Summary
- It now appears that the yield model may be correct. If the yield decline is confirmed by further declines tomorrow, then we have seen the top in equities today.
- The yield decline looks a good fit to the models, so far. We just need to confirm the message from the yields with an actual large equity market sell-off follow-through.
- Gold is consolidating; almost done. Gold should make higher highs, if yields rise and equities rise as well. But if yields fall further and equities follow suit, then gold falls.
- Sentiment has suddenly changed. Now equities consider every yield downtick a catastrophe -- it used to be that equities ignore those. These are precursors of a market sell-off.
- Equities very skittish to the downside. I still believe we have one more uptick in yield and that may rally equities back to breakeven entry points. Then boom!, market falls.
--------------------------------------------------------------
During the first TEN months of 2020, PAM delivered phenomenal real-dollar trading performance, the best at Seeking Alpha:
PAM's flagship Swing Portfolio, year-to-date (October 31) delivered $103, 997, 327.54 profit on $2,172,813 capital. Year-to-date performance: 4,686.29%, on 787-83 win-loss trades. Year to date 2020 spreadsheet here.
Two other PAM funds: Algo Portfolio and Seasonal Portfolio (private) year-to-date (October 31) delivered even better performances.
More details on the SWING PORTFOLIO October 2020 performance here.
SWING PORTFOLIO's September 2020 performance here.
-------------------------------------------------------------
Dec 8, 2020 2:39 PM
robert.p.balanModeratorLeaderOwnerDec 8, 2020 10:01 AM
GOOD MORNING EUROPE
Some nasty sideways trading from late Asian trade.
We have orders filled.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 10:09 AM
*We provide a stoploss-reverse contingency for the RTY short trade.*
PAM BUYS 288 CONTRACTS RTYZ0 AT BREACH OF 1888, GCT -- FOR ALL FUNDS.
*This order was filled.*
*RTYZ0 -- DONE AT 1888.4 BOUGHT 288 CONTRACTS RTYZ0 -- FOR ALL FUNDS. *
*The stoploss reverse trade means we are now net long 144 contracts RTYZ0 at 1888.4*
robert.p.balanModeratorLeaderOwnerDec 8, 2020 10:20 AM
*We also provide a long hedge for NQ shorts.*
all PAM BUYS 500 CONTRACTS NQZ0 AT BREACH OF 12,585 GTC -- FOR ALL FUNDS.
*This order was filled.*
*NQZ0 - DONE AT 12,585.95 BOUGHT 500 CONTRACTS FOR ALL FUNDS.*
I asked XXX to *offset last night's NQ short trade (288 contracts at 12,559.70)* so it will not become a distraction in the scalping.
*That means we are now 212 contracts long in NQZ0 at 12,585.95 which are now scalpers.*
robert.p.balanModeratorLeaderOwnerDec 8, 2020 10:33 AM
*We provide a long hedge for stranded YM shorts.*
all PAM BUYS 500 COMTRACT YMZ0 AT BREACH OF 30,050 GTC -- FOR ALL FUNDS.
*The situation in the yield action may provide limited moves to the upside -- so we do not engage long hedges yet. We will relocate our long YM hedge slightly higher.*
all MODIFIES THE THRESHOLD OF THE LONG YM HEDGE TO 30,100 (FROM 30,050) GTC -- FOR ALL FUNDS
If the yield retraces 50 pct of the decline from Friday's top --- we could 0.95/0.955 again.
That means we could see RTY back at 1894 area, and NQ at or slightky above the 12,610 top again.
So we keep the long scalpers. and see what else we can scalp on the way up following a yield rise.ES not a good long scalp candidate -- its momentum has faded, and in fact RTY is also not making much of the rise in yields anymore.*
If/when there is any sustained downmove, ES will probably lead the way.
* We use it to potentially hedge our scalper longs (212 NQ and 144 RTY) in case the market falls out of bed in a hurry and we do not want to leave unhedged stranded longs.
all PAM SELLS 500 ESZ0 AT DOWNARD BREACH OF 3669 AS POTENTIAL OVERHEDGE FOR LONG NQ AND RTY SCALPERS, GTC -- FOR ALL FUNDS.
Gold (XAU) is consolidating -- almost done. Gold should make higher highs, if yields rise and equities rise as well.
But if yields fall further and equities follow suit, then gold should decline.
