Bear Cave 2 (Bull Allowed)

Mike Wilson continues to see poor risk / reward for the S&P 500 over the next several months

He thinks the Fed will err on the side of hawkishness, given inflation is now arguably out of control… which likely leads to equity valuations overshooting to the downside. He has been saying 18x NTM EPS is ‘fair value’ based on a 10yr UST yield of 2.1% and an ERP (Equity Risk Premium) of 350 bps. However, this ERP now appears too low based on everything going on in the world today, and could easily overshoot to the upside by ~100bps. This would translate to a P/E closer to ~15x, and -17% downside for the S&P 500 to 3500, assuming earnings don't take a hit. However, he also sees top-line misses and margin issues for several companies in 1H’22.
https://themarketear.com/
 

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This Ultimate Market Barometer Signals a Rally
Jeff Clark | Mar 14, 2022 | Market Minute | 2 min read
If you’re looking for signs of a stock market bottom, then pay attention to junk.

High-yield bonds (a.k.a. junk bonds) are the ultimate barometer of investors’ willingness to take on risk.

If the stock market is going to rally, then junk bonds will likely rally first. And, when the market is set to fall, weakness in high-yield bonds is often the “canary in the coal mine.”

We’ve written about this relationship between junk bonds and stocks many times here in Market Minute.

The action in high-yield bonds tends to lead the action in the broad stock market by anywhere from two days to two weeks.

That relationship should inspire some hope among the stock market bulls. It looks like high-yield bonds are setting up for a rally.

Take a look at this chart of the iShares iBoxx High Yield Corporate Bond Fund (HYG)…
https://www.jeffclarktrader.com/market-minute/this-ultimate-market-barometer-signals-a-rally/
 

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I'm currently only day-trading stocks, but just bought TLT again. With some type of good news we could get a Rip-Your-Face-Off short cover rally. I have NO short positions.

Sentiment screams buy
The Fear and Greed index has ended the week at 14 (Extreme Fear).

Sentiment screams buy at the top of their lungs
The GS indicator records an extreme...
 

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TLT daily: Remains in a downtrend. Moved below the 134.33 marker last week, and now trying to climb back up. I like to trade lower BB tags if other indicators support a possible bounce. The trade is based on odds for a possible winning trade. I like the current setup.

Long TLT....
 

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OIS forwards have risen 50bp from their local lows...
....and are pricing in a peak funds rate of 2.20%, 6m earlier than a month ago…




Treasuries remain historically rich

JPM: "intermediate Treasuries remain historically rich after controlling for their drivers". Chart shows residual of J.P. Morgan 10-year Treasury Fair-Value model; % (Regression of 10-year Treasury yields on 5Yx5Y seasonally-adjusted TIPS breakevens (%), 3m3m OIS rates (%), Fed policy guidance (months), J.P. Morgan US Forecast Revision Index (%), and CFTC spec positions in interest rate futures (3y z-score).

https://themarketear.com/
 

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SPY daily: The trend remains down below the 3 ema and the 10 day sma.... I tried to catch a new DCL using TSP funds, but it did not play out well. Likesmoney covers it in his weekend report below. I will only be trading in other accounts and stepping aside for now from making any TSP moves. Watching for a move back above the 10 dma, and a possible new trend that will last more then one day. I will be trading VXF at Vanguard if I like the setup. I'm currently long only TLT at Vanguard.

The 3/12/22 Weekend Report Preview

Stocks

The status of the daily cycle is not clear.

Stocks still need to break bullishly above the 10 day MA and turn it higher to confirm day 22 as the DCL. However stocks being in a daily downtrend and contained by the declining 10 day MA makes it more likely that Friday was day 39. A break below the day 22 low of 4114.65 will extend the daily cycle decline.
 

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robo said:
Lot of at the money options expiring
Next week's expiry will have the biggest concentration of at the money options expiring since 2019.
Click to expand...

Listened to a guy today who said next week will be the bottom due some massive short squeeze. He said his data shows a massive imbalance of put buyers to call buyers and that they will be forced to buy 'em back on a good news catalyst. Seems like a bunch of tweet worthy nonsense, but any day can be a bounce.

