inflation narrative circulating at the moment, as well as the key indicators kind of being on a knifes edge and giving mixed signals… it is probably wise to say on the side-lines for now.
months! It has not retraced this much, and this fast since the infamous COVID-crash. The question is; is this just a tantrum, or a trend change? To be fair, a case can be made for both and honestly right now I think (at least for me) it is too early to tell.
Two weeks ago in our last post, we proposed that buying into the sell-off and VIX spike would make for a good long entry, both on equities (offshore) as well as on Oil. That play worked very well and markets are bouncing back rather hard. From here we think it is most probable that the market (U.S.) goes on to make a new all-time high. We do harbour some concerns around market breadth, especially within the Nasdaq index (US100), but even so we believe that over the short-term (until the end of the year), it is most likely that markets will remain bullish and push a few new highs.
Gees guys, we take one week off from posting and the whole place falls to pieces!? Who broke the market is perhaps not the question we should be asking though. We’re asking, will the dippers win again? There are some mixed feelings on this at the moment. Our local market looks, well, not very good. We had a hard time finding any kind of setup that was not bearish. Things are looking dire here. In the offshore world though, although there is an similarly high level of confusion, we do have some ‘reliable’ buy indicators that give us hope for a bounce next week. So let’s look at why it might be time to buy the VIX spike.
A busy schedule for us on this side, sto this week we offer only some brief thoughts and a handful of offshore trading ideas.
$940bn worth of options traded on Thursday last week, making it the single biggest volume day for U.S. options… ever. Interestingly, 70% of the options traded have expiries less than one week. Also worth of note is that options volume was 140% equities volume and the vast majority of those options being bought were calls. …
Last week we called for new highs and we got them. Now we’re kind of sitting here thinking that is is looking a bit stretched and wondering if the market is not due a bit of a breather.
The market has become very strange indeed. The trend is so strong and there are so many dip buyers around that it seems the part will never stop. Although, whenever there are a few down days, the mood turns really dark and a semi-panic seems to take over. This is one more thing that worries us when thinking with the longer-term hat on. Why are traders to extremely negative when the market ticks down only a few percent? How much is the average trader geared and long the market? What happens when the market pulls back 10%? What happens when the Fed actually hikes interest rates? And what happens if the Fed hikes rates and starts tapering at the same time? These are some of the questions that we are pondering. But for now, the show goes on and the bulls keep dancing. Buckle up, because we’re headed for new highs.
Well, seeing that this post is only going up at Midnight, we’ll just keep it simple and get straight to the trade ideas.
Our bullishness last week was clearly not the right call. Volatility has crept into the market and there is a lot of uncertainty around what happens next. Therefore, in order to clear our own minds of bias, we will be looking at markets from purely a technical perspective this week.