First as I said, volatility will increase, the Dow has its widest weekly range of the year, 460 points but the move from Monday through the close today was worth an AMAZING -0.04%
Tons of volatility with the market going no where, why do you think that is? Meat GRINDER, Traders are the meat.
The gap up move we were expecting and got today also came with the title, "Second best day of the year for the market".
We were looking for a gap up today and we got it, the thing is the Non-Farm Payrolls were about as luke warm as you can be, I'd guess if there was a leak of the number, then the market wasn't set up in advance this week as we saw to gap up on the data, it was the lack of movement from the data that gave them the ability to set up the market (which costs them some money) and not have to worry about a surprise going against the set up they already had in place (which was put together all this week).
It seems the bears are still bearish, but quite a few had covered yesterday, yet quite a few more entered short again today and why not? This is TEXT BOOK Technical Analysis short set up, just from textbooks that have been around for a century, it's not like the market isn't aware of how retail will react, so I think we can also safely assume they put this set up together because of that and secondly because a set up this textbook hasn't worked in over a dozen years, but technical traders still fall for it every time, it seems they don't have the ability to think outside the text book and for themselves.
The set up today which was a gap up right in to the triangle's resistance again just like Tuesday seemed to serve a couple of purposes, 1) it was more than likely the area of max pain for an op-ex pins today as it didn't move much after 2 p.m. and 2) it's again the perfect textbook area to short right below resistance. What would be the difference between this time and the last? Well the Pavlovian effect. Earlier in the week if you shorted on the rejection of resistance, you got 1-day down, not much, but they need that day down as confirmation to bring traders in. Looking at setting up a new short in the area they will be expecting a lower low, I saw some things in the market today that made me think we either see the market move down in to the close and part of Monday or Monday. The reason this is NEEDED is because the bulk of Technical traders won't make a move without price confirmation meaning the negative divergences seen today in the market and every other place as I showed using IBM as an example are likely to send the market lower on Monday, at least enough to pull in the shorts that need that price confirmation.
Toward the end of the day it seemed like those negative divergences that in some cases went out to 5 mins (so it could potentially be a nasty little move down) started to dissipate. In fact by the end of the day it wasn't really clear what exactly was happening, did someone change their mind about how to handle short term trade or was it the need to wait until after op-ex pins after 2 p.m.?
I did some looking around at futures and guess what I found, the earlier charts are confirmed, my best guess Monday we see some downside, at least enough to pull the shorts in, how it acts from there I can't tell you, but the bear trap is still very much alive and well, futures confirmed that too, in fact it grew stronger. So some of the short term trades we picked up today like XLF puts or FAZ/VXX long should make a little money early in the week which should allow us to set up new call/long positions again. As I said, I'm not exactly sure how the reversal will look, maybe a ket 1-day reversal with downside early and a snap higher later, all I know is the probabilities for the bear trap to spring are the highest other than the longer term market decline.
What convinced me other than market behavior (meaning retail won't move big without price confirmation)...
If I'm totally off base and we snap higher Monday and trigger the bear trap, most of us still have June monthly calls and we'll still be fine, it's really more of a minor detail than anything.
In any case, the SPY 5 min or SPX 15 min futures can't compete with the SPY 15 min and ES 60 min above, the rough translation is a move down which is still setting up the bear trap followed by a VERY nasty upside move.
Hopefully is we get downside early next week, we can use that as I said today- a Market Gift to set up new positions as 4 were closed today that were set up this week, only 1-2 days old and gains of 18+ to 69%, it would be fun to do that again.
Other information...
HYG held up well considering, my guess is they have their HYG positions for a big move on the upside and they aren't letting them go, VIX moving up and TLT will have to do the job, HYG is an institutional risk on asset and they look to be set for the bear trap.
Amazingly, HY Credit held up even better, this is also one of their main-stay long positions, but because it's thinner liquidity than HYG, it usually doesn't move like iot did today, they are in HY credit long and they aren't letting ti go it would appear so those SPY and ES/NQ charts of a bear trap above have more than a few confirmation signals.
WHAT'S NEXT AFTER A BEAR TRAP?
First of all, we don't want to misjudge just how strong this move will likely be, if you think the downside moves have been volatile, this upside short squeeze should make those look like mellow days.
Why? Because there's really only one good reason for a bear trap and that's to create a bigger bull trap and why would that be? Because this market is a disaster about to show us what a real bear market decline can do. That's another day, another bridge though, I'll just offer you some evidence...
If you want an idea of how bad this really is when we look at the BIG picture...
Just so you know, as part of my hobbies, I've looked at every bull and bear market in the 20/21st centuries, these are by far the worst 2 and in many ways, the current one is even worse than 1929.
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