Speaking of bounces, for the star gazers, we have Bradley turn dates coming up on 3/26 and 3/28.
 
Lot of at the money options expiring
Next week's expiry will have the biggest concentration of at the money options expiring since 2019. Let's see how this plays out given the Russian/Ukraine situation, the renewed China bear and the Fed event. Things are definitely "dynamic".

Options Expiration Calendar 2022
https://www.marketwatch.com/optionscenter/calendar
 

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What extreme price swings mean for this bull market
Jason Goepfert
Published: 2022-03-11 at 07:35:00 CST
Looking at price swings during bull and bear markets

One of the market tropes being bandied about now is that since stocks are swinging wildly from day to day, it necessarily means that the bull market is over. Only during bear markets do we see volatility like this.

It certainly has been volatile. Over the past 2 months, the S&P 500 has had a closing gain or loss of more than 1% on 21 sessions, exactly half the sessions. That's high.

The chart below shows the number of +/- 1% daily changes in the S&P over a rolling 42-day stretch, with the gray shading highlighting bear markets. Most of the heavy clusters of 1% swings certainly seemed to be during bear markets.

https://www.sentimentrader.com/blog...l&utm_term=0_1c93760246-7aade12b27-1271291994
 

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TLT has become an unusually good bargain just as it had been exactly one year ago.


On March 18, 2021, TLT traded as low as 132.72 in the pre-market session which it had not previously touched since July 2019. Today we dropped to within 1% of that nadir.


Investors keep worrying that unpopular, undervalued assets like U.S. Treasuries or the Japanese yen or low-P/E shares will be adversely affected by rising inflation, a stronger U.S. dollar, geopolitical turmoil, and other factors. Historically the assets which are the most adversely impacted by a bear market are high-P/E U.S. growth stocks. Paradoxically, this is what investors are most eagerly buying directly and via funds of these holdings.

Kaplan

https://truecontrarian-sjk.blogspot.com/2022/02/the-real-secret-to-investing-is-that.html
 

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TLT/EDV/VFX/UWM daily chart and current positions: Around 2 hours to go until the close....

Long and ST trading: UWM/VXF/UWM/EDV
 

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TLT daily: Under cut of the low and a lower BB tag.

Long TLT again for a trade. I also took a trade of UWM based on Sentiment Trader's data I posted above. ( Small Trade) We shall see how both play out.

Why TLT: Because some Big Money funds use it as a flight to safety. For now I like the odds of it being a winner, but as we all know one can never know for sure. My last TLT trade did well.
 

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Why it matters whether stocks gap up or down at the open
Jason Goepfert
Jason Goepfert
Published: 2022-03-10 at 07:35:00 CST
Why the open matters for intraday returns

It's long been known that U.S. stocks have performed better overnight than during regular trading hours. Theories abound, but in truth nobody really knows why.

Jay took an in-depth look at this phenomenon in the SPDR S&P 500 ETF Trust (SPY) since its inception. But helpfully, he broke it down by day, and whether each day's open was higher or lower than the previous day's close.

For example, the chart below shows the growth of $1 in SPY held intraday only on Thursdays if SPY opened higher versus the growth of $1 in SPY held intraday if SPY opened lower or unchanged.

We can clearly see that if stocks opened higher on Thursday, then they tended to do significantly better during regular trading hours as well. A hyper-active trader using this strategy (not including commissions or slippage) would have returned -17.8% if buying SPY after a down open on Thursday. Other days show even more stark differences in performance.

https://www.sentimentrader.com/blog...l&utm_term=0_1c93760246-7175cf026a-1271291994
 

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TLT/EDV daily: Looking to take a position. Testing the 134.33 low marker, and a lower BB tag.
 

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Stock Market Historical Crash Search: History could repeat! The point is one should stay nimble in a market like this one..... We remain in a HUGE STOCK MARKET BUBBLE and the SPX/SPY remain very stretched above the mean. The mean is the 200 month ma. See chart posted above.

https://www.youtube.com/results?search_query=stock+market+crash+2008

The Good News is we now have circuit breakers in place after the 2010 Flash Crash.

Stock Market Crash - Flash Crash May 6, 2010

https://www.youtube.com/watch?v=E1xqSZy9_4I&t=34s
 
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