Bear Cave 2 (Bull Allowed)

[robo]

SPX daily: The SPX remains above the 10, 20, 50, and 200 day MAs. Hold longs if using the 10 and 20. The 3 ema signal a sell signal yesterday so I bought some VXX. We shall see how that plays out, but it looks like it just might be a whipsaw for ST trading. Most of my trading is ST = ( Short term). I day trade often.


Swing High
Stocks formed a daily swing high on Monday.

Stocks did get a bit stretched about the 10 day MA on Friday and may be simply allowing the 10 day MA to catch up to price. However a close below the breakout level would be a bearish signal. At 24 days, stocks are approaching their timing band for a daily cycle decline. If stocks deliver bearish follow through and break below the daily cycle trend line that will signal the daily cycle decline. Stocks are currently in a daily uptrend. They will remain in their daily uptrend unless they close back below the lower daily cycle band.

 

[robo]

Time to hedge the downside

Bearish arguments once again sound a little more appealing. Some of them inevitably have to do with similarities with the August peak (yes, there are a few). However, given that it is a huge macro week, it is probably not the best risk/reward time to go outright delta-one short. We would prefer to implement our view via volatility markets. Let's have a look at the latest updates on why this rally might be coming to an end and how to hedge the downside.

https://themarketear.com/

A Leading Indicator Shows This Market Is on Shaky Ground
High-yield bonds, also known as “junk bonds,” are flashing another warning sign…

Junk bonds help to gauge investors’ appetites for risk. When junk is rallying, it’s a “risk-on” environment – and stocks tend to do well.

But when junk bonds are falling in price, investors are reducing their risks. And in this sort of “risk-off” environment, stocks tend to fall.

The good thing for traders is that the action in junk bonds tends to precede the action in the stock market by anywhere from a few days to a couple of weeks.

So, traders can use the action in junk bonds as an indicator of the future direction of stocks.

And right now, junk is looking lower. Look at this chart of the iShares iBoxx High Yield Corporate Bond ETF (HYG)…

https://www.jeffclarktrader.com/mar...dicator-shows-this-market-is-on-shaky-ground/

 

[robo]

Viewpoints | January 24, 2023

AFTER A TIMEOUT, BACK TO THE MEAT GRINDER!
By Jeremy Grantham

My calculations of trendline value of the S&P 500, adjusted upwards for trendline growth and for expected inflation, is about 3200 by the end of 2023. I believe it is likely (3 to 1) to reach that trend and spend at least some time below it this year or next. Not the end of the world but compared to the Goldilocks pattern of the last 20 years, pretty brutal. And several other strategists now have similar numbers. To spell it out, 3200 would be a decline of just 16.7% for 2023 and with 4% inflation assumed for the year would total a 20% real decline for 2023 – or 40% real from the beginning of 2022. A modest overrun past 3200 would take this entire decline to, say, 45% to 50%, a little less bad than the usual decline of 50% or more from previous similarly extreme levels.

But this is just my guess of the most likely outcome. The real risk from here is in the unusually wide range of possibilities around this central point. I would suggest wide and asymmetric error bars around any such forecast. Regrettably there are more downside potentials than upside. In the worst case, if something does break and the world falls into a severe recession, the market could fall a stomach-turning 50% from here. At best there is likely to be at least a further modest decline, which by no means balances the risks. Even the direst case of a 50% decline from here would leave us at just under 2000 on the S&P, or about 37% cheap. To put this in perspective, it would still be a far smaller percent deviation from trendline value than the overpricing we had at the end of 2021 of over 70%. So you shouldn’t be tempted to think it absolutely cannot happen. (For an example of a real nightmare, in 1974 the S&P troughed at below 7 times earnings!)
https://www.gmo.com/americas/resear...a-timeout&mc_cid=3631838f70&mc_eid=5b348a9ca0

 

[robo]

SPX daily: We shall see how the breakout plays out..... A very nice move back above the 200 day MA. The SPX remains on a buy signal and is trending above the 10,20,50 and 200 day MAs.


Keep a Close Watch on This Bullish Market Bluff

You might have even spotted it yourself. It’s a large, inverse head and shoulders pattern.
https://www.jeffclarktrader.com/market-minute/keep-a-close-watch-on-this-bullish-market-bluff/

 

[robo]

VIX/VVIX and the US dollar: Waiting to see how this pattern plays out....

The U.S. dollar index may be bottoming along with VIX.


