Parking pre-CPI snapshots of key data points.
The next 75bps is locked in already; we’ll keep an eye on if today’s print makes the next raise 50bps more certain, or if there’s a move away from that. And same for the print after.
SpotGamma levels:
Vol trigger is 3800.
If the UK doesn’t manage to one-up itself on messing things up, whatever direction today shows could last for a few days.
Even though both headline and core CPI came in hot, and bonds immediately priced in an additional 25bps at least, we ended up retracing a whooping 5.5% after falling 3.5% on the news. The initial drop is consistent with the news; the rally afterward is not.
This likely demonstrates how positional flows can overtake actual news effects after the initial news as been priced in, which the market did for the first hour. It’s also quite interesting that the sell-off stopped right around 3500, which was the strongest support level today, at least as far as gamma levels are concerned. Here’s SG explaining this:
Here’s the corroborating realtime vol drop:
For what it is worth, we still have some vol left in the tank. Some of it should be related to the UK situation. This implies that if that is resolved (well enough) tomorrow, we could have a continuation of the rally from just positional effects.
Maverick vouches for Katie Stockton as a strong technical analyst for this year.
Stockton suggests a bear market rally off SPX 3500 to as high as SPX 3900, and to use the opportunity to sell, as long term is still bearish.
The more than 4% swing in the S&P 500 today is of little surprise to Stockton, who told clients in a note on Thursday that the index was gearing up for an imminent test of a key support level: 3,505. That level represents a 50% retracement from the March 2020 COVID lows of about 2,200 and the January high of about 4,800.
In fact, October has been dubbed a “bear market killer” by Carson Wealth’s Ryan Detrick, who observed in a note earlier this month that of the previous 17 bear markets, stocks bottomed in October six times. The seasonals get even more positive when you consider the upcoming mid-term election.
According to Stockton, any relief rally that takes hold in the stock market could send the S&P 500 to its first big resistance test around 3,914, which represents potential upside of 9% from Wednesday’s close.
Still, even if such a move occurs, Stockton sees deterioration in long-term momentum indicators and would use rallies as an opportunity to sell.
Maverick suggests not fighting the bull trend unless the June low of ~362.16 is lost again.
Thanks for this. I’m reading the explanations come in today and still finding it difficult to understand the cohesion from the usual factors we notice for rallies. The talking heads at Bloomberg even seem to be shrugging their shoulders.
More importantly for me she’s calling for a bear market relief rally? Good levels to keep in mind.
Happy opex week! Although unlike other weeks, it seems like macro news is dictating where the markets are going. Nevertheless, for situational awareness, here’s the option gamma complex we are starting out the week with. Vol trigger is 3750, below which MMs exacerbate motion, and above, dampen it.
As we can see below, this is put territory. Which means it pulls us down the more strikes we pass on the way down, but also pushes us up as we climb out of them. We’ve been in high vol territory for a while now, so I don’t think this information provides us with a directional edge. It just says, where there is movement, it’ll be heavy…
Incidentally, shorter dated options are becoming more and more prevalent in the markets now; unclear if this is hedges or pure speculation. Again, no directional edge, but another warning for us to be careful. When elephants frolic around, the smaller folks can get crushed.
The key variable to watch here might be VIX, which is rather high. If VIX keeps coming off, de-hedging by MMs will result in nice tailwind. Overall though, no preference in direction based on this, at the moment.
TLDR: First big test of this uptrend is coming up. We’ll see if this rally fizzles out by tomorrow or continues to go higher towards the 390-400 area.
On the SPY hourly, we basically consolidated all day after the huge move in the morning. AH SPY is running again. Possibly a gap up heading into tomorrow? We’ll see what the bank earnings look like. Overall though, it does seem like SPY still has strength to run as we’re not really overextended on the hourly. But who knows, maybe we’ll get a sudden shtishow like on Friday again.
SPY on the daily showed a very strong bottom wick. Also nearing the 21 EMA and the downtrend line. The biggest resistance is in the 369-370 area, probably safer to say 370. If this rally will continue, I want to see it continue to track up past 370 with confidence. One thing to notice about this day is that the volume was low. This is probably because it was a short squeeze day at the start combined with all the sellers not trying today. It was all buyers and we’ll see if sellers continue to stay out tomorrow or if buyers can overcome the sellers tomorrow. But overall, there is a chance that SPY’s rally could fizzle out by tomorrow.
One thing that’s supporting this rally is that the VIX is tracking down. Although, it’s still high as hell and could easily lead into a big sell off. But right now, it’s a good sign that VIX is agreeing with this move.
I didn’t include the 2 year yields here because it was pretty tame. It did go down which is also a good sign for stocks, but it didn’t really tank down. The dollar however did. The dollar tanking down like this is a good sign for this rally to continue on. Overall, it does seem like most signs are pointing towards a continued rally.
