My notes to self often get so technical and so into the minutia, and long (surprise surprise), that they’re of little use, in their entirety, herein.
So I’m sharing two snippets from last night’s log entry below just to give you the flavor of what I’m seeing and thinking about conditions in the very short-term (the last sentence being the most important):
Note: To the extent that I express my short-term outlook on the overall market, a sector or a commodity, in my log entries, these are not to be the least bit construed as trade recommendations to the reader. At all times, under present conditions in particular, they are subject to change without notice. What might appear to the reader as a viable trade idea today, could be something I’ll do an about face on — as new information presents itself — tomorrow with no prior warning. I share excerpts from my notes only when I deem them useful in terms of me helping our clients maintain proper perspective.
“Stocks fell 3% today, bonds rose 4%, gold rose 4.4%, silver rose 5.94%, the VIX dropped 6.7%, VVIX -10.3%, the dollar index -0.11%, the euro +.53%, the pound -1%…
Stocks, after rallying briefly on huge Fed stimulus in the pre-market, traded lower the whole session on failure to pass a fiscal bill. Bonds held their rally. The action in the vix (although still at an extremely high level) — among other things — says to me that traders likely see a rally coming, as do I.
The fact that precious metals caught a bid and held it independent of stocks today confirms, for now, my thinking that the worst of the initial liquidity crisis — as it relates to leveraged funds and negative gamma — is over.”
“The strong dollar trade still makes fundamental sense, however, the action today, and this evening in futures trading says that it may succumb to the Fed’s latest action. That’ll provide a bit of a tailwind for equities right here.
Upon the Fed announcement junk caught a bid, but lost it as the session progressed. As it stands the Fed will buy up corporate paper, but only IG, so the short-junk trade (despite the Fed indirectly supporting the space) remains viable…
Equity volatility indexes tanked across the board:
Russell 2k: -5.3% Dow: -7% Nasdaq: -8.6% EU: -13.5% EM: -7.7%
Gold vol closed 41.16, up 11.8%; that’s the one contradiction to my thinking that now’s a good time to add — although it closed well off its high on the day. Silver vol closed down 2.37%, that’s bullish.
This across the board drop in volatility indicates short-term across the board bullishness…
This present bullishness is consistent with my expectations that after that first panicky deleveraging phase, the market is ready for a respite, which may consist of a sharp rally into the end of the month, supported by quarter-end rebalancing…
Of course, that said, given present circumstances, whether or not a rally even makes it to month’s-end, let alone lasts much beyond is a complete crap shoot…
We’re in a bear market that, like most, will likely go through several phases before ultimately finding a permanent bottom…”