence is growing exponentially. Is this greed, fraud, stupidity, or all of the above? Mean while, Crypto, and Bitcoin in particular, are skyrocketing higher as the dollar, and fiat in general, looks increasingly like toilet paper.
Touching on SPY technicals, which we'll discuss further in today's live analysis, the bulls successfully broke us above the megaphone pattern, solidifying it's role as a key technical support going forward. This was a surprise to me, as I expected the bears to show up with a monthly rejection in the final days of December. However, instead we saw no quarter end rebalancing, no profit taking, no selling, and next to no flows into risk protection. It goes without saying, but I'll say it anyway, there's simply no fear in risk today.
Looking ahead this week, we'll be keeping an eye on the Georgia run-off elections, FOMC minutes on Wednesday (for more bedtime stories from Powell's Printer), Thursday's initial claims print, and Friday's payrolls print. As always, I appreciate your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
Stocks have gone wild! We're seeing essentially every risk asset on the planet melt up as the dollar continues it's slow, and incredibly painful demise. The money supply continues to rise as investors raid their savings accounts, and banks lend their excess reserves in search of more attractive returns than 0.10%, which is the current IOER rate. Based on M1, we can see that investors are clearly raiding what little savings they have left (70% have less than $1,000), as the concept of downside risk becomes folklore, and inflation begins to rear it's ugly head. I think it goes without saying that the line between fantasy and reality has become completely blurred, and so with our hard earned money at risk, we must take this into account, and trade accordingly.
The S&P hit a new all-time high in the overnight session, kissing 3,773.38 before giving back some gains this morning. European and Asian markets are solidly in the green, apparently off the back of the media's favorite 2 suspects; hope, and optimism (around a vaccine). Nothing to do with central banks relentless obsession with parabolic debt levels, and perpetual dollar debasement, only to achieve ever-diminishing (real) returns. It now takes over $7 of debt to achieve just $1 of GDP growth, and the divergence is growing exponentially. Is this greed, fraud, stupidity, or all of the above? Mean while, Crypto, and Bitcoin in particular, are skyrocketing higher as the dollar, and fiat in general, looks increasingly like toilet paper.
Touching on SPY technicals, which we'll discuss further in today's live analysis, the bulls successfully broke us above the megaphone pattern, solidifying it's role as a key technical support going forward. This was a surprise to me, as I expected the bears to show up with a monthly rejection in the final days of December. However, instead we saw no quarter end rebalancing, no profit taking, no selling, and next to no flows into risk protection. It goes without saying, but I'll say it anyway, there's simply no fear in risk today.
Looking ahead this week, we'll be keeping an eye on the Georgia run-off elections, FOMC minutes on Wednesday (for more bedtime stories from Powell's Printer), Thursday's initial claims print, and Friday's payrolls print. As always, I appreciate your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
Note
Vix is catching a solid bid here, and we're up around 9% at the moment. We've broken through the highway of MA's with conviction. Who wants risk protection right now? I'm certainly not selling mine, that's for f*ck sure: Note
21 period EMA on the hourly (372), is holding up as support for the time being. Volume actually looks decent on the open: Note
The Put/Call ratio is still looking incredibly skewed. Each time we see a breakout to .60 or so, we get hammered back to mid .30's on the open. Sentiment is more than just overly-bullish, it's clearly being held captive, similar to how rates are currently being fixed: Note
21 period EMA on the hourly captured, and bears are now eyeing the 50 period MA at 370.57: Note
Moving over to the daily, the first major support is the 21 day EMA around 368.20. This is the level I'm watching most closely. If 368 breaks, the bottom of the white channel is in play, which is sitting around 365: Note
Vix is now up around 13%, and gaining momentum: Note
Here we go, 50 period MA on the hourly kissed: Note
Dow, S&P, and Small Caps all down over 1% now...Note
Vix at a 26 handle, up 15%...Note
Bitcoin being bid heavily, and now up 
4K since this morning's crash, back to $32,000. Seems like only Tesla and Bitcoin are immune to today's selling...Note
Vix now up 18%, and looking like a rocket waiting to take off: Note
21 day EMA just tested, let's see if it holds: Note
Megaphone is at 360 folks. This is escalating quickly, and I have no doubt that if the white channel at 365 breaks, it will be tested...Note