In conclusion, SPY had some huge days and probably on pace to continue to have huge moves. Either we’ll get rejected at 370 tomorrow or we’ll continue to rally hard this week. Many signs are pointing towards a rally, which kinda makes sense as there aren’t really any big news for a while to spook the markets. We were also near the 200 MA on the weekly which is historically a huge support and end of these bear markets/ huge corrections. Be careful out there and don’t try to get puts until you do see a reversal. Also be mindful of the big resistance levels when going calls.
TLDR: In my opinion, it seems like there’s more left in the tank for SPY and 380 isn’t a dream.
On SPY hourly, we tested the previous day close multiple times and didn’t break through. It lined up nicely with the 21 EMA and we’re above both the 8/21 EMA now. We’re not overextended anywhere, and seems like we’re about to go continue to make new high soon. Right now seems very bullish.
Now the daily is why i think that we’re going to see higher. We held above the 370 level and got a bottom wick. This is bullish that we’re able to hold up above the downtrend line and the 21 EMA. Another sign that I see is that the volume was low today. There weren’t enough sellers up here to bring the markets down enough and bust through the support at 368 or whatever. The volume shows that there isn’t enough conviction to shit on the markets just yet and bulls held their ground. Good signs, and especially with NFLX beating earnings, tomorrow could be another big green day. The next major resistances for me are 382 and 390 where we could reverse.
Now looking at VIX, it’s an inverted hammer and turned down. This is continued bullish signals that this move up is supported. The 2 year yields are also very slightly down, dollar is flat, but still good since it’s not recovering, PCC not near the extremes for a top and small caps are continuing to go higher. These are all good signs for bulls and signs that don’t show this rally stopping soon.
Overall, I do think that we’re going to see a continued rally this week. There aren’t enough sellers right now to cause a massive shitshow and since NFLX did beat earnings, tomorrow at least should be a green day. Who knows what SNAP and TSLA will do to the markets, but TA for now says we should be leaning bullish and looking for major resistances to load up on puts.
TLDR: Looks like we’re about to turn down in the markets after bulls tickled our balls with some hope.
On the hourly, SPY can’t get back above the 8/21 EMA and the RSI MA. Also we’re starting to turn below the 50 level, not good signs for bulls. In AH, we went back to test the 368 support and we’re back below. Not good signs.
We bounced off the 8 EMA on the daily, but everything else is bearish. Couldn’t get back above the 21 EMA, gapped down, RSI is turning down at the 50 level, and the volume isn’t there for bulls. Maybe I’m overreacting and this is just a pullback into a bigger rally. But the other indicators are pointing towards to bearish sentiments.
VIX was down, but it’s still holding above 30. Not good signs, but the dollar, 2 year yields and small caps are all showing bearish signs. I’m not going to show the charts because I’m lazy, but the dollar and the 2 year yields are back to soaring up. Not good for stocks and putting more bearish pressure onto stocks. The small caps (I track using IWM and JNK) are making lower lows and are not holding up as well as SPY. This is an early sign that this rally’s strength just suddenly faded away. Not good signs, and strength is starting to lean towards the bears.
Overall, it seems like the rally is starting to fizzle out and we’re going to head lower. I thought that NFLX and TSLA earnings would bring more bullish sentiment, but it seems like the markets have other plans. Another thing to note is that any big earnings tomorrow and this week could change the sentiment again. This market is hard to navigate and you should stay on your toes. Right now, bearish sentiment seems to be winning, but since there’s no confirmation, it’s just a guessing game right now and not worth getting into swing puts, unless you got money to average down multiple times with longer expiries.
Hot off the press - volatility guru Cem Karsan just did an interview on TD: https://twitter.com/TDANetwork/status/1583175570447568896
The gist: we waffle around into FOMC and midterms, then rally into the end of the year. First part of Q1 will be good to us, and then all hell will break loose because hedges will have come off, and Fed will have given a sense of a pause before then.
I am sober for the first time this week so here’s some good TA for yall next week.
TLDR: I think that this rally is a bull trap and we’ll get another dump - whether it’s a higher low or a lower low, we’ll see, but I am not convinced of this rally confirming a bottom.
Starting off with the weekly chart, SPY moved back towards the 8 EMA. We are not oversold anymore on the weekly, giving me more reason that we’ll have enough tank to take another leg lower. We’ll see if the rally continues on higher to test the 21 EMA on the weekly, but right now, nothing on the weekly is bullish enough for me to say that this is a bottom. No bullish divergence on the RSI, RSI isn’t above 8/21 EMA, and the volume isn’t showing the capitulation move to mark it a bottom.