Market sentiment flipped, just like that. With yields doing nothing at all.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 12:58 PM
Equities now very skittish to the downside. I still believe we have one more uptick in yield and that may rally equities back to breakeven entry points. Then boom!, market goes lower.
But the sentiment has suddenly changed. Now equities consider every yield downtick a catastrophe -- it used to be that equities ignore those. These are precursors of a market sell-off.
ES overhedge for longs partially filled, awaiting details from DCC. Now filled.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 1:14 PM
PAM SELLS 500 ESZ0 AT DOWNARD BREACH OF 3669 AS POTENTIAL OVERHEDGE FOR LONG NQ AND RTY SCALPERS, GTC
*This order was filled. *
*ESZ0 -- DONE AT 3668.25 SOLD 500 C0NTRACTS ESZ0 AS HEDGE FOR LONG RTY(144 CONTRACTS) AND LONG NQ (212 CONTRACTS) , FOR ALL FUNDS *
robert.p.balanModeratorLeaderOwnerDec 8, 2020 2:12 PM
If we get a chance to breakeven on the long scalpers, we will. Otherwise, I don't have much concern for leaving those long scalpers which we would revisit after a brief correction lower. Breaking even is becoming less certain with yields on free fall.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 2:33 PM
*The stoploss reverse trade means we are now net long 144 contracts RTYZ0 at 1888.4*
all PAM SELLS 144 CONTRACTS RTYZ0 AT BREAKEVEN (1888.4), FOR ALL FUNDS, GTC.
*That means we are now 212 contracts long in NQZ0 at 12,585.95 which are now scalpers.*
all PAM SELLS 212 CONTRACTS NQZ0 (NO NETTING) AT DOWNWARD BREACH OF 12,550 TO HEDGE LONG 212 CONTRACTS LONG NQ SCALPERS GTC -- FOR ALL FUNDS.
robert.p.balanModeratorLeaderOwner Dec 8, 2020 2:39 PM
Look at that yield go down.
PAM SELLS 144 CONTRACTS RTYZ0 AT BREAKEVEN (1888.4), FOR ALL FUNDS, GTC.
*Modify to:*
all PAM SELLS 144 CONTRACTS RTYZ0 AT BREAKEVEN (1888.4), OR AT BREACH OF 1881, OCO, GTC -- FOR ALL FUNDS
PAM SELLS 212 CONTRACTS NQZ0 (NO NETTING) AT DOWNWARD BREACH OF 12,550 TO HEDGE LONG 212 CONTRACTS LONG NQ SCALPERS GTC
*Modify to:*
all MODIFY THE THRESHOLD FOR THE NQ HEDGE TO DOWNWARD BREACH OF 12,540 (FROM 12,550), GTC.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 2:54 PM
It now appears that the yield model may be correct. We will know after NY close today.If the yield decline is confirmed by further declines tomorrow, then we have seen the top in equities today.
alexddsDec 8, 2020 10:32 PM
Do we know that? NY Closed already
robert.p.balanDec 8, 2020 6:56 AM
Yes we do alex -- it looks a good fit to the models, so far. We just need to confirm the message from the yields with an actual large market sell-off.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 3:10 PM
*That means we are now 212 contracts long in NQZ0 at 12,585.95 which are now scalpers.*
all PAM SELLS 212 NQZ0 CONTRACTS AT BREAKEVEN (12,585.95), GTC-- (INDEPENDENT FROM EARLIER DOWNWARDS BREACH SELL ORDER) -- FOR ALL FUNDS.
User.49362576Dec 8, 2020 3:13 PM
GM, Robert. Do you have a general idea about the direction of gold (GC)? Thanks.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 3:31 PM
So far gold has mapped itself to NQ moves 4936 -- but that could change quickly.
PAM SELLS 144 CONTRACTS RTYZ0 AT BREAKEVEN (1888.4), OR AT BREACH OF 1881, OCO, GTC
*This order was filled.