VVIX may have completed a multi-year bottom on January 5, 2023, while VIX may or may not have ended a downtrend of more than one year when it slid today (January 27, 2023) to 17.97 at 12:15 p.m., thereby marking its lowest point since January 13, 2023.


The U.S. dollar index, representing the value of the greenback versus a basket of currencies, slid to 101.504 at 1:52 a.m. on Thursday, January 26, 2023, thereby marking its lowest point since May 31, 2022.

Kaplan


True Contrarian
@TrueContrarian

Jan 19
I predict we're entering the 2nd year of a 3-year bear market. My post also appears in Seeking Alpha in "Caldron Bubble" at

https://twitter.com/truecontrarian
https://truecontrarian-sjk.blogspot.com/

 

[robo]

It sure looks like a breakout..... We shall see how it plays out.... I have NO POSITIONS in this sector.

NASDAQ - working on the break out
Above the negative trend line, above the 12k level, but still below the 200 day moving average. The "tech as the main pain trade" logic continues to work very well and frustration is running high. Let's see how far they "must" chase this.

 

[robo]

XLE daily: Looking to short this sector again. We shall see how this pattern plays out. The pattern indicates the next ST move is down... But as we all know, NO ONE knows for sure. Still, I like the odds for a shorting XLE over chasing it on the long side.

 

[robo]

Sell lows, chase highs pain is back

Good luck hedging short gamma
SPX futs basically flat here, but with some major intraday moves. As we pointed out earlier today (here), the market traded into rather deep short gamma at lows today, making dealers longer and longer deltas on the way down. Few of those just watch 60 points lower market and were most probably puking deltas close to lows. These same dealers became shorter and shorter deltas all the way up, and post the 75 points move higher from lows, a lot of forced buying has been executed. All this while we are unchanged on the day...
https://themarketear.com/posts/cbx5Wn5eIN

 

[robo]

We shall see how his list plays out. I just follow and trade the MA's! However, I do plan on being a tad more patient and disciplined in 2023.

David Rosenberg
@EconguyRosie
·
19h
Last Chance to Access -- The 2023 Outlook: Year of the Rabbit Means Hopping Back to the Bond-Bullion Barbell

My advice for the coming year is to be patient and disciplined.
https://twitter.com/EconguyRosie/status/1617941991941148673/photo/1

 

[robo]

A Recession Indicator With a Perfect Track Record

Jeff’s Note: Today is the start of what I predict will be 44 days of hell. You see, due to a federal law, hundreds of stocks are set to experience one-day drops of 10%, 20%, 30%, or more…

When I correctly predicted the 2000, 2008, and 2020 crashes, few people believed me. But when stocks collapsed, it crushed the retirement dreams of millions of Americans. So please don’t take this warning lightly.

A Perfect Track Record
The Fed is mandated by Congress to keep prices stable, and people employed… hence the focus on inflation and the labor market when it comes to interest rate policy.

But the problem is that both inflation and employment are lagging indicators… meaning they’re among the last things to worsen when the Fed is deliberately slowing the economy as they’re doing now.

So, in order to stay one step ahead of where things are going, it pays to follow leading indicators of activity.

That’s why I closely follow the Conference Board’s Leading Economic Index (LEI). It’s comprised of 10 underlying metrics and historically leads key turning points in the economy by around seven months.

And here’s where the bad news comes in… LEI is falling sharply.

The drop is surpassing levels that have a perfect track record at predicting recessions. You can see that in the LEI chart below…
https://www.jeffclarktrader.com/market-minute/a-recession-indicator-with-a-perfect-track-record/

 

[robo]

VVIX knew
Muted VVIX eventually "spilled" over to VIX that moved lower post the initially sharp move lower in October. Note that VVIX and VIX have been moving in opposite directions lately. Nothing huge, but worth watching. VIX at these levels looks relatively attractive given the fact we have several macro events as well as big earnings coming up.

 

[robo]

Short pain in a pic
Not only is the crowd not long enough risk, but they have shorts that hurt big as market, especially tech, exploded higher yesterday. According to GS, yesterday was the biggest short covering since June 2022 (99th percentile 5yrs).

 

[robo]

Massively unchanged
Just a gentle reminder, this market still lacks a new trend. Both SPX and NASDAQ are basically unchanged since May last year...
https://themarketear.com/posts/cVt8RKCctI

 

[robo]

Pushing Your Luck


John P. Hussman, Ph.D.
President, Hussman Investment Trust

January 2023
The problem with speculation is that there’s usually a gap between the underlying risk and the inevitable outcome. The gap is most dangerous when there are potential rewards for pushing your luck.

