WEDNESDAY’S NOTES

Well, at least we’re getting a pause in the currently rally, for now .. Aside from the indices, underneath the hood there is some backing & filling going on in some of the hotter spots of the market .. See the SMH & the chip stocks for an example .. There’s no selling whatsoever in the banks yet which have been scorching of late .. Every bull wants one more drawdown to set up a potential rally into year end, and that may be the main issue in why we won’t get one yet .. Gamma is still stuck up there at 2b strong with the gamma gang still claiming 3100 resistance & 3010 as a potential volatility trigger .. Our intraday & extreme short-term indicators have softened a bit .. thanks in large part to rotation & dull intraday price action .. EOD indicators remain on the warm side because we can’t finish a session red of late .. Positioning still looking delicious, as HEDGEFUNDS are actually reducing exposure in recent days.. That wasn’t a typo, I said REDUCING, not adding exposure to equities here .. As I mentioned the last couple days, I’m personally keeping my focus on individual names .. Looking for names that are catching sweepers at decent spots, while letting some of the hot stuff cool down a bit out there .. As for the indices, there’s obviously some downside risk over the short-term, especially off a legit catalyst .. I’d rather have ammo ready for that, when/if it ever shows up.

OVERALL SENTIMENT

Sentiment remains at POOR RISK-REWARD following Tuesday evening update .. It has more to do with being a bit extended here & until we get a drawdown or some sort of digestion, the indices remain a tough new entry up here for anything more than a quick tactical trade .. Individual names & sectors should remain our primary focus for finding some alpha & outperformance .. I would suggest being a bit more selective here & try to stick with fresh sweeper activity at solid spots .. Be smart on names that are a bit extended & up multiple days in a row .. I would also suggest any full positions you are currently holding, make sure you are ok & have the time to get through a potential flush if/when it shows up .. If not, make sure you plan accordingly by taking some profits, rolling out or putting on some cheap protection while you still can .. There’s also that possibility of melt-up mode as we discussed.. If that is the case, sweeper activity will trickle down into other groups & names that aren’t nearly as extended .. Those set ups would ultimately be the best r/r plays in either scenario for new entries anyway ..

BIG PICTURE SENTIMENT INDICATOR

Our Big Picture Sentiment indicator moves from HOLD to POOR RISK/REWARD environment .. Now that the Energy sector has officially played along in this powerful rotation theme that is taking place out there, a larger chunk of bullish setups have moved away from quality entry spots .. That goes along with some of sentiment readings leaning towards the bullish extreme side of our indicators .. What this all means to us now is, we still want to respect the rotation taking place in individual names & groups but become alot more selective on any swing entries out there .. Stick to the higher quality spots in laggards for any new swing positions .. Utilize sweeper activity more for intraday momentum purposes .. Ask yourself the question, am i ok with starting a new position here in XYZ & sitting through the potential of some digestion or pullback .. Remain tactical here while trying to still take advantage of any intraday momo generated off of aggressive sweeper activity.. The elements out there are still calling for a continuation in what we’ve been seeing to this point, with gamma exp sitting around +$2b & pressure on short-term volatility. A strong enough catalyst for the start of an unwind off this short-term positioning is where the risk enters the equation .. For now, the gravitational pull to 3100 remains until proven otherwise . At some point though, there will be a down session & chasers will catch some sort of kick in the teeth but thats where we wanna have some ammo left to take advantage ..