Time For Shake-N-Bake

CLUB/EDGE client post Thursday, August 22, 2024. Focus on

» CLUB/EDGE client post AUGUST 22nd, 4:00 PM ET.

Event Risk De-risking Today into Friday OpEx

BOJ rate hike threat tonight? I'm not betting on it, but it is there.

Powell hawkish Jackson Hole presser Friday at 10AM ET? Again, my bet he is typical dove to 'allow for a normalization' cut starting in September FOMC versus hawkish 'accommodative' cut. Very different messaging that he will be careful to thread that needle.

BUT, IF Powell is hawkish... prepare for bid in yields and dollar; sell off in equities and gold. Kinda like what is happening today in markets, but maybe more intensely.

It was also time for shake-n-bake, with SPX tagging daily gap fill price target of 5639.02 and getting rejected.

Again, I think this is the fear heading into Friday OpEx where market makers and short-duration players are actively managing their exposures.

It also wouldn't surprise me if we get bid right back up to tag the hourly gap fill of SPX 5638.88 on/about NVDA earnings and then digest.

Trading Room Notes

Gold has already intonated on the 2H chart with a solid Head & Shoulders roll-over pattern exactly as the DXY hits my ~100.20 support - as discussed pre-market in my live trading room. So there's that.

But what I really need, still, for the market to take a solid VIX leg higher is for:

1. 10Y US yield stays below 3.8%
2. Crude oil crashes + stays below $70.
3. Jobless claims get/stay above 267K

And we aren't there yet.

We still have strong mechanical buying flows 'out there' lurking, and folks really aren't looking at dollar, yen + oil as carry trade threats - YET!

We have market bias leading bullish on headlines and price action, but they are starting to protect on downside - as is evidenced from VIX rising off my 14.29 support near 200D - as called out Monday and which is continuing higher into above macro-moving event risks of BOJ + Powell - getting up to its 21D at 18.06.

NYSE is relatively bid and defensive sectors like XLV, XLP, XLU haven't even broken their 3D!

It's all NDX 100 'concentration risk' shake-n-bake, with NVDA the easiest set-up short on chase timeframe after tagging my 129.80 swing long PT (now resistance) and breaking back below noted 127 daily support - now heading into 8D support near 122. With former AMD swing long into 200D getting pushed back as well as AMZN hitting 182 yday where I expected digestion.

It makes sense we have some selling in MAG7 given the VXN chart I spied early yesterday and warned, not to mention how badly BXM was beyond extended.

While ZM short-covering chase this morning exceeded my $66PT (into overshoot target of 67.76) with PTON running into/beyond its descending 200D.

Also in the trading room, I said I was not worried about Trend Long BJ, as the report was good.

I also still like swing long faves of CI, MDT, RKT, CPB and how derisking in big tech isn't hitting PYPL, PLTR, CARR, AZN, WMB all at/near new 52W highs.

And I discussed at length how DIVERSIFICATION is largely a façade in sector ETFs and reviewed the top 50% of each holdings and focused on my favorite way to diversify portfolio risk into potential stagflationary recession sometime next year.

Also, the 818,000 revision to US employment payrolls yesterday caused a bit of a 'reality check'. As I warned, bad news should start to be viewed as bad news.

In a nutshell, markets can/will move higher as long as NVDA is not crashing, and as long as we have breadth strong for NYSE + NDX, which we do.

We just need to interrupt the flows and it will be very unpleasant again.

Market is betting on a NVDA beat and BOJ/Fed not upsetting the apple cart.

SO... with that, we still have higher gaps to fill in SPX, QQQ, XLK, AAPL ... then after we tag (on/about NVDA earnings), and post OpEx/Jackson Hole/BOJ Friday... then we can test the bulls again.

Until then, they see falling USD + YIELDS + OIL as supportive of a disinflation impulse that confirms Fed rate cuts AND supports a bid in the assumed continued margin expansion and consumer spending.

Only way that thinking flips is for FORCED SELLING to kick in and stay kicked in.

August 5th was yet another policy intervention which is why hedges have been covered at the same time an air pocket of risk grows under the surface.

JUST NEED A MACRO TRIGGER ;-)

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