Views of Market Direction...06.09.16

First of all I have to hand it to  this guy...if he makes it work he'll be richer than Carlos Slim in no time.  Sure wish I'd figured this out a few years ago but I actually believe there are still some nuance arbitrage opportunities for the little guy using this strategy if you've got the time and energy... and you don't need a $350,000 computer. More on this later..
Here's are a couple charts from my pals at State Street as the market mood turns cautious. The buzz today was regarding Soros's bearish moves, which we actually highlighted last week and which apparently every trader and his brother was already well aware of..  The little guy is always the last to know....which means you probably missed the institutional rally in GLD and GDX the past week.
To highlight the bizarre behavior of the current market the last chart shows the recent trend of the SPX versus VIX...both are up.

Decoupling of SPY and TLT Volatility...06.08.16

There is a developing situation of SPY and TLT volatility decoupling....SPY is in a steady volatility decline while TLT volatility remains flat to slightly upslope. What are the possible implications of this pattern?  In the case of SPY it most likely reflects an increasing complacency with the odds of a significant decline despite the fundamental and seasonal factors hinting that down is the best odds trend forecast. In the case of TLT the implication appears to be the opposite...that there is steady or increasing anxiety regarding short term treasuries' stability in the face of massive short interest.
Its been odd recently to see SPY and TLT move in relative lockstep in the face of a low VIX environment and with SPY just pennies away from an all time high and the odds for a consolidation or pullback cycle are heightened...despite the bullish technical outlook via the Ponzo and other guidance.

MVP View of SPY and Credit Spread.Idea....06.07.16

Here's an expanded view of the MVP chart of SPY.  Note the current status of the PCL chart....currently well below threshold levels for a high probability trade.  This situation confirms our ongoing contention that the markets are more than ever at the whim of large institutional and prop traders who are confounding "normal" technical indicators (that's their job). Low volume has probably exaggerated much of the recent momentum but we may yet face the day of reckoning once the fear factor kicks in and the VIX climbs out of its doldrums (but not soon according to yesterday's Ponzo).  For those who doubt the SPY can penetrate the 213 overhead resistance here's a credit spread idea that looks like a balanced risk/reward opportunity.

PONZO Updates...SPY Bullish AGAIN!....06.06.16

Two weeks ago SPY was uber bullish, last weak it was bearish and this week the SPY Ponzo forecast is long term bullish.  It seems the horrible jobs report on Friday was actually bullish in traders minds as it pretty well cancels out any threat that the FED will raise rates in the near term.  The VIX forecast has been consistent for the past three weeks and TLT is looking prone to some short term selling but appears stable to bullish on the longer time frame...  There is some technical decoupling on TLT with the best odds scenario suggesting a significant selloff around the end of Summer..

VDX Updates as XLU Hits All Time High....06.04.16

Friday was a technical mess as the dollar plummeted, bonds blew through the roof, SPY recovered from an early S1 pivot collapse to close near the high of the day and the VIX,  well, the VIX was down 1.25% closing at the low of the day.  Trying to make sense of that action was far above my pay grade.. Volume picked up to 80% par as XLU hit an all time high jumping over 2% intraday (that's bearish). Surprisingly, the best looking chart is TLT.
Here's the Traders Outlook for next week and a little ditty from Reuters on the status of investor confidence. Our TLT puts crumpled on Friday's action and in response we doubled down 200% so our net cost is now $ .12.  It's an iffy trade and we'll note its progress into expiration.

What's Wrong With This Picture?...06.02.16

Here's the bond/ TLT updates on M1 and M11.  The precarious stability of treasuries seems more and more apparent as the forces driving recent gains begin to erode and bond ETFs increase exposure as a likely whipping post..Given the FED rate hike odds, the current RSI2 value of 96 and the increasing short interest in treasuries TLT is looking susceptible to an overdue pullback.
LQB is long the 128 TLT 6/17 puts @.22.  FYI
Click once on charts below to enlarge.

PONZO Updates Reverse Course....06.01.16

This week's PONZO updates have the SPY in a dramatically different forecast than last week, which was wildly bullish.  It may be the seasonality issue kicking in or other outlier issues but the current view is clearly not bullish.  VIX maintains a narrow range forecast with an upside bias (don't forget the November 20 target) and TLT looks neutral short term with a slight skew to the upside longer term.  Current market dynamics are focused on the FED...June or July for a rate hike versus an increasing number of credible reports that the economy may not be doing so great after all. Its often difficult to see through the smoke and mirrors of economic reports which are frequently constructively edited to cast the report in a favorable light and situations like the US/Saudi treasury deal mentioned yesterday have been front run for years by those in the know.
All of which makes finding a reliable and consistent trading edge more and more problematic