The New Bull Market

[aus_trader]

Market in a process of finding a floor in short term correction:View attachment 113118View attachment 113119

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

View attachment 113120

The effect of the Fed. cannot be overstated:

View attachment 113115View attachment 113116View attachment 113117

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:

View attachment 113114

jog on
duc

Interesting how Dr.Fly is holding SQQQ. Unless there is actually a drop or a crash in the market, SQQQ will only lose value over time. In Dr.Fly's words it is a decaying piece of sh#t of an instrument to use for betting against the market.

 

[peter2]

I don't think SQQQ is a long term hold. In this case I think SQQQ is a position that ensures FFFly gets out of bed the next day. He can't sleep in knowing he has a position to defend.

 

[Chronos-Plutus]

I got it wrong on the trajectory and I apologize.

However I think Trump will win:

 

[ducati916]

So a few comments to address:

First off the x3 leverage ETFs

So QQQ (main chart) returns from the bottom to current: 79% +/-
TQQQ returns 196% +/-

So it should have returned 240% +/-. Did it fail? Well yes and no. Yes it failed as it bled costs/hedges/etc, but no in that if you held it, your returns are significantly higher than they would have been. Of course your losses would have been greater as well. I prefer the x3 ETFs because:

(a) An ETF will return less than an individual stock that takes off. Using ZM as an example:

Lets say you bought at $100: today you would have returned 461% +/-. Now an ETF (any) will struggle to match that return. The x3 ETFs (assuming you get market direction correct) at least keep you in the ballpark. But from a risk point of view, earnings miss etc. they are far more stable and you get part of the performance in any case.

Now I had a question in my private mail re. the post about removing hedges, VIX was 'bottoming' and the aggressive entry. So look at the chart below:

The boxes highlight VIX readings on any given day. I calculate manually, the closing VIX each day. What that shows is whether VIX is (absent a signal indicated via a break in the trend-line) getting stronger or weaker. If it is getting stronger as it was (far left) I know that at some point vol is going to ramp up. Cross indexed with other charts (which I post) I can get the timing pretty close.

So we start with:

That shape also has a ranking value, which indicated that it was likely to turn higher, which it did. Which a couple of days later was followed by this: now I can calculate the VIX at any point (intra-day if I wish) and act accordingly. That is essentially what I did. I calculated it near the close and acted just prior to the close.

In the same way that a 'bottom' can be calculated, so can a 'top'. I believe Mr Skate runs a very similar calculation in his 'Blue Bar' indicator.

So why take an aggressive entry?

Laziness really. I had a very busy day at work for Friday NZ time (Thursday US time) and could not be bothered to set the alarm for 3am or whatever time that I thought the market would bottom, so I rebalanced a day earlier. Hopefully that answers the question that I received.

On general market news:

Interest rates, if you were in any doubt, are the dog and not the tail:

And of course, Mr flippe-floppe-flye has returned to his rightful place atop the mountain:

jog on
duc

 

[qldfrog]

So a few comments to address:

First off the x3 leverage ETFsView attachment 113186

So QQQ (main chart) returns from the bottom to current: 79% +/-
TQQQ returns 196% +/-

So it should have returned 240% +/-. Did it fail? Well yes and no. Yes it failed as it bled costs/hedges/etc, but no in that if you held it, your returns are significantly higher than they would have been. Of course your losses would have been greater as well. I prefer the x3 ETFs because:

(a) An ETF will return less than an individual stock that takes off. Using ZM as an example:

View attachment 113187

Lets say you bought at $100: today you would have returned 461% +/-. Now an ETF (any) will struggle to match that return. The x3 ETFs (assuming you get market direction correct) at least keep you in the ballpark. But from a risk point of view, earnings miss etc. they are far more stable and you get part of the performance in any case.