On the daily, we have a huge volume, likely showing a short squeeze. We still haven’t made a higher high on the daily though and it just seems like we’re in a range trade. We’re also right at the 50 RSI and we can shit down from here. The charts on SPY are showing bullish, but everything else is not.
On the hourly, we are getting close to overextended. Either we go down to test the 21 EMA and make a bearish divergence or we start to turn here. Either way, very very bullish on SPY hourly.
Now looking at VIX, it’s still holding above 29 very strongly. It’s showing that fear is still in the market, even with all this green. For the huge green day that we had, we should have moved lower down, but we didn’t. Not a good bullish sign.
Another sign that I’m looking at are the small caps such as IWM, JNK (junk bonds), and TLT. These are all making way less gains than SPY, showing weakness in the markets. This is not a good sign. If this was a bottom on SPY, these small caps should be making as higher or bigger gains than SPY.
The 2 year did come off a little, but zoom out and you see how far it’s run up. This is just a very very minor pullback and not big enough to really say that this is bullish.
The dollar did come off strong as well, but it’s still holding that support level. I don’t think that the dollar is weak enough right now to cause us to dicks up rally.
Overall, I am not seeing enough signs to say that bull season is back. Maybe we drift up higher, but I do think we’ll eventually fall back down. Maybe earnings this week will shit it or fear leading into the FOMC meeting will. Who knows, but small caps are lagging behind hard and each time that it has, it has marked the next leg lower this entire year. Earnings next week could also shift all my TA here. If earnings all come in surprisingly good, then maybe we did see a potential bottom for the short term and rally hard. But until CPI reports show that inflation has peaked and Fed is giving signals that they’re about to pivot, I do not see this as a bottom and we’ll either retest the lows or make new lows.
TLDR: This rally might continue on for a bit longer
On the hourly, SPY retested the 21 EMA successfully and on a strong upwards without really any bearish divergence on the RSI. I think this means that this is an incredibly strong uptrend that’ll probably continue into tomorrow.
The daily is where I really start to think that this rally will continue at least until tomorrow. We had a low volume breakout above the previous highs. This signals that there are no sellers here and it’s all bulls. The sell volume in the morning was ate up and it looks like the next target is the 382/388 zone. I’ll be looking at that zone for this rally to fizzle out.
VIX still isn’t dying which makes me believe that we have not actually seen the bottom, but we’ll see what happens
Other signs that I’m seeing is how the 2 year yields are not rolling over. Until this rolls over, all rallies are just fake and hopium that the fed will pivot and inflation has peaked. I want to see the 2 year yields roll over. The 10 year yields were also up today, not showing confirmation of the bottom being in.
The dollar had a doji, not much to say other than it’s holding up pretty well, probably signaling that this rally is not the end of the pain.
The other sign I’m looking at are the small caps - IWM and JNK. They are not making higher highs. This is not a great sign and all this signals is that this is a bear market rally. Be careful folks.
In conclusion, I think that we rally a bit higher, but I don’t think that this is not the bottom based on the other indicators and the fed.
TLDR: I think that tomorrow is either going to be flat or another green day tbh.
On the hourly, we broke down in AH. This was due to earnings, although we’ll see how the market reacts tomorrow morning. I’m going to watch if the RSI breaks the 50 level or breaks below the 21 EMA. Right now, it could be the start of the downturn, but there is no bearish divergence on the RSI. This could possibly mean that we’re going to get a higher high with a bearish divergence form. We’ll see if the market shrugs off the earnings looking forward to the other FAANG doing well.
On the daily, we are reaching overbought levels, but that doesn’t really mean much since it’s not like we’re very far overextended. Another thing to watch is the volume. Low volume which means that there aren’t any sellers here. We’ll see if sellers come in full force tomorrow, but I’m watching 386/388 levels for bears to come in full force.
Another reason why I’m slightly leaning bullish is because of the VIX. It’s broke the 29 level finally. Maybe a bull trap? Maybe a sign that markets will shrug off tonight’s earnings? We’ll see.
Now the reason why I’m still slightly bullish but bearish in the longer term is because of the 2 year yields. It formed a tweezer bottom and not going down. It’s not going up either, showing that there may still be tailwind for this rally. But since it’s not dropping, I highly doubt that we’ve seen the bottom.
Looking at the dollar, it dropped even more. This is bullish, although it’s in an uptrend in the bigger timeframe. We’ll see if this is the top on the dollar, but right now, dollar is showing bullish signs for the markets.
Another reason why I’m bullish is because the small caps finally broke above the previous highs. This was with strong volume too. Maybe this signals that we have more room to run on the markets, but it could also be a bull trap.
