Hammer Time

Hey guys, so in what appeared to be shaping up as another over-night pump in futures, S&P futures traded as high as 3451 this morning, making a run for the Green line resistance, and recapturing the 100 period MA on the hourly SPY chart (343.17) for the cash open. We bounced off the 21 day EMA yesterday (341.54), and absent a close above this level today, we may see another move down to the 50 day MA (339.50), and possibly the 200 period MA on the hourly (338.05). If we lose these supports today, we may not catch a bid until we see a revisit of the low from Oct 2nd at 331.19. From those levels, it would be very difficult to end the week bullish, and near impossible to recapture the Green line, maintaining the long-term uptrend.

Are we witnessing a Double-top?

The last time we observed what could possibly be a double top, was back on June 8th. But, the price action the week of July 13th, and 20th, showed a strong continuation of the bullish weekly trend, and we closed above the previous weekly high (close), the week of the July 27th. The difference I'm observing today, is a clear multi-week rejection at the all-time weekly closing high, and a solid break of the Green line support, setting us up for further downside in the near term. If yesterday's price action was a prelude to this week's sentiment, we're in for a major move to the downside. In my opinion, the direction of the longer-term trend could be confirmed this week if we fail to recapture the Green line.

Notes:

- Building permits and housing starts came in strong this morning. I guess just because people don't have jobs, doesn't mean they can't buy a house? We'll find out soon enough.

- DOJ filed an Antitrust Lawsuit against Google. The plot thickens for Mega-Tech. I'm expecting bearishness off the back of this news alone.

- Senate Republican, John Thune said, "It'll be hard," to get enough Senate Republican votes to pass a bill as high as 1.8 Trillion (the dems want 2.2 Trillion, and I don't think they're going to budge. If they do budge and come to a "deal" then they would be telling the world that Donald Trump is a good negotiator, and successfully made a deal, 2 weeks from the election. Very unlikely the dems want a deal here guys, just my opinion.

- According to Reuters, Pelosi and Mnuchin spent an hour on the phone last night, discussing details of the latest stimulus package (on top of the 3 trillion in aid already approved), and, "continued to narrow their differences." We're still waiting on Robert Lighthizer to show us a real US/China Trade Deal. That narrative pumped stocks for years with no winners, before they switched the story to a measly Phase 1 accord, and we all learned it was a bull-shit farce. It's all about narratives, and reading between the lines.

I appreciate your time today guys! I'm excited to see how things play out today, and best of luck out there. Stay tuned for updates! Cheers, Michael.

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Sitting in orbit at the moment around 345. Yesterday's ugly close is now a thing of the past. We're seemingly making our way up to the Green line (346.50), which should now act as resistance, once again. Can the bulls get us there before the bears show up and eat everyone's lunch?

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Vol catching a bid here after bouncing off yesterday's resistance around 28.50. Sitting at 29.2.

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US Dollar getting hammered here, back to 93. 10Y yield up notably to .794. We've only been at this level a few times since March. But, we've been in an uptrend since the beginning of August.

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We just broke back below the 100 period MA on the hourly. Over night rally fizzling quickly. Tech back in the red. Vol spiking. Here we go...

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Now seeing headlines that Pelosi and Mnuchin are scheduled for another 3PM call today, before the self-imposed deadline on negotiations expires. Deal or no deal, this is going to be a sell-the-news event imo. We've more than priced in a perfect economic recovery, and a near 2 trillion dollar deal, and yet, investors are doing what they always do. Ignoring and underestimating negative outcomes, because subconsciously people always prefer not to think about bad things happening. Let's see how the afternoon session shapes up...

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Interesting article on Zero Hedge today about a single VIX trader whose trades accounted for 68% of all put volume on Friday, through block trades. If a single trader could use VIX options to move the entire market, this market is even more broken than I thought.

"The fund was most likely buying a giant put spread in a massive bet that the VIX which is currently at 29 will tumble to 17 by February, or just after the inauguration date. According to Bloomberg, the unknown trader bought and sold some 360,000 put options, sending volume in those contracts soaring and moving the broader put-to-call measure, which has been declining in recent months, to 3.5, the highest level since 2009. And all that from one trade."

Today it's all gone, though, and put volumes are tumbling back to 0.98. Talk about a manipulated market, my friends. But, I digress...

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Small rally here back to the 21 period EMA on the hourly (345.84). Still floating in orbit, and hovering around 345 at the moment just above the .618 fib.

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Tech now up around 1%, along with the rest of the majors, after being in the red just 2 hours ago. What changed? Headlines about optimism that Pelosi and Mnuchin are "narrowing the gap" on stimulus talks. Wash, rinse, repeat.

SPY just broke above it's 21 period EMA on the hourly, and is now within arms length of the Green line (resistance) around 346.80 where I expect a rejection. We're at the HOD, and we have momentum, but the bulls will need to fight hard to break through. Will the bears show up and issue a sharp rejection of the Green line, or are they hibernating today? We'll find out very shortly. stay tuned...

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Near perfect rejection off the Green line resistance. Mid-day rally is losing steam, as we break back below the 21 period EMA on the hourly. Let's see if the bulls buy the dip, and take another stab at it...

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Just a thought, and please share your insights if you have other opinions on this:

US GDP is over 20 Trillion dollars per annum. Given the (real) economic climate, post COVID, in this context, how many more stimulus packages would we need to replace the permanent loss of productivity (and hence GDP), from the 10 Million job losses we're still seeing 6 months into the "recovery" ?

Imo, these job losses are rotating at the moment, as evidenced by the weekly claims numbers, but they're likely permanent, and this could be the tip of the iceberg. Inflation or no inflation, whether it's 1 Trillion, 5 Trillion, or 10 Trillion dollars in stimulus, if printing half a country's GDP is the new economy, and jobs no longer matter, then why try to find a job in this new "economy," and further, why pay taxes?

Imo you will look for a job in the future, and you will pay taxes, because you will need money. Markets will crash, like they always do, and the (real) recovery is going to take a decade or more, like it always does.

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Back to SPY Analysis:

Seeing some weakness here as we approach power hour and the infamous "negotiations call" with Pelosi and Mnuchin. Let's see if the 100 period MA on the hourly (343.74) holds up as support. Bears defended the Green line resistance with conviction today, so I suspect they have plan for the bulls heading into the close.

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Just broke below the 100 period MA on the hourly. Looking very bearish heading into the close. Can Super Nancy and Bat Mnuchin save the day with some much needed "optimism?"

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SPY is now red on the day, and appears to be making it's way down to the 21 day EMA at 341.70.

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Vol is catching a bid here, and is now sitting near the HOD at 29.30. Someone call Mnuchin!

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Solid bounce off the 100 period MA, and we're sitting around 344.50. I'm observing an interesting bullish trendline on the hourly that started on Oct 1st, then was revisited as support again on Oct 6th, then again yesterday, and then again today. It's sitting around 343.90, just at the 100 period MA on the hourly. I think if we lose this, it could get ugly fast.

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Okay guys, so it was a pretty wacky day of price action today. Although we closed flat, the important thing to note is that we were rejected at the Green line resistance, after a bullish morning session. We also lost the 100 period MA on the hourly, and lost what I've observed is a short-term bullish trend line which was sitting at 343.90. It was bearish price action for the second half of the day, and I expect to see an update on the stimulus deal in the interim, which would at the very least, increase liquidity and trading volumes immensely, if not create a significant sell-the-news correction.

Thanks for your time today, and I'll see you guys tomorrow. Cheers, Michael.