Now I had a question in my private mail re. the post about removing hedges, VIX was 'bottoming' and the aggressive entry. So look at the chart below:

View attachment 113185

The boxes highlight VIX readings on any given day. I calculate manually, the closing VIX each day. What that shows is whether VIX is (absent a signal indicated via a break in the trend-line) getting stronger or weaker. If it is getting stronger as it was (far left) I know that at some point vol is going to ramp up. Cross indexed with other charts (which I post) I can get the timing pretty close.

So we start with:

View attachment 113188

That shape also has a ranking value, which indicated that it was likely to turn higher, which it did. Which a couple of days later was followed by this: now I can calculate the VIX at any point (intra-day if I wish) and act accordingly. That is essentially what I did. I calculated it near the close and acted just prior to the close.

View attachment 113189

In the same way that a 'bottom' can be calculated, so can a 'top'. I believe Mr Skate runs a very similar calculation in his 'Blue Bar' indicator.

So why take an aggressive entry?

Laziness really. I had a very busy day at work for Friday NZ time (Thursday US time) and could not be bothered to set the alarm for 3am or whatever time that I thought the market would bottom, so I rebalanced a day earlier. Hopefully that answers the question that I received.

On general market news:

View attachment 113184

View attachment 113190


Interest rates, if you were in any doubt, are the dog and not the tail:

View attachment 113181View attachment 113182

And of course, Mr flippe-floppe-flye has returned to his rightful place atop the mountain:

View attachment 113183

jog on
duc

Mr Duc,
Maybe due to my poorer english, the general exhaustion of a removalist or just stupidity:
You mentioned you calculate Vix manually?
I always thought vix was the ^VIX - CBOE Volatility Index
So vix or/and vix/spy can be retrieved directly even intra day?
And vix increasing means vol is getting higher...vix being volatility index, 'vol' in that context means volume?
A bit confused.
Have a great weekend

 

[qldfrog]

Great pedagogy efforts Duc.much thanks...
Sadly i lost smiley or links access in the new site version,but at least my typing is not mangled anymore

 

[qldfrog]

And is this divergence of interest:

Bond Markets Brace for ‘Blue Wave’ That’s Soothing Stock Traders

(Bloomberg) -- With 18 days to go until the U.S. election, growing odds that Democrats will take control of the White House and the Senate is sending volatility gauges for stocks and bonds in opposite directions.The Cboe Volatility Index -- known as the equity market’s “fear gauge” -- has been...

finance.yahoo.com

?

 

[ducati916]

Mr Duc,
Maybe due to my poorer english, the general exhaustion of a removalist or just stupidity:
You mentioned you calculate Vix manually?
I always thought vix was the ^VIX - CBOE Volatility Index
So vix or/and vix/spy can be retrieved directly even intra day?
And vix increasing means vol is getting higher...vix being volatility index, 'vol' in that context means volume?
A bit confused.
Have a great weekend

Mr Frog,

Yes I calculate not the VIX value, that is a market value, but an intra-day calculation of the ratio that creates an index number, which, when contrasted against other charts (to which I also calculate an index number for) gives me an idea of when turning points might assert themselves. 'Vol' is volatility rather than volume.

So yes, VIX/SPY ratio is a live intra-day chart, which makes it very useful and yes an increasing VIX is an increasing volatility.

So the EOD charts:

A surge towards the close of PUT purchases, which means the inverse of CALL purchases: Option MM are short PUTS (sold to purchasers) therefore to hedge, they will sell short stock/futures. Hence the hard sell-off into the close.

The declining issues are pretty much at their support point.

Another shorter term look at the same chart.

The index number for this (above) chart is also sitting on a 'support' reading. This rather suggests that the close wasn't painted (which happens quite frequently) but rather was a function of that PUT buying.

This is the second time this week that really big Options activity has had a material impact on the market. Under more normal conditions, the VIX would have declined and the market risen. As it stands that didn't quite work out that way today.

And the VIX:

So we still have no signal: the signal being a break of the trend line. As the other charts now indicate however, the downside is pretty limited and the (far higher) probability is to position for higher prices, with a break in the VIX trend line unlikely. To obtain that break, we would need a sell-off comparable to the sell-off earlier in the year.