21 day EMA (368) is holding up for now, let's take a closer look from the 1m chart: Note
All the majors are now down around 1.5% as today's selling quickly spreads across the asset classes. Let's see if we get some dip buying here from those shoppers who love 1% off sales...Note
Note
21 day EMA being tested here again: Note
21 day EMA broken, and the message from the bears is clear: game on. Note
Vix up over 22% and approaching a 28 handle: Note
Losses accelerating as we approach the bottom of the white channel at 365: Note
View from the hourly as we kiss the 200 period MA: Note
View from the daily. That white channel is toast: Note
Majors all down over 2% now, Vix at a 28 handle...Note
The Dollar looks poised to breakout: Note
Still waiting patiently for the 10Y yield to break above 1%, then skyrocket higher, shocking the credit markets: Note
Bears just captured the white channel. This is going to get ugly: Note
View from the hourly: Note
Convincing bounce off the bottom of the white channel at 365. This is perfectly expected. Let's see if we see a dead cat bounce before another leg lower to the megaphone at 360: Note
Vix just saw a new HOD at 29.20 before cooling off, exactly at the longer term downward trendline from the March high and the top of the October spike: Note
View of the bounce from the 1m: Note
This is usually when we might see a massive buy program, hammering Vix back to the lows of the day. Let's see if a short squeeze can save the bulls, or if the channel crumbles along with sentiment...Note
Here's a closer look at the Vix rejection. If we break above the green dotted line today, we could see a 33 handle before the close. Otherwise we're going to see a massive short squeeze, which would be the status quo outcome imo, and Vix will be hammered, erasing most of the days gains. Personally, I think we're going to 33: Note
SPY testing the channel again, look out below: Note
Majors now down around 2.5%...Note
Bulls are taking full advantage of the white channel support, and have now recaptured the 200 period MA on the hourly (366.87). Let's see if they get a rejection, or if they go for the 21 day EMA, now sitting around 367.90: Note
View from the 1m - RSI is back at the opening high's as you can see, and we're currently overbought on this timeframe. The downward trend has broken, and the moving averages are flattening. We could easily kiss the 21 day EMA, but then I do expect a reversal, and a continuation of the downtrend: Note
Just kissed the 21 day EMA (as resistance). Let's see if polarity principle holds up in the year 2021, or if the bulls, along with central banks, and corporate buy backs squeeze the hell out of everyone, bust through resistances, and Vix implodes...Note
First rejection: Note
Second rejection: Note
Third rejection: Note
I don't usually look for patterns on the 1m timeframe, because you'll drive yourself crazy trying to understand noise. But, this looks an awful lot like a head and shoulders, which would match our intraday outlook: Note
Vix is back at a 28 handle. Let's see if this is a topping pattern on Vix, or if we see that leg we talked about that takes us to 33: Note
Massive buy program just took us back to the 21 day EMA, check out volume, and then the clear (fifth) rejection once again at the 21 day EMA: Note
Massive rejection, look at volume. Is power hour back? Note
Yet another rejection. But, I would say the increase in volume with the rise in price we saw a glimpse of at the onset of power, seems suspect. Perheps the bulls are planning a move into the close, and were exercising a probe to gauge market depth. This is what I call a line in the sand: Note
Vix is looking awfully toppy, which suggests bulls are about to capture the 21 day EMA. Let's see what happens next: Note
To clarify, I meant the 21 day EMA on the SPY...Note
Clear view of the days price action from the hourly: Note
Bulls have captured the 21 day EMA, and are going for the 100 period MA on the hourly (369.44): Note
Just kissed it: Note
This is getting very interesting as we approach the close. Volume is spiking again, along with price, as we discussed was possible from the probe we saw around 3PM. Now we're seeing a rejection at the 100 period MA on the hourly at 369.44: Note
That's all folks! It was a formidable battle between the bulls and the bears. The bulls had a rough morning after enduring a 2.5% sell off on the majors. Vix was up over 25% at one point, and held on to a 29 handle for a few brief moments before getting smacked like a cheating boyfriend back to a 26 handle. But, the bulls staged a relentless rally from around 12:50PM, which tested the 21 day EMA about 7 times before the bulls finally broke through. All in all, it was a victory for the bears, because for the first time since the end of October, we're seeing fear of downside risk return to markets. Trade accordingly. Have a great night everyone. Cheers!
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