It’s 1:00 AM my time & my degenerate ass is still going over sentiment charts here .. It is a fairly interesting set up though, so here’s what I’m seeing –> As bullish sentiment has been building by the day on intermediate timeframes, thanks in part to a super dovish Fed where nobody seems to care about anything else, our short-term indicators have been hanging in there .. Now I know that likely confuses you a bit but it actually does make a lot of sense if you think about where we are .. While more players may be feeling more bullish these days, they have acknowledged that the market is “overbought” is the term they like to use & could use a breather. When overbought conditions are obvious, even for the riff-raff , active players will likely cut down there risk exposure over the short-term or put on some cheap protection .. especially during earnings season .. Some players will even attempt to get cute & look for a quick short to profit off some sort of drawdown or consolidation .. as I mentioned recently, from my experience usually the end result from this type of sentiment set-up is a choppy form of consolidation .. A scenario where both longs & shorts get frustrated .. but don’t think for a second their won’t be moves that look convincing & reel in chasers on both sides .. there is also the possibility of rotation while this chop takes place, where you can find some decent outperformance in individual names while the overall indices wears out the riff-raff .. To me, the rotation option would be the best case scenario .. The worst case scenario would be this market continues to extend to the upside & we end up cooked across the board on every timeframe .. The end result to that scenario is never a good one .. but either way I wanted to make clear to you guys tonight that any legit further upside from here, there will be a number of key indicators we follow sitting at or near levels where the indices would normally see some sort of drawdown or breather .. a drawdown that would get sentiment back to neutral, at the least.. especially during earnings season, which is notoriously known for those gap up morning’s on good news to get everybody excited, only to ultimately fade into the afternoon .. regardless, we need to be aware & ready .. it’s earnings season anyway, so being selective, patient & watching our risk is already a priority .. remaining nimble & paying close attention to the flow for rotation is still the best remedy here .. no time for greed & take what the market gods are willing to give .. Time for me to try & get some sleep .. so the moral of this story is at some point in the near future, things will need to chill out, especially in overextended names & the major indices.. we need to keep this in mind, even more so if a chase ensues ..


Overall activity was mixed, leaned bullish .. There was definitely quite a few solid orders call-side amidst the slip of earnings positioning.. As expected, most of the activity did capture earnings dates but we continue to see “clean” spec-activity .. As we discussed, individual names are still the way to go here as far as looking for some outperformance & short-term momentum .. We can very easily see that trend continue as bullish sentiment builds & we enter the heart of earnings season.. As mentioned in last night’s note, keep a close eye on sweeper activity off the opening bell as it often will provide strong clues to which names players may position in aggressively for that session .. AMD was a terrific example of that Monday .. We also need to keep close watch for any sector rotation out there, especially in any post-earnings names .. We are getting close to the point where things may need to cool off a bit, especially in some select hot spots out there but there’s definitely a possibility that they rotate groups instead of a drawdown in the indices .. while some players attempt to get cute for a tactical “overbought” short, rotation into laggards would allow the indices to consolidate or go sideways to work off some heat & chop up some shorts, again .. just a heads up, looks like a good amount of Fed speak on Tuesday’s calendar ..