The only chart that gives pause for concern is:

Where we see a 'potential' break of the trend line and a move to safety in the 10yr Note. We'll have to see how this plays out next week.

jog on
duc

 

[ducati916]

Time is probably (about) right for a pairs trade in the indices:

Below is the correlation:

In the table below, we are interested in the SPY/QQQ. If the SPY rises, 8% of the time the QQQ will fall. If we are placing a pairs trade Long SPY Short QQQ, we make money on both legs. However 8% is low. Generally, we will make money on 1 leg, lose it on 1 leg.

Which translates as:

So we will be trading the second lowest conditional probability: SPY/QQQ

To date:

There is a 25% spread. Time for a return to mean trade?

In a shorter time frame:

Not shown above is the longer term trend line. Above is the shorter term trend, which is now signalling a return (potentially) to the longer term trend.

Now there are a number of ways to structure the trade: Futures, ETFs, Options or a mix of all. I'll be looking at the various ways for a follow up post.

The advantage of the trade is that it is market neutral: it should show profit whether the market rises or falls.

jog on
duc

 

[ducati916]

Vol. still drifting higher. Currently it is not an issue. That could however change. We are sitting on the signal point. If we blow through that, we will have an actual decline rather than a time correction sideways, which is what we have currently.

Market is trying to find a bottom:

All sectors are pretty meh:

See how strongly or weakly the market closes.

jog on
duc

 

[ducati916]

A mix of news in the market:

Doing well, probably better than could be expected.

Of course with the election looming large, there will be endless speculation and repositioning.

All sectors doing well today after some poor days (for the bulls) the last few days.

Still not out of the woods yet. See how the EOD stuff looks later.

And a bunch of Oil news:

Market Movers

- Halliburton (NYSE: HAL) said that U.S. shale drilling activity has bottomed out and could be staging a rebound.

- Transocean (NYSE: RIG) received a notice from the New York Stock Exchange of non-compliance with continued listing standards.

- EOG Resources (NYSE: EOG) saw its share price jump last week on speculation that a “major company” is considering a bid to take over EOG.

Tuesday, October 20, 2020

Oil remains anchored at around $40 per barrel, awaiting new direction. Coronavirus cases are on the rise and raise new concerns about demand as travel restrictions begin to increase. In the U.S., the market is hoping for federal stimulus but odds look remote until after the election.

ConocoPhillips confirms takeover plan for Concho. ConocoPhillips (NYSE: COP) has agreed to purchase Concho Resources (NYSE: CXO) for $9.7 billion, setting up the largest U.S. oil deal since the onset of the global pandemic. Combined, the company would be the largest U.S. independent, and its Permian output would only trail Occidental Petroleum (NYSE: OXY).

Halliburton posts fourth straight loss. Halliburton (NYSE: HAL) reported its fourth straight quarterly loss on Monday, although the company still beat analysts’ estimates. Halliburton struck an optimistic tone. “The pace of activity declines in the international markets is slowing, while the North America industry structure continues to improve, and activity is stabilizing,” Chief Executive Officer Jeff Miller said in a statement.

Rig count jumps by most since January. The U.S. rig count rose by 13 (12 oil rigs, 1 for natural gas), the largest weekly increase since January. The increase also adds some evidence to the notion that drilling has bottomed out and could be in recovery mode.

Refiners turn to biofuels. U.S. and European oil refiners facing the prospect of closure are switching to biofuels. BP (NYSE: BP), Total (NYSE: TOT) and Eni (NYSE: E) have all recently announced plans to convert aging refineries to handle biofuels. The strategy “allows plans to play a role in the energy transition, creates long-term value and mitigates the costs of a full shutdown and site cleanup,” Rob Turner, partner at PWC, told Reuters.



IMF: Oil at $40-$50 in 2021. Oil prices are not expected to rise much next year, and will stay in the $40-50 a barrel range, the IMF said.

