Bitcoin As The Liquidity Tell
SPX has traded back above the 4,600 level as of Friday afternoon, after being stuck in a range of 4,550 to 4,600 the last 2-3 weeks!
Last time we were here in July, we rolled over for all of Aug/Sept/Oct.
Getting and staying above 4600 on a weekly basis will put us on track to pushing back into 2021 highs.
As break-outs become parabolic, it's time to consider...The market is now more exposed to a shock to the downside into/post mid-Jan than at any point this year.
Whether from a macro trigger (UST auctions, CPI, PPI, FOMC, or BOJ), or just year-end profit taking, Bitcoin selling is a Liquidity Tell.
(See chart of reversal back below monthly resistance at $42K on way back to $38K as the momentum indicator (bottom panel) rolls over.)
I reposted this on X because I agree wholeheartedly: H/t @passedpawn:
Low realized volatility can be self-reinforcing in equities.
The lower it goes, the more leverage is deployed, and BTD becomes automatic.
This suppresses volatility even further.
Realized volatility has been extremely low recently.
This condition may persist, but the market is also more exposed to a shock, which would trigger deleveraging.
This is not a doom post - the market has been remarkably strong. But worth considering buying puts for protection or at least not selling puts for yield enhancement.
Keep in mind: we already have had the dollar, US yields and USDJPY crash lower. Yes, they are in the midst of some stabilizing bounces, but the sharp fall from the highs is an indication of both intervention but also price instability.
With FOMC on Wednesday, it is a perfect time for Powell to try and talk the market out of so many rate cuts it has priced in.
WSJ’s Nick Timiraos reported: Fed officials aren’t likely to entertain serious conversations about when to cut rates this week-and potentially for several months unless the economy weakens more than expected. Still, they don’t think rates need to remain at their current, economically restrictive setting indefinitely. Officials’ updated rate projections, to be released Wednesday after their meeting, will show that most expect to cut rates somewhat next year. https://tinyurl.com/3e2chjf4
Bond auctions have been nothing to write home about, but longer-duration bond (and yen) shorts are still in short-covering mode WHILE the VIP stocks that have made for out-sized bets in concentration risk in MAG7 are gently unwound.
It is NOT a surprise that Bitcoin is rolling over WITH Growth, and both are a precursor for volatility.
CHASE/SWING UPDATES:
Chase shorts have been profitable to focus on MAG7 plus LLY/NVO - 2023 winners - with LOTS of oversold value/tech continuing to do well long.
Recently added last early last week: BKNG + ABNB doing really well.
Open Swings past few weeks like GD, KHC, ENPH, ZM, ISRG, JETS, ETSY, CME are all digesting well and continue to push higher since recommending.
DOCU idea from 45 into 49.60 EPS is now firmly above and hitting 52.18 PT with 53.41 next.
NKE idea since $94 also tagged just tagged $118 wkly price target
Congrats if you stayed long momentum faves of UBER, LULU, DECK, CMG etc.
My fave sector of "Building Material" stocks - BLDR, OC, VMC - continue to delight.
Point is, this feels and looks great for bulls as SPX just ended its 6th straight week of gains - longest streak since November 2019 "repo madness" - on falling Wall Street inflation expectations, yields and dollar, amidst a "goldilocks" job report (see more about this from Friday's post above), and the BOJ talking back its hot-mic take on removing negative interest rates.
Triple Witching Week
No question, positive gamma and bullish option flows continue to lead the market higher.
MenthorQ highlights:
4600 continues to be the strongest level out there.
But it is important to note that4700 is starting to become an important one as well. So there is clearly strong flow coming into the market.
But with Powell up to the podium Wednesday AND the strongest Triple Witching of the year this Friday, it bears remembering, as per SpotGamma:
This part of the cycle is when we seasonally expect a surge in positive gamma, and then a release of it (and general unpinning) in the week to follow.
Levels of importance:
Market gamma would weaken quickly if the price drops back toward 4550.
And then from what we know about the steep gamma drop off at 4500, and the Volatility Triggerâ„¢ at 4545 (ranging in the past two weeks from 4500 to 4570), this checks out that implied volatility could quickly wake up, especially considering how low it is.
Otherwise, we are headed to $4660 and above that is a precursor for 1999-esque ramp into $5000.
Did you enjoy #samanthas-market-thoughts posted above? Then you would love full access to her and her live trading room, detailed macro and intermarket analysis, not to mention full portfolio of trades across Chase, Swing and Trend timeframes!
Upgrade to CLUB or EDGE today!