Some dumb fool on cnbc said that with all the billions and trillions on the side line in money market accounts getting 0.25% or less are beginning to feel that the only investment to get anything better then a lame ass 0.25% return is the stock market, so he actually thinks money is going to come in from money market accounts into the equities pushing the markets higher. These fund managers always believe in the money on the sidelines theory....fools.
Market refuses to go down
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The strength in the bid is not going to disappear overnight, there are thousands of short contracts trapped and their efforts at defending their position have not been successful. It won't take much more up side to get them to capitulate. Lots of positive news flow and number will suck in the retail investors who are still on the sidelines but even if it doesn't all that this market need to keep rising is for the USD to keep falling. That is the one thing that could stop this rally dead in its tracks, if there is some event that causes the USD to appreciate, especially given how crowded that trade is. Huge USD strength and we will get a correction in equities, just don't see that happening though with current administration/Bernanke. Even Geithner trying to talk reassuringly no longer works, they have basically lost all credibility as far as the USD goes. More likely is a quickening of the USD sell off along with a parabolic move in US equities.
Yes it will all end badly especially for the man in the street who isn't participating in this rally but unlikely to happen this year.
If we get 1026 Sunday overnight it would be an absolute gift and I would be a buyer in size all the way down to 1002. If that doesn't hold then all bets are off.
So you're carrying 55 ES futures waiting for that blowoff top and VIX to drop to the low teens?? Crazy boy!
What makes you so sure of that blowoff?
I could see the VIX in high teens, but low teens, not in many many years. It just made a new 52-wk low, and that is in my opinion a great time to sell, not to buy.
Those contracts were just a buy the overnight dip trade, sold them during the day sesssion. Only carrying options over the weekend but a sizeable number and unhedged, rare for me and I will admit that I am perhaps on a little bit of a tilt having been short and stung early this summer. Still it seems to be working so I will just go with it. I sat through half of 2006 adding to a losing position and it was damn painful and even though the pay off was big in 2007 and 2008 I will never forget the frustration of those long months in 2006. I was starting to feel the same way this summer and not wanting to have a repeat I just decided to go with the flow this time. There will be plenty of time to get short again just as there was in 2007 (I think the best indication will be when those overnight dip trades stop working).
Market delta work and just watching the market suggests to me that there are 20-30K contracts at least short just below the break out area and I don't think they have covered yet. I also think that there are a lot of contracts that faded this BO. In addition I think there are many participants who didn't participate this summer because they didn't trust the volume or wanted to see more economic data before they were confident enough to put money to work. As we get in to the fall volume should give them that confidence and the economic numbers have been trending up for a few months now whether you believe them or not. Performance anxiety along with the other catalysts mentioned above should produce a blowoff top which will also no doubt suck in the retail bagholders who will take the plunge and get back in near the top of the move as they always do (lol hopefully that is not me right here right now!), equity fund flows suggest that they are still not buying in to this market. The weakness of the USD and the rally in treasuries should keep a bid under the market and allow it to drift higher until it reaches the tipping point that will trigger the various participants who will cause the blow off. I feel that we are close to that point, especially as a lot of shorts and dip buyers are hoping to get out or get in on an expected swoon in Sept/Oct. As it does not materialize it should add to their panic.
Low teens may be a stretch but this feels a lot like the trading environment I experienced in 2006 when the bid was also unrelenting, voracious, and seemingly insatiable. I also think that a huge number of covered calls were written on the way down and those have been unwound as the market rallied and have caused implied volatility numbers to be exaggerated as covered call sellers hit the bid. As that activity diminishes it should help the Vix fall further. But Vix in the high teens will be enough for me to become more vigilant.
I'm long vol like a motha via Eur/Jpy. I wish I had access to a market with a later expiry, mine expires the 18th.. I see crude near 70 and gas getting much cheaper at the pump, I'll take real world evidence any day.
The epic deflation that is coming will destroy the rest of the dumb money and absolutely shock most of this forum. 3800 on the dow? 450-500 on the spooz? I haven't a clue but it is about to get UGLY....I will say that the collapse on the vix futures from 33 to 27 over the past week was epic, it now ensures that no one knows where this market is going. I do, gov't cannot fill in the black hole of deflation. No amount of manipulation can beat the market.....
The epic deflation that is coming will destroy the rest of the dumb money and absolutely shock most of this forum. 3800 on the dow? 450-500 on the spooz? I haven't a clue but it is about to get UGLY....I will say that the collapse on the vix futures from 33 to 27 over the past week was epic, it now ensures that no one knows where this market is going. I do, gov't cannot fill in the black hole of deflation. No amount of manipulation can beat the market.....