Refinery glut persists for years. Refinery margins remain close to zero across most regions, and utilization is down 10 percent from year-ago levels, according to Bank of America Merrill Lynch. At the same time, new greenfield refineries are set to come online, adding 6 mb/d of new capacity between 2021 and 2023. That is unless other refineries shut down.

Wind and solar cheapest power in most places. Wind and solar power are the cheapest forms of new electricity in most of the world today, according to Bloomberg New Energy Finance. A separate study from Lazard finds that the levelized cost of electricity for solar and wind is lower than existing gas and coal when subsidies are included.

Aramco scales back $20 billion chemical plant. Saudi Aramco (TADAWUL: 2222) has scaled back plans for its $20 billion oil-to-chemicals plant as it hopes to shore up its finances.

OPEC+ on brink of crisis. The OPEC+ member countries are on the brink of a financial crisis if the latest assessments of the International Monetary Fund (IMF) are accurate. The IMF has presented a very bleak outlook for an economic recovery in the Middle East and Central Asia, predicting a 4.1% contraction for the region.

Global finance turns against fossil fuels. Fifty globally significant financial institutions have introduced policies restricting oil sands and/or oil and gas drilling in the Arctic including 23 to date this year, according to a new report. “Over 140 global financial institutions have already restricted thermal coal financing, insurance and/or investment and we are now seeing a similar accelerating shift of capital away from oil and gas exploration,” the report’s author said.

OPEC+ discusses demand outlook. OPEC+’s monitoring committee met on Monday to assess the status of the oil market, which faces demand concerns due to rising covid-19 infections as well as the return of Libyan supply.

NJ calls for 100% EVs by 2035. New Jersey has proposed a ban on gasoline vehicles by 2035, the only state so far to follow in California’s footsteps.

ISIS calls for attacks on Saudi oil industry. The Islamic State has called on its members to start targeting Saudi Arabia oil infrastructure as punishment for the Kingdom warming up to Israel. “Targets are plenty…Start by hitting and destroying oil pipelines, factories, and facilities which are the source (of income) of the tyrant government,” a spokesman for ISIS said.

Morgan Stanley: low bar for “outperformance” for E&Ps. Shale E&Ps did so poorly in the third quarter relative to crude oil that their stocks now look cheap, according to Morgan Stanley. “We see a low bar for outperformance and tilt positive into the quarter,” the bank said in a note. Other positive trends include improved valuations, a strategic shift from growth to free cash flow, and consolidation, all of which create “an improving risk-reward.”

North Dakota oil output increases. North Dakota’s oil production rose about 12% to 1.16 mb/d in August.

Diamondback: Shale shouldn’t grow. Diamondback Energy (NYSE: FANG) provided an operational update on Monday, in which the company said it would keep production flat going forward. Also, CEO Travis Stice warned against others trying to grow. “Our industry…must acknowledge two fundamental truths: we have a significant influence on the global oil market, and today that market is oversupplied,” Stice said. “As such, if North American producers decide to grow again, even at mid-single-digit rates, we will magnify the issues our industry is fighting today and face repercussions from other global producers.”

Automation sweeping over oil industry. Automation is growing in offshore oil drilling. Reuters looks at how Equinor (NYSE: EQNR) is using automation and the role that played in a recent workers’ strike.

Pioneer Natural Resources in talks with Parsley Energy. Pioneer Natural Resources (NYSE: PXD) is in talks with Parsley Energy (NYSE: PE) about a tie-up. The companies’ executives – Scott Sheffield and Bryan Sheffield – are father and son.

Finally Mr flippe-floppe-flye:

Tricky tape atm.

jog on
duc

 

[ducati916]

TSLA time:

Pricing in a 6% move.

Sell CALLS @ $450 strike
Sell PUTS @ $402.50 strike

Not priced as well as last time round (ie. they are more efficiently priced now).

jog on
duc

 

[qldfrog]

TSLA time:

View attachment 113482View attachment 113483View attachment 113484

Pricing in a 6% move.