Overall, I think that the markets won’t freefall down tomorrow, but I also don’t think we’ll crash upwards much longer. I am looking for a retest of the lows or make a new low. Good luck everyone and be careful of the earnings this week and CPI incoming soon.
TLDR: I am personally bearish based on the charts on SPY, but other charts are showing some bullish ass signs. Idk what’ll happen
SPY on the hourly is holding the 21 EMA strongly. We formed the bearish divergence and got rejected at the 388 like I rejected, but we’ll see if we have another turn up, or if we shit down from here. Overall though, hourly is leaning bullish holding above the 21 EMA and the 50 RSI level.
On the daily, we had an increase in volume. This shows that the bears are stepping in. Maybe this rally fizzles out here? We’ll see what happens. But even if we pullback, the daily in an uptrend right now, we’ll see if this reversal confirms with the breaking of the 8/21 EMA and the 50 level on the RSI. The nasty upwick makes me bearish though.
Now here’s where the other charts are showing major bullish signs. VIX had another big red day, showing that fear is leaving the market.
The 2 year yields also are heading lower, retesting the lows the previous days and looking to head lower. Possibly a tailwind for SPY soon? We’ll see.
The dollar fell HARD too. This is weird since we had a huge sell off today. Maybe combined with the dollar and yields falling and the earnings not being too shitty that we’ll continue to push higher? We’ll see
Small caps today were green today though, not confirming with the hard sell off on SPY. Interesting to see what’s happening.
Overall, SPY chart seems slightly bearish to me, but since all the other charts are showing bullish signals, I’m honestly leaning towards more green days this week. But there are more earnings, so as long as nothing is too bad, we shouldn’t die I guess.
TLDR: Honestly, I think that the markets are frontrunning the fed saying that they’ll pivot. I don’t really see any other reason why we would keep running up. If the Fed doesn’t give pivot language and stays hawish next wednesday, I expect us to retrace all these gains.
So on the weekly charts, we’re not in the overextended ranges anymore so we can more room to run or fall. We’re testing the 21 EMA, which has been a huge level of support/resistance so we’ll see if we can hold above it.
On the daily, we’re going up with more volume. That’s good to see and showing that bulls are winning the fight against the bears right now. We are starting to go overextended to the upside, but we’ll see how much more we’ll run before the next pullback. Overall though, looking very bullish and strong on the daily.
On the hourly charts, SPY is looking a little overextended, but it’s so strong that I think the pullback we’ll get will be to the 8/21 EMA and then another higher high to form a bearish divergence for a deeper pullback. Overall though, very bullish and really nothing to say other than bulls are winning.
VIX is agreeing with this move up as it’s falling down continuously. Interesting to see.
The yields are kinda agreeing with this move. Had a big green day yesterday, but still lower than the previous high and we’ll see if this is the lower high and we continue lower.
The dollar looks like a double bottom, but we’ll see if this actually continues to play out and the dollar rallies or it falls through that level.
Another good sign is the small caps are rallying hard. They’re no longer showing the bearish divergence with SPY and they’re rallying even harder. This makes me think that there’s much more strength left and more room to run for bulls.
Overall, it does seem like we’re going to see a couple more green days until the Fed meeting. I think the markets are running on hopium that the fed will be dovish and say pivot language. If they are still hawkish, this rally will die off super fast. Good luck all and be safe.
Looking back at this callout by Katie Stockton.
SPX really rallied to 3900 off that bounce on October 13.
We’ll see where this goes this week. In my opinion the rally gets shut down on Wednesday by JPow, similarly to Jackson Hole, where he will put to bed the fed pivot optimism. However if JPow confirms dovishness, then the rally goes higher.
But I don’t see JPow being dovish. Core PCE, core CPI, UMich inflation expectations, oil on the way back up, stock market rallying, all indicate for more interest rate hikes.
The 2Y yield also moved higher thanks to the core PCE reading. The bond market disagrees with the fed pivot optimism.
TLDR: I think it’s either going to be a flat or red day tomorrow heading into Fed.
SPY on the hourly chart is just flat. Nothing much to say other than we’re riding on the 21 EMA. We’ll see if we break below and hold tomorrow or this is just the dip before the next red up.
We had an inside red day which is typically a bearish candle. We’ll see if this plays out, but overall trend is up for now. Literally nothing to say.
The VIX is also down too, basically ending the day flat. Interesting to see.
Other charts aren’t really showing much either. Today was a relatively flat day with no real movements one way or the other. But one thing that’s sticking out to me is that bonds are continuing lower, junk bonds died and small caps were up today. Since bonds are taking a hard turn down, I’m thinking that we head lower, but we’ll see what happens.
Overall, nothing to say other than watch out for Fed in 2 days and we’ll see if they show pivot language or not. Good luck folks.
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