The New Bull Market

[ducati916]

All about Bonds.

The rise in yield to 0.78% in the 10yr suggests that 1% is in the offing which signals a slow return of the economy to some form of normalcy. Of course financial stocks (Banks) are on fire as a wider spread increases their profitability (the spread is wider on all points of the curve).

There will be new arguments around inflation due to rising yields, although there is no sign of it currently. Oil still remains stagnant. However as economies re-open, that will not remain the case. There will also be concerns on the dollar value of Junk Corporate debt and defaults. If yields continue to rise, gold will be crushed. There will undoubtably be calls for the Fed. to manage the curve at some point if it continues to rise.

jog on
duc

 

[qldfrog]

A bit of a shock as Trump canned talks of stimulus until election is over.
like him or not, he has balls to decide not to be blackmailed by the democrats.
Market wise, i breath better as i had taken bear positions on mondays inc a bear gamble on the US market
Now have to increase my sell threshold

 

[aus_trader]

A bit of a shock as Trump canned talks of stimulus until election is over.
like him or not, he has balls to decide not to be blackmailed by the democrats.
Market wise, i breath better as i had taken bear positions on mondays inc a bear gamble on the US market
Now have to increase my sell threshold

What instrument (i.e. Stock/ETF/Options) have you used for taking a short position on the US ? I would like to do the same with a small position with somewhat longer term horizon, but not sure how to do it cheaply and safely.

Why cheaply and safely: I don't want to spend a lot of money to take up a large position against US stocks for example as all that money will be tied up. On the other hand if there is a massive "unprecedented" FED pump, I don't want to be caught short with a huge position against me. I thought there might be a cheap option that I could allow to expire worthless in case I am wrong due to the possibility of FED pumping the sh#t out of me, but option premiums are very high to my liking at the moment

 

[qldfrog]

What instrument (i.e. Stock/ETF/Options) have you used for taking a short position on the US ? I would like to do the same with a small position with somewhat longer term horizon, but not sure how to do it cheaply and safely.

Why cheaply and safely: I don't want to spend a lot of money to take up a large position against US stocks for example as all that money will be tied up. On the other hand if there is a massive "unprecedented" FED pump, I don't want to be caught short with a huge position against me. I thought there might be a cheap option that I could allow to expire worthless in case I am wrong due to the possibility of FED pumping the sh#t out of me, but option premiums are very high to my liking at the moment

Bbus

 

[finicky]

My guru says strong October
@DaveHcontrarian on twitter

 

[qldfrog]

My guru says strong October
@DaveHcontrarian on twitter

i actually expect strong

 

[aus_trader]

Bbus

Problem with this inverse ETF is it's good for short term trading. But you don't want to leave it on for a longer perspective. The reason is it loses value over time, a kind of decay that is inbuilt with it's construction.

Agree with you guys, there is less likely to be a downturn before the US election is done and dusted. After which markets may decide the direction based on the amount and frequency of FED pumping required by the new US president. I think for the time being, there may be just short peaks and troughs due to the uncertainty of the election outcome.

 

[ducati916]

So of course on the day POTUS tweets at the close, I had a busy day at work followed by a class in the evening, so by the time I got home I couldn't be bothered to update. Anyway, today, POTUS reverses himself.

The point is:

Elections and who wins are irrelevant. They cause a lot of noise but no signal.

Mr flippe-floppe-flye trading intra-day, churning positions:

Today, POTUS reverses himself and markets reverse.

Coincidently, these were taken yesterday:

A pause was always likely. It would seem POTUS did us a favour and launched the market over a technical resistance point.

Bonds have resumed trend and Financials have caught fire again. Gold, if yields continue to rise, will continue to fall.

jog on
duc

 

[ducati916]

What instrument (i.e. Stock/ETF/Options) have you used for taking a short position on the US ? I would like to do the same with a small position with somewhat longer term horizon, but not sure how to do it cheaply and safely.

