The truth is, today is my Birthday and I have a B-day dinner with family. Remarkably a few of you somehow knew/remembered my birthday which I find amazing as I didn't even realize today was my birthday until I saw my inbox filled with FB birthday messages. For those of you who sent me birthday wishes and emails today, Thank you very much, but I want to know how you knew!!!!
In any case, the market is getting stranger and stranger, all of the cycles that we are so use to are starting to really just look like empty shells or wasted efforts. I told you yesterday that this "W" base in the market was already quite weak compared to the typical cycle base. When I saw how much the market was depending on levers of intraday manipulation (The SPY Arbitrage model), I was a bit surprised as they weren't using levers to get past a sticky point in the market, they were using them the entire day.
As I suspected a few days ago, something more than meets the eye is going on with TLT, I chose some very long (August) calls to try to see how long I can hold that position as by summer, the market should be in shambles and treasuries should do well not only from a "Flight to safety " trade status, but because banks will not have the free lunch they have had since 2009 and they'll need collateral to put up to borrow from the F_E_D as QE is eventually withdrawn and the housing sector comes crashing down (it's like 2007 all over again in many respects)- not to mention whatever they have in the market, that could be big trouble.
The only real correlation that counts any more is this one...
This is a 1 min chart of today.
Surely most of you remember me tracking and noting the changes in character in the carry trades? I posted probably over a hundred charts over the course of a month or so that looked a lot like these below.
The AUD/JPY was a channel buster, by the way, these all started just before the new cycle that started at 11/16/2012 lows. The pair broke above the channel (channel buster) which appears at first to be bullish, but rarely ever is; then it breaks down below the channel.
Today (overnight) the Nikkei which only a week or so ago and all of this year was like a runaway train to the upside with the bulls driving, was down again, this time by 5% when an unsourced piece came out via Reuters saying the Japanese Pension system was allowing a change that would let stocks move higher in the pension program, I don't understand exactly what it was, but it did this to the Nikkei instantly, even without a source...
It looked like this is the USD/JPY...
As I said, things looked a bit lose in the market, but I wasn't in panic mode, I find the market almost wants to get you in that mode and chasing stuff only to be violently whipsawed the other direction.
Near the close, the USD/JPY really looked like it was and still will, make a run higher which is obviously good for the market on the upside.
So if we look at some of the averages, we see the same thing on a macro and micro (meaning days or less) basis.
Lets look at the SPY
My interpretation, the very short term intraday trade either gave out, is pulling back before trying to ramp higher or was specifically trying to scare people in to making rushed, emotional decisions and positions.
The 3 min tells me that this is not yet over, it could end up that way, but so far the intraday volatility which I warned would make it very hard to hold a position, thus our "Hit and Run" tactics, is just shaking everything lose. However the signal is not that consistent that I'd say WE MUST BE in all positions NOW.
The 5 min tells me that while the above may be true, we don't have long. The 30 min and 2 hour show the damage is done, its bad and we aren't coming back from this.
I saw the same pattern in a number of individual bellwether stocks today as well, this is why I had to exit some of the options as a loss of momentum is a killer, but I feel we can still ride some to the upside for a day or so longer.
The bottom line is things are looking really bad, but we still have some time and a lot of positions that are ALMOST there, its just a matter of patience.
I'll try to get back with you again after my B-day dinner.
Oh, by the way, the closed positions (which have less and less profit as the volatility takes over, looked like this:
The URTY (3x Long IWM ETF) was a full size position and was in the equities tracking portfolio as a hedge for some short positions I liked the entry on and didn't want to give them up. The gain was around 3%, but again, this was used largely as a hedge until I felt I didn't need it anymore, which was today. A position that large and leveraged going the wrong way on a market break-down wouldn't be good.
The NFLX Call position that was closed yesterday for volatility/momentum reasons, was opened again today with nearly an 11% 1-day gain. I think there's more upside if we get another decent entry so we may play this one again. Heck, some Hedge funds can't make 11%, actually the majority of hedge funds can't make 11% for the year, much less a day.
I'd say things are still on track, but VERY volatile and with that comes increased unpredictability. So I'll be winding down call trades and focussing on filling out equity shorts which I would have done more of today if I had felt the signals were telling me, "This is a high probability trade right now". Instead many were saying, this is a great trade that in years past you would have gladly taken right here and now, but we have a better edge now that allows for better entries.
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