Sell CALLS @ $450 strike
Sell PUTS @ $402.50 strike

Not priced as well as last time round (ie. they are more efficiently priced now).

jog on
duc

On the oil field, surprise fall in diesel stockpile..fastest ever recorded ..but stating from very high.
Linked to slower production but also higher consumption

 

[qldfrog]

Still looking for link but no luck so far.read this last night

 

[ducati916]

Market continues to go essentially nowhere:

Vol. is still elevated and has strengthened, but not enough to cause a panic or fall yet. Attribution for this higher level:

The election. Who knows.

Markets have a good history of weathering storms. Not a good idea to bet against Bull markets.

Some still do:

TSLA

And I closed both legs for a profit.

Pricing is currently for an 8% move, I only had a position pricing a 6% move. The profit was available: I took it.

jog on
duc

 

[ducati916]

Meh tape is starting to resolve:

First up the VIX: it could be argued that the trend line is now support for VIX to move higher. There are a number of arguments against that and that rather the trend line is still valid and VIX is to move lower: (i) my index number (after moving higher) is again moving lower; and

(ii)

We seem to have found support; and

(iii)

Potential support. This is clearly in no-mans-land, so how does that lean towards the Bulls? Again an index number that is divergent from the chart. It is not a significant divergence, but it is there. However it has to be said that it could change pretty quickly.

And finally (iv)

We simply have a correction through time and that PP is looking real solid. All sectors are looking strong (good breadth).

Therefore tomorrow, the market moves higher and holds its gains and the Bull is back on.

Of course, Mr flippe-floppe-flye is onboard:

jog on
duc

 

[ducati916]

So 3 news stories dominate currently: (a) Election, (b) COVID and (c) MMT in no particular order or coherence. Of these stories, which if any, have any implications for the market? (a) Election: no. Stocks don't care. (b) COVID: no. Stocks don't care. (c) MMT: yes. Stocks do care and care quite a lot. In MMT I include Monetary Policy (interest rates) as part and parcel. So the 'stimulus' talks/negotiations are not really critical for the market per se, but if agreed upon, will send the market higher. Of far more importance have been the rising yields over the past few days.

Banks love a steepening curve. The rest of the market, meh, not so much. The rest of the market prefers the 0.7% range.

The rest of the market gets their financing via the 10yr. If the 10yr rises (in yield) then financing become more expensive. If due to COVID or any other issues, you require cheap financing, rising yields are not a happy place. Hence, they would look to the Fed. to step in and cap the rise in yields.

Moving in the right direction, but Bond market jitters could upset the apple cart again.

We are moving higher, it is just a really miserable way to do so.

Mr flippe-floppe-flye:

jog on
duc

 

[ducati916]

Some longer term charts highlighting the repetitive nature of markets and probabilities that can be calculated from them.

First up: Seasonality

Sept/Oct = 100% for the 10 year (but it could be the 30 year)

How it plays out in the market:

Notice the dates: Sept/Oct resolving (usually) into Nov/Dec. (remember Nov/Dec are 75%/50%)

Market ready to move back to trend-line: although, the end of the Sept/Oct seasonality may not yet be fully resolved (remember the Nov/Dec) but will indicate through a breaking of the trend-line, that this year's cycle is complete.

It was said that the cycle in Sept/Oct was due to the harvest being brought in. Banks would restrict lending in this period to facilitate finance to the farmers. Which may or may not be true. It does not however explain how this phenomenon remains into the 21'st century.

jog on
duc

 

[ducati916]

Well the market turned to custard over the w/e.

There are the headlines, take your pick as to causation.

Placed hedges back (too late of course) but if the market continues to tank, will be happier tomorrow.

jog on
duc

 

[qldfrog]

Well the market turned to custard over the w/e.

View attachment 113716

There are the headlines, take your pick as to causation.

Placed hedges back (too late of course) but if the market continues to tank, will be happier tomorrow.

jog on
duc

My volatility systems went bear a while back and happy so far..not so much with my trend ones who went in a relative buying spree yesterday..
One area i am keeping a keen eye on is BTC.
Cryptos are doing quite well lately and last night fall as far as i can see remains subdued in the crypto world