Why cheaply and safely: I don't want to spend a lot of money to take up a large position against US stocks for example as all that money will be tied up. On the other hand if there is a massive "unprecedented" FED pump, I don't want to be caught short with a huge position against me. I thought there might be a cheap option that I could allow to expire worthless in case I am wrong due to the possibility of FED pumping the sh#t out of me, but option premiums are very high to my liking at the moment

So safely: (cheap is a relative term):

Typically I will, using NASDAQ as an example:

Buy a CALL on SQQQ; and
Buy shares in TQQQ to the correct delta (which on an opening trade is 0.50).

You now have a market neutral position that can profit either higher or lower. By playing with the delta you can adjust to your bias. Essentially if the market goes pretty much nowhere, the position will lose the premium (but the loss is fixed to the cost of the option).

If the market rises: you profit from your long position being delta 1.0 and your loss in the CALL being fixed.
If the market falls: you profit from the CALL gaining value at x2 (assuming ratio of 2:1 with delta 0.5 at open of trade).

These are the current prices on x3 leverage on QQQ for 30 odd days expiration.

jog on
duc

 

[aus_trader]

So safely: (cheap is a relative term):

Typically I will, using NASDAQ as an example:

Buy a CALL on SQQQ; and
Buy shares in TQQQ to the correct delta (which on an opening trade is 0.50).

You now have a market neutral position that can profit either higher or lower. By playing with the delta you can adjust to your bias. Essentially if the market goes pretty much nowhere, the position will lose the premium (but the loss is fixed to the cost of the option).

If the market rises: you profit from your long position being delta 1.0 and your loss in the CALL being fixed.
If the market falls: you profit from the CALL gaining value at x2 (assuming ratio of 2:1 with delta 0.5 at open of trade).

View attachment 112793View attachment 112794

These are the current prices on x3 leverage on QQQ for 30 odd days expiration.

jog on
duc

I was thinking of buying an inexpensive put, e.g. out of the money. But what you showed could work well provided the market doesn't stay range-bound.

 

[ducati916]

I was thinking of buying an inexpensive put, e.g. out of the money. But what you showed could work well provided the market doesn't stay range-bound.

That would certainly work, much easier (set & forget). With my strategy, IV is an issue, that is essentially what you are trading. A big move in either direction and you'll end up profitable.

Even range bound can be profitable, but you will have to adjust the position and this is where the IV becomes the issue. Essentially realised IV must exceed postulated IV and you realise that profit through adjustments. This is 'gamma scalping' and works really well with volatile stocks. TSLA has been a great stock earlier in the year for this. The QQQ's have also been moving and sufficiently so (to date) to make this strategy profitable.

jog on
duc

 

[ducati916]

I sense bearish sentiment percolating. Possibly due to the historical import of Sept./Oct. In the past 4yrs Oct. for SPY:

In the previous 3/4 yrs it has been a swoon. In 2018 things deteriorated into a serious decline. However look at the signal the Bond market provided in 2018/2019

Current

Also the PUT/CALL ratio over 3 timeframes

Now I haven't drawn the lines but:

Fig.1 From 2018, there is a bias to Calls decreasing Puts increasing (all year) into the decline. Currently we have the converse with a blip and what looks like the resumption of that Bull bias.

Fig.2 This current bullishness is more clearly seen. The Bears are far weaker currently.

The aggregate moving towards and above their 50day

We still have issues here. This has been due to the undue influence of the major Tech. names and otherwise lacking breadth from July onwards. For a healthy market we need full participation as there was leading into May from the lows.

Last word to Mr flippe-floppe-flye:

jog on
duc

 

[ducati916]

So this was an interesting post: is it true?

Let us examine the evidence:

VIX is still headed lower. The issue for me is that it is starting to stretch from its trend-line. At the green support, which is also coincidentally a pivot point, assuming no prior change, I would expect vol. to jump back higher.

