ES Journal - 2021/2022

BeautifulStranger said:
Interest rates were low for a long time. It is hard to appreciate the impact of rapidly rising rates and the yield curve inverting. The following is a list of effects:

1. Higher financing costs reduce corporate profits, increase risk of bankruptcy, and can cause dislocations in the labor market, affecting consumer confidence, business confidence, and investor confidence. When confidence is lost, spending tends to be reduced.

2. Consumer disposable income is reduced resulting in less demand for discretionary goods leading to lower corporate profits and their capital spending, affecting other industries.

3. Rising rates makes fixed income more competitive for investors’ dollars.

4. Stock valuations become relatively higher for those who use a discounted cashflow model resulting in a much smaller universe of perceived worthwhile investments.

5. Relatively higher US interest rates versus other countries causes appreciation of the US dollar, resulting in our exports becoming more expensive to foreign buyers, usually reducing demand, assuming US corporations attempt to maintain their margins.

Long term rates have roughly doubled and represent a major economic and equity market headwind. In other words, to quote one of our own, “Lifts are gifts”.
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Not to even mention the technical's are garbage as well, which is relevant because clearly for the Weekly chart to look this bad, shows larger players have been exiting positions consistently and for quite some time.

Is someone willing to lay out the bull case? Like more than just thinking it's going to go up because the market is low and it's the US equity market. That's a given, but that's not really something to rely on or at least not good enough for me given all the current factors. Have not really heard anyone make a solid case for bull side.
 
Concinnity said:
Not to even mention the technical's are garbage as well, which is relevant because clearly for the Weekly chart to look this bad, shows larger players have been exiting positions consistently and for quite some time.

Is someone willing to lay out the bull case? Like more than just thinking it's going to go up because the market is low and it's the US equity market. That's a given, but that's not really something to rely on or at least not good enough for me given all the current factors. Have not really heard anyone make a solid case for bull side.
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ES is roughly 6 ATR below its daily mean based on a quarterly moving average. This represents a short term reversion to mean long setup for me, waiting for 1 of 3 triggers. That said, it seems likely the geopolitical situation in the next few weeks will get scary. Potentially real scary.
 
BeautifulStranger said:
ES is roughly 6 ATR below its daily mean based on a quarterly moving average. This represents a short term reversion to mean long setup for me, waiting for 1 of 3 triggers. That said, it seems likely the geopolitical situation in the next few weeks will get scary. Potentially real scary.
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Yeah, no doubt I am aware of the means reversion setup and concept(not specifically yours necessarily, but have my own). There's just not much long integrity in the market though, so not a big fan of looking for any type of mean reversion setup to the long side, particularly with NQ and RTY June lows still outstanding.

It's possible you have a more efficient way of capturing it though. I find focusing on losing/regaining levels is superior to any type of means reversion play, just speaking for myself obviously. If the weekly wasn't so bad, than I'd be more interested in looking for long side means reversion.
 
Concinnity said:
Yeah, no doubt I am aware of the means reversion setup and concept(not specifically yours necessarily, but have my own). There's just not much long integrity in the market though, so not a big fan of looking for any type of mean reversion setup to the long side, particularly with NQ and RTY June lows still outstanding.

It's possible you have a more efficient way of capturing it though. I find focusing on losing/regaining levels is superior to any type of means reversion play, just speaking for myself obviously. If the weekly wasn't so bad, than I'd be more interested in looking for long side means reversion.
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For what its worth, my mean reversion trades use vertical option spreads that I will initially partially hedge and adjust my hedging according to shorter term setups than the expected trade duration.
 
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