Sentiment Update

Earlier and yesterday I said I thought retail traders were getting whipsawed and chopped to pieces.

From my sentiment update...

This is one of the better traders on twitter:

"Pretty shitty day for me overall#waited in aapl puts early morning .. Then got out for a small profit now they explode lol !!"

"Took a $3.5k loss on the 165 calls and rolled into 164s. whipsaw city today. Playing small and tight now"

So it's even chopping the better traders and killing the retail shorts.

Yesterday I showed a chart of how tight these swings are under increased volatility, not just in amplitude, but in all ways. I mentioned it's nearly impossible for traders to hold any position, I can't imagine not having the tools we have and that's hard enough.

 I'm just trying to give some idea of how large a reversal area is, you can see recently they are tiny, but very volatile so positions are stopped out easily.

imagine going short after the break is confirmed on5/22 under $167 and the next day have to decide whether to cover or not as the market gaps down but runs to close near the highs, if you went long that day, the next day the market gaps down and you're out, then a big gap up on 5/28 that traders will chase, but there's nothing left for them once they get in, they bought at the top, if any one went short (and they always want confirmation so they don't go short at the reversal, the next day they're likely stopped out and if they went long on 5/29-5/30, they're crushed on 5/31. By the time the shorts are in on confirmation on 5/31, they're crushed yesterday. You heard the guy above, one of the better traders and he barely got out with his skin.

That's meat grinder volatility.

Market Update- HYG

HYG (High Yield Corp. Credit) is not only one of the biggest institutional risk on assets, it's also a SPY Arbitrage asset because of the fact so many institutions trade large credit positions and HY when they want to express a risk on sentiment and IG (Investment Grade) when they want to move to safety or risk off.

What is interesting is that HYG is an example of what I just showed you, the bigger base as well as the earlier note that every time you look there's something different or new.

An hour ago HYG was pretty much positive (very much so) on the 1 min intraday timeframe which  is nice for a quick move, but it doesn't have the bigger base to support a longer or more extended move, I figured it didn't matter as institutional money had accumulated and didn't seem to sell any so although I haven't seen it, it made some sense that the market could turn without having these larger bases in place.

Just look at how HYG has changed and remember as an arbitrage asset, when it moves up, it is goosing the market higher, either as manipulation or just correlation.

 The 1 min is a sharp upside leading positive, but as is often the case with a 1 min intraday negative which it went slightly negative in red within the larger leading positive, it caused a lateral consolidation, this is where institutional accumulation and distribution are most often seen, in tight ranges.

 During that range the 3 min chart which was not positive went leading positive, that's the longest intraday timeframe.

Even more surprising, the first institutional timeframe of 5 min went leading positive, you can be sure this isn't retail buying HYG, most haven't even heard of it although it holds more sway over the market than anything on their charts.

More Stocks Look Like They Are Building Bigger Bases

As I mentioned I think the last post, you can have sharp 1 and 2 min positive divergences that are really leading positive, but they aren't a strong base, the offsetting factor was I am up in the air as to whether they need a base or not.

In any case, if they do build a bigger base, they can certainly support a stronger move.

The 15 min Index Futures charts have been suggesting what I'm calling a strong upside, "Emotional" move, a lot of individual stocks are looking more like this. I'll use XOM as an example.

 2 min XOM is a strong leading positive divergence, but still 2 min only. You can see it has the accumulation in the right place, but as it develops, it's looking more like this...

The 5 min is leading positive, it looks like a bigger base, it has the head fake move in place.

That would make some sense with the ES and other Index Futures with these very strong 15 min leading positive charts. I'd guess these are more than capable of breaking over the triangle and hitting a new SPX high, that's emotional, but still capped.

Market Update-Random Charts

I will tell you, even today where we pretty much predicted the entire move up until this point, the market sure looks different, again, things are changing fast, I want to try to stay nimble and not get too weighed down.

Here are some random charts of different assets, what is strange is almost every time you look at them (even just a few minutes between glimpses)  and they look different, I'm not saying they always look better, sometimes a few have scared me and I came back and they looked better, it's just very strange and this is what I meant yesterday about there being a lot to learn about how fear works in the market as this is a once in a 5 year opportunity, to this extent, maybe a once in a lifetime opportunity to learn.

 HYG already leading at a new intraday high, but there aren't a lot of charts much further out and I don't think there can be without more of a basing process.

TLT getting a sharp leading negative which is market positive when it moves down.

 VXX doesn't show much in intraday timeframes, but you get to 5, 10 min, etc and you can really see the negative divergence that makes the Index Futures 15 min positive seem to really confirm.

IWM 2 min leading positive which is pretty big for so little basing time.

TF-R2K futures

NFLX intraday has been very positive.

USD/JPY moving up is market positive, a leading positive as it has been in line almost all day

The change in trends on the TICK chart.

ALL INDEX Futures are positive

AAPL Shaping Up Too-Again SPECULATIVE

I don't see how trades like AAPL (with no 2 or 3x leverage like some of the ETFs)  are worth it without some leverage

I'd Love to Add to HYG- I can't Maybe you Can use it?

HYG is going to be needed to set the spark.

I'd add, but I've already taken on too much.

About 10 mins ago when I said HYG is in position that it looks like it "could" put in a strong divergence, it was about where the white box is, now it's leading stronger almost every 10 seconds.

XOM Is Another Short term Speculative Long

I'd only use call options on this for the leverage, if I had XLE (Energy) as a spec long, then I'd skip XOM, too much correlation.

TICK Transitioning

This isn't the tight "V" reversal in the NYSE Tick (intraday), but it's clearly transitioning to the upper part of the channel and above it.

COST by the way is an asset that I'd like to short, but in the very near term, again for a speculative long, maybe a call option, it looks like it too is getting ready to make a run to the upside.

XLF / FAS Long

These are speculative too, they aren't my favorite, but the SPX has about 22% weight in Financials so the sector will have to perform and it doesn't look bad for the type of hit and run spec trades.

If you don't like options, the 3X leveraged Financial long ETF, FAS looks decent here.