THURSDAY’S FLOW NOTES & SENTIMENT UPDATE

More selling on Thursday as the indices took yet another bath but flow did have a little bit of a different feel to it compared to the past few days .. For starters, there definitely was some buying out there in both individual names & major ETFS .. The buying in individual names was still somewhat selective as a whole but a nice band of sweeper activity showed up into early weakness to help propel a strong squeeze (700+ DOW points) .. Size opening activity in both SPY & QQQ April calls (likely the same syndicate) was also a part of that early band of Sweeper buying .. Like we’ve discussed recently, it’s important to understand what we have on our hands here .. It’s pretty obvious that this is a panic & the selling pressure has been no match for short term tactical sentiment indicators .. That’s confirmation in itself that we are dealing with a different beast here, as opposed to your run of the mill pullback .. On top of that, we are coming from the total opposite side of sentiment extreme .. There is a lot of built up long exposure out there that this market is trying to absorb .. And on the fundamental side of things, the fear is we have a global economy that goes into lockdown mode & basically freezes up .. How the hell do you price that in? Not to scare anybody but that’s 2008 all over again .. Now before you jump out the window, I said that this was the fear out there, a worst case scenario, it doesn’t mean it has to play out that way .. But if you were “all in” prior to this rollover, guess what? You’re panicking & need to take down risk dramatically .. So that’s the pickle we find ourselves in & what we need to remember is the ultimate goal is to have the ammo to fire at opportunities once this thing finally calms down .. With VIX up here, there should be some large squeezes in between, followed by massive fades & then squeeze again.. That’s why the ideal situation is to stay patient & wait on those bands of buying to show up (like this morning) & remain light & nimble .. If you can’t be as quick or your only interested in more upside, just be prepared for the process .. Take it nice & easy .. Take a small stab on those SPY April’s, assuming you may be early & look to add into any further weakness when there are signs of buying.. This way you’re not frustrated or suicidal when your profits disappear by the end of the day .. Once we get intermediate-term sentiment (positioning) back in our corner, it increases the odds of sellers drying up & buyers showing up into further weakness .. We got a higher probability of a tradable bottom .. At this pace we could get there by next week but a size squeeze prior to that point wouldnt shock me one bit either .. No reason to try to be a hero here .. When the time comes, there will plenty to eat ..

WEDNESDAY’S FLOW NOTES & SENTIMENT UPDATE

SWEEPER ACTIVITY was bearish on Wednesday .. Some bull flow early as indices bounced off the open but it was fairly obvious early on that call sweepers weren’t too interested in putting on risk into strength .. As the day progressed & rallies faded, call buyers lacked interest & put sweepers took control with a primary focus in ETFs & virus/travel related issues .. The only positive take out of today’s order flow as a whole is that there was some selective buying that gave us some watch list material, but thats about the extent of it.

SENTIMENT was little changed as a whole from Tuesday’s session .. Short-term & tactical sentiment remains in “squeeze mode”, which tells us that short term players are getting sloppy playing the downside .. When these tactical signals only translate into gap ups off the open & intraday squeezes, that in itself is a signal that there is something larger at play .. Think of the 4th quarter of 2018 as an example .. We then fall back on our stronger intermediate signals which will tell us when positioning finally becomes thin enough & players have little supply left to sell .. One of the main issues in why the selling here has been so viscous is because we just came from the complete other side of the extreme .. Positioning was quite full off the 2019 rally with HEDGEFUNDS, CTAs & riff riff getting more involved by the day .. The Fed pumping liquidity into the system forcing everybody in risk assets & now we’re seeing the unloading of that right in front of our eyes .. We are getting closer to bullish IT signals by the day & the likelihood of some of these intermediate term indicators flashing green by next week is very realistic .. That will at the least allow us to pick our spots & do some buying into days of weakness .. We will start to see sweepers do the same & start accumulating names in size, with time .. We will likely see SHARPIES (commercial hedgers) become interested again, the 1st time since those Dec 2018 lows ..

THE PLAYBOOK remains the same .. Remaining extremely nimble here is the best & only way to go until we see some confidence from sweepers .. This volatility can get out of control, so the best thing to keep busy is to just pay attention to any sweeper accumulation with time in names you may have an interest in .. The longer this goes on, the more names we will likely see be accumulated, the more we can potentially target .. but as we’ve seen before, missiles & “Bazooka Joe” show up when least expected, so don’t fall asleep behind the wheel or become disinterested here .. They “usually” arrive when intermediate sentiment is flashing buy sigs & the noise is at its worst but now is a good time to prepare & be ready .. Ultimately these corrections set up the best risk-reward opportunities for options trading, please don’t waste firing your bullets at bullshit! (excuse my French)