Tomorrow’s the big day! Fed rate cuts & FB/AAPL earnings to cap it off .. Obviously we would’ve like to go into tomorrow off a bit of a pullback or some digestion but it could’ve been a lot worse .. Our sentiment indicators are not scorched here, warm maybe, but still have room for further upside if they want it .. The problem with the more upside scenario, especially off an event like the Fed, it most certainly would lead to scorched sentiment .. Gamma is long & strong as well, sitting a bit under $2b .. and while that hasn’t been an issue yet, as we approach that 3050 level, dealers will likely start to sell into further strength .. but that’s subject to change as well .. Regardless, it makes a play on the indices up here for new entries a bit difficult because of added downside risk.. If we do see some profit taking off the FOMC decision, we could see something similar to what I’ve marked off on the ES chart below.. From my experience, price usually comes back to near the spot where upside niner exhaustion signals failed 👇🏻
While a play in the indices is a bit tricky, we still need to keep a really close eye on sweeper activity & potential rotation here .. If indices do indeed get stuck a bit there’s definitely the possibility of rotation into commodity related issue or anything else that has lagged during this rally.. We also still have some opportunities stemming from post earnings reactions, similar to what we’ve been seeing .. Thanks to the fact that we are just of bunch of degenerates & action junkies anyway, all this should make for a fun next few days .. A lot of things to monitor right now, even if it’s not immediately an actionable situation .
Market continues to do her thing .. Logically, nobody wants to be stuck in any size short here going into the Fed .. On top of that, you would have to deal with tape bombs on the other side now regarding positive trade war headlines & better than expected earnings (so far) .. There are no real sellers out there .. We can see that in both the price action & as some of our options Sentiment indicators start to warm up .. Markets could run into some profit taking ahead of the FOMC or some heavier selling on a “sell the news” type event .. Ultimately, if bulls continue to lean they will get a nice kick in the teeth .. The sooner that happens from this point, the lighter the kick .. Regardless, we wanna keep the eye on the prize & try not to get overly analytical on the minute to minute gyrations of price action .. Look to keep some ammo dry for periods of weakness .. remain tactical, playing off momentum over the short term .. Don’t get too greedy though, don’t wanna get caught in between when that momo dries up cause that trade has some downside risk .. And more importantly, as far as positioning is concerned, continue to add to a “hit list” of names to watch a bit more closely these days .. SPX 3050 is the level that can act like both a magnet & resistance, is what I’m hearing from the gamma gang .. Keep an eye on commodities as they have been shorted for years & could provide some crazy fireworks if a squeeze ever gets lit .. Only a matter of time now in that camp. Good luck out there today!
A lot going on this week .. We are smack in the middle of earnings season, macro data all over the yard, phase1 of the trade-deal getting nailed down & the FOMC meeting on Wednesday with 90% probability of a rate cut .. Is that enough action for you guys? And all of this going on with the VIX bleeding out & players desperately seeking exposure to anything cyclical .. We go into the week with sentiment a bit above neutral & honestly, some the weekly indicator updates look even better .. So nothing out there yet screaming bullish extreme, yet .. We have Gamma exposure sitting at puffy +1.5b & the gamma gang telling me the odds are favorable for more sticky price action with upside bias .. With the VIX still mis-priced, these programmed machines will keep selling vol until it trades at par or they get bit in the ass off a major headline.. As far as any big level getting in the way, 3050 is the only number of note .. So, the bottom line here is the likelihood for more of the same type price action up until the Fed on Wednesday .. Keep an eye on both sweepers & price reactions to earnings, especially in those rotation names .. I’d be careful on the stuff that’s already a bit extended out there that you may be looking for anything more than a quick trade .. Personally, I’m looking to play tactical for the next few days .. meaning, I’m just looking for quick hits off momentum .. For positions, I’m solely concentrating on names off weakness or that have been severely lagging this rally .. We’ll reevaluate everything come Wednesday morning & see where we stand going into the Fed .. For now, our overall signal sits at HOLD, meaning hang on to positions you may be in off quality entries & you have time to spare .. Regarding new entries, look to take advantage of momentum over the extreme short-term👇🏻
Courtesy of TradeAlert