The beat goes on .. With “the scramble” for risk-on exposure in full effect, I still see very little indication that this chase in anywhere near over .. And by “over” I mean that the trillions of cash out of the “non believer” camp is not even close to being deployed in any major way yet .. There’s evidence from the systematic trading crowd that they have started to aggressively buy, with an expectation of $12b which is looking to find a home over the next week or so .. Our HEDGEFUND positioning indicator doesn’t even show a pulse yet, rumors of short covering, but that’s about it .. BULL/BEAR positioning indicator update this morning finally got off the mat of being pinned to 0 since this rally has started, nowhere near NEUTRAL yet .. Later today we get an update on SHARPIES/RIFF-RAFF positioning & let’s see if they even budge from an “ALL IN” signal for Christ sake! The lone negative sign we are currently seeing is the simple fact that this chase & aggressive short-covering has created sloppiness in the options markets .. Whether they are hedging shorts being squeezed or scramble for quick exposure in names, players are gobbling up calls at a frantic pace .. This has resulted in p/c ratios & every measure of options buying being really cooked over the short term. As we discussed on last Sunday’s webinar, sometimes that can result in a violent yet quick pull back over the short term which would result in just another long entry for us .. That’s what I would prefer, that’s what WE would prefer, giving us another solid risk-reward window for the next leg higher.. But that’s our main risk in chasing here .. Again, remaining tactical by being less greedy, more nimble, etc can offset some of that risk & allow us to still take advantage of the short term momentum on new long entries .. Just take what the momentum gives you & don’t get greedy by looking for “more” . Regardless, by now you should be well aware of your risks out there by now .. be prepared, acknowledge that risk & the rest is in the hands of the Market Gods!
I honestly don’t have enough energy to talk about today’s action, it was breathtaking to say the least .. The craziest part about today’s buying spree was, up until late afternoon, predominately all the buying came in cyclicals .. In other words, it wasn’t full participation & that’s pretty scary .. Now we always want to keep in mind when we see this type of chase into strength, there’s a lot of forced buying out there .. Underexposed players & funds (non believers) scrambling to get long something. The reason I bring this up again is because, personally, that’s not the type of flow I like to swing full size positions off of .. Or at the least, I remain extremely selective if I decide to pull the trigger on a new swing .. The approach I’m most comfortable playing off this type action is remaining tactical & looking to take advantage of the momentum created off the buying, over the extreme short term. So as I’ve mentioned recently, if this move does become an all out chase (scenario 1 from Sunday webinar) from here, my plan is to lighten up on profitable positions I’ve been holding into strength & not look to replace all that risk with new names I would be chasing at higher levels .. I will certainly look to ride momentum intraday & possibly hold the extra day for some follow through but the only way that I’m going to end up getting aggressive, as far as new swing positions, is if we get some consolidation or weakness & we see quality buying into that .. BUT, I’m just sharing my own approach here, in which I’ve felt the most comfortable & experienced the most success over the years.. Regardless, I would recommend keeping a close eye on those same key positioning indicators we look at continuously, as well as RIFF-RAFF/SHARPIES weekly updates for possible indication of when the music may stop .. But can we see a pullback before then? The answer is Yes & honestly, that’s what I’m actually hoping for, because as I stated, that’s likely the only way I get to reload some cash I raised off positions I take off the table into this rip .. As always, if you guys have any questions, always feel free to ask.
A few changes in sentiment to give you folks an update on .. We come into today’s session officially off a SELL signal on Tactical Sentiment .. We have been toying with the “red zone” a few times over the last week & have officially triggered off yesterday’s rally .. TWEEPS (Twitter) sentiment, they are off suicidal watch for now, large spike in fear on that indicator Friday, has now subsided .. The most interesting thing to share with you guys is a note from the MS QUANT DESK this morning, mentioning a bucket of buying that could show up from the systematic crowd .. Will post that right after I shoot this post out .. That flow may need to clear before we see any sort of a breather or pull in the indices .. Overall flow & Sweepers have been great, especially for tactical players .. An extremely high hit ratio on sweeper buying into weakness on the tactical side, even though all the weakness of late has been intraday & mostly in individual names ..
Short-term sentiment continues to heat up as we now have an official sell sig on our TACTICAL SENTIMENT indicator .. SQUEEZE-O-METER leaves a bit more room for a little more upside tomorrow & P/C ratios got creamed again Tuesday .. Whether it’s the Gamma Gods at work again or a desperate need for risk-on exposure from non-believers, it’s fairly evident that money is being put to work on every little dip .. They haven’t really forced money to chase upside, yet, but you certainly can smell that coming with that big MOC into today’s closing bell.. And keep in mind, it’s the likely conclusion but it’s just a matter of when .. During that type of scramble, you can take short term sentiment, p/c ratios, niners & throw em out the window .. Forced buying is a superior force .. We currently remain at a critical spot here .. If we can get some sort of flush of sloppy bulls here, it can really lengthen this trend, still give bears hope & keep weak bulls unsure.. But if they force all that money on the sideline to chase green from here, positioning & sentiment can cook & fast .. Out of flow, we continue to see an extremely active tape daily, especially considering where we are on the calendar .. Aggressive spec buying, under the radar & squeeze names seeing interest & some good looking bets continue to flow into selective names .. Today, one of our fav semi plays TXN caught an absolute missile & another sharp bet followed in another chip play NXPI, both likely fired by the same syndicate .. As I’ve been saying the last few days, if you are looking to remain tactical, there’s a ton of juice out there to take the quick money off top shelf flow .. For swing positions, if we continue to see new names hit & don’t get a breather in the indices, we can slap on some protection if we feel a bit too exposed .. With positioning where it was & still is, we do not fear weakness as it’s an opportunity .. But if we start to lose chunks of that positioning/sentiment support, that’s exactly when we would want to concern ourselves about our risk & protect against a potential pull. For now, be aware of these indicators as we track em daily & we all know what to look for .. If you don’t, just keep your eyes & ears open, I will make you well aware!