The 50 has hit its trend-line. Now, does it move through or turn lower? It can turn lower while the market as a whole continues higher, which is then an early warning to either (a) get out, (b) hedge, (c) go short (which of course is really time frame dependant because currently there is no macro signal, we are only talking about swing trade time frames).

The 20 is already at its resistance point. I am less inclined to agree that there is significant upside remaining prior to a short term pullback.

Bond vol. similar to stock vol.

This is the chart that most closely cleaves to the opening statement: stocks could trade to the outlier bound. Will they? On the previous evidence all except the 20 confirm that they could and the probability is slightly higher that they will.

Last word to flippe-floppe-flye:

jog on
duc

 

[ducati916]

Markets continue higher:

With good breadth:

Economy continues to slowly open up:

And flippe-floppe-flye still alive and kicking:

So for the moment all in the market is hunky dory.

jog on
duc

 

[ducati916]

There has been (another) surge in short term Option activity:

This is the weekly QQQ contract. Two strikes standout: 290/295. Again, will necessitate as a potential hedge, dealers buying stock (there are other ways, but generally this is the easiest).

This is the intra-day VIX. It is meh.

Yet the market is:

On fire.

Sectors:

A bulge again in Tech. Earlier it was apparent, but not as pronounced. Now far more pronounced.

End of day charts could be illustrative later today.

jog on
duc

 

[ducati916]

After market close:

Confirmation of significant and material CALL buying (which will mean buying stocks to hedge the position).

VIX is meh. The squares indicate that this VIX shape (has recently) indicated a rise in the VIX.

After a surge, this indicator is also meh.

No signal yet, but again, where we had a 2% day and at one point 3% in the QQQ, not what you would expect to see.

Yields marginally higher, good for the Financials.

Futures pretty meh.

So the big surge in Options volume at the 290/295 strikes are for expiry on Friday. At some point (probably not tomorrow) if the market continues to rise, those profits will have to be taken off the table which will include selling the hedges. I'm guessing Thursday or Friday and this position will reverse. That means, be ready for a sell-off towards the end of the week.

While flippe-floppe-flye thinks the top is in, I would give it to Thursday, possibly Friday. But guaranteed Friday, it is over for these CALL positions.

jog on
duc

 

[ducati916]

Earnings season is back with Banks first off the rank:

JPM & C already reporting

Market

Slight uptick in vol. has this effect:

Which rather suggests the mega-caps are driving the market direction again. AAPL, AMZN, GOOG, TSLA are all meh. Remember, the monster CALL buying was actually in the QQQ itself and although its constituents benefit over time, 1 day is not sufficient time for this effect to occur.

So I have now hedged all major positions. Probably should have done it yesterday.

jog on
duc

 

[ducati916]

Where we sit with earnings to come:

With 2 of the big sectors in OB, we may still have some downside yet.

Here are the Tech. earnings and dates.

The volatile ones, which will have some good earnings trades attached to them with raised IV in the Options. TSLA being one of the best last time round:

That large bulge in the CALL Options is gone (closed out yesterday) hence the selling pressure yesterday triggering vol.

Mr flippe-floppe-flye having issues atm.

jog on
duc

 

[ducati916]

Looks like the 'bottom' is in:

This is an aggressive entry mind. It is entirely possible once the EOD data can be seen that the market may need to settle another day or two. However, I have now taken off the hedges.

jog on
duc

 

[ducati916]

Market in a process of finding a floor in short term correction:

Vol is still (obviously) elevated, but the breadth is again increasing, which means that the market is stabilising for a move higher.

The effect of the Fed. cannot be overstated:

Companies (if not individuals) will weather the storm. The market (reflecting that reality) will continue to rise. Obviously there are concerns about the consumer (hence all the news stories about stimulus packages) but she will pull through absent a few casualties.

Flippe-floppe-flye, not so optimistic:

jog on
duc