In July 2007, Chuck Prince, the CEO of Citigroup, famously pushed his luck saying “When the music stops, in terms of liquidity, things will get complicated. But as long as the music is still playing, you’ve got to get up and dance.” The deterioration that would shortly unfold into a global financial crisis was already underway. After years of Fed-induced yield-seeking speculation in mortgage securities, aided by demand from yield-starved investors, and abetted by Wall Street institutions that were all too ready to supply new “product,” the inevitable implosion would produce a 55% loss in the S&P 500, and a 98% loss in the value of Citigroup.

The bottom line is simple. We don’t require forecasts, but investors should not ignore risks or insist on pushing their luck. The present combination of extreme valuations and unfavorable market action creates a “trap door” of downside risk for the financial markets. Likewise, the persistence of extreme valuations – in the absence of the causes and conditions that encouraged those extreme valuations – creates risk. The tendency of negative estimated risk-premiums to resolve into deep market drawdowns over the next 30-36 months creates risk. The reliance of investors on “forward earnings” multiples that embed record profit margins creates risk. The assumption that inflation will come down in a rapid and linear fashion, despite historical persistence of inflation, creates risk.


https://www.hussmanfunds.com/comment/mc230123/

 

[robo]

QQQ daily and weekly: Maybe a tad overbought on the daily, but the weekly needs to show me some BEEF! It continues to make lower highs and remains under its 50 week MA. The daily remains on a buy signal and its 200 day MA be up next..... So are you trading the daily or the weekly charts. I trade both.... For the TSP funds and Vanguard investing account I use the weekly charts. But for ST trading I use the daily charts, and trade both ways.

 

[robo]

Welcome to overbought
Chart showing RSI of NASDAQ and SOX, but as we all know, overbought can stay overbought for longer than most think possible (same with oversold).

 

[robo]

Chasing
The crowd has been forced to chase the SPX as well as downside protection (SDEX). Rising skew actually means they are paying up for downside protection in relative volatility terms.

 

[robo]

It ain't over...
...till SPX closes "well" above the negative trend line and the 200 day. 4050 is a big level to watch.
https://themarketear.com/posts/c0TYTRiC8m

 

[robo]

SPX and VXF weekly charts: VXF moved above the 50 week MA..... We shall see if the SPX can follow. Both are currently on buy signals. Week 4 for the SPX.... As was pointed out by likesmoney. We are fairly deep into the weekly cycle, but that doesn't mean the SPX and VXF can't continue higher.... However, one should be using some Risk Management this deep into the weekly cycle. Best to use the weekly data when trading TSP funds and the daily cycles can be used in a trading account. Well, that is what I do. Vanguard money market is currently making around 4.5% as I wait for a better setup to buy at an ICL.


Resistance At The 50 Week MA

Stocks rallied for 1.19% on Monday to break out to a new daily cycle high.

While stocks broke out to a new daily cycle high on Monday, they have consistently been rejected by the 50 week MA since April. Stocks would need to close above the declining 50 week MA before any trending move can be sustained.

At 15 weeks, stocks are nearing their timing band for an intermediate cycle decline. If the resistance at the 50 week MA holds, stocks will likely decline into their ICL. And stocks would then have a better chance at sustaining a trending move if they break above the declining 50 week MA soon after emerging from the ICL as oppose to doing so on week 15.

https://likesmoneycycletrading.wordpress.com/2023/01/23/resistance-at-the-50-week-ma/

 

[robo]

Another Sign of Trouble for This Market

The Importance of Bond Yields
I’m talking about the 30-year government bonds yield. It’s the annual interest rate that the U.S. government will pay out on its 30-year bonds.

But the significance of it is much more than just the payout on bonds.

https://www.jeffclarktrader.com/market-minute/another-sign-of-trouble-for-this-market/
You see, this market also signals what investors think of the broader economy… as well as influencing the interest rates that are paid on loans.

Another important point about bond yields is that the yield of a bond (how much the bond will pay out) moves opposite to the price of the bond.

In our current economic environment, the market has been selling bonds when it thinks that inflation is headed higher, and the Fed will raise interest rates.

On the other hand, the market has been buying bonds when it thinks that inflation is stabilizing, and the Fed will slow down or even halt their rate hikes.

With that in mind, let’s look at a price chart of the 30-year government bonds yield. This yield is considered by many investors as the bellwether U.S. bond… ( The last chart)