*RTYZ0 -- DONE AT 1880.85 SOLD 144 CONTRACTS RTYZ0 TO EXIT SCALPER LONGS (1888.4), FOR ALL FUNDS-*
robert.p.balanModeratorLeaderOwnerDec 8, 2020 3:38 PM
If the 10yr yield falls below 0.9%, equities may final start getting real, and dump.
artbriskDec 8, 2020 3:57 PM
When this ‘real’ starts to materialise, is the bigger short-term picture for the next 2 weeks remains broadly in-line with what we outlined on 13 Nov Robert?
https://rc-cdn.seekingalpha.com/file-upload/wAqh6x9LZhkTcuKqk/Clipboard - November 13, 2020 5:47 AM
robert.p.balanDec 8, 2020 4:06 PM
Different art, but too soon to say -- lets get over this day and get more price data. Tomorrow could provide the confirmation of an equity market top.
artbriskDec 8, 2020 10:49 PM
Thanks Robert. Thought so. Looking forward to the update once you get sufficient price data. 100% aligned with you and, whilst it's painful right now, am certain our moment will come and it shouldn't be too far away!
robert.p.balanModeratorLeaderOwnerDec 8, 2020 3:48 PM
AT 1872.45 BOUGHT 432 CONTRACTS TO OVERHEDGE GOLD SHORT EXPOSURE
all PAM PUTS A TRAIL STOP TO THIS HEDGE FOR THE SHORT GOLD SCALPERS. -- SELL 432 CONTCTS AT BREAK EVEN (1872.45) GTC -- FOR ALL FUNDS
robert.p.balanModeratorLeaderOwnerDec 8, 2020 3:57 PM
Yield now below 0.9%.
robert.p.balanModeratorLeaderOwnerDec 8, 2020 4:03 PM
MODIFY THE THRESHOLD FOR THE NQ HEDGE TO DOWNWARD BREACH OF 12,540 (FROM 12,550), GTC.
*This order was filled.*
*NQZ0 -- DONE AT 12,539. SOLD 212 NQ TO HEDGE THE SCALPER LONGS AT 12,585.95 -- FOR ALL FUNDS.*
It's wild and woolly out there -- NQ collapsing and RTY soaring. What are the MOTUs doing?
robert.p.balanModeratorLeaderOwnerDec 8, 2020 4:26 PM
PAM PUTS A TRAIL STOP TO THIS HEDGE FOR THE SHORT GOLD SCALPERS. -- SELL 432 CONTRACTS AT BREAK EVEN (1872.45) GTC
*This order was filled.*
*GCG1 -- SOLD 432 CONTRACT AT BREAKEVEN (1872.45) TO EXIT THE HEDGE FOR THE SHORT GC SCALPERS -- FOR ALL FUNDS. *
robert.p.balanModeratorLeaderOwnerDec 8, 2020 6:11 PM
PAM SELLS 212 NQZ0 CONTRACTS AT BREAKEVEN (12,585.95), GTC-- (INDEPENDENT FROM EARLIER DOWNWARDS BREACH SELL ORDER)
*This order was filled.*
*NQZ0 -- DONE AT BETTER SOLD 212 CONTRACTS AT 12,588 FOR ALL FUND*
robert.p.balanModeratorLeaderOwnerDec 8, 2020 10:13 PM
Just noticed these diagonal wedge EWP structures today. We are indeed close to a top, if not seen it already.
Ascending wedge is a wave 5 -- the ultimate rally.
But unfortunately knowable only after it has happened (if it happens),
wc.happyDec 8, 2020 10:18 PM
What about VXX? Looked like w 4 triangle that resolved downwards. So assume more decay to come
TimK123Dec 9, 2020 12:16 AM
Could argue VXX might be having an ending diagonal also. Not saying its the final low but could bounce I guess. Mild RSI divergence too recently. Chart below.
TimK123Dec 9, 2020 12:16 AM
sparketDec 8, 2020 10:47 PM
Looks like and ending diagonal to me.
ptTL9Dec 8, 2020 11:05 PM
ptTL9Dec 8, 2020 11:05 PM
sparket something like that?
TimK123Dec 9, 2020 12:11 AM
I thought so too, drew this earlier. I guess ascending wedge/ending diagonal = same thing in this instance. RSI looking decidedly dod
artbriskDec 9, 2020 12:19 AM
Ending Diagonal Triangle Elliott Wave Pattern
This article looks at the ending diagonal triangle Elliott wave pattern, written by internationally known author and trader Thomas Bulkowski.
TimK123Dec 9, 2020 12:21 AM
The indices have exhibited the 3 wave internal moves typical of an ending diagonal. Hope to see some reaction tonight, and not too much throw over for the W5 top.
artbriskDec 9, 2020 12:24 AM
I feel there may be some throw over with the decline starting Thu afternoon / Fri. Am not sure how deep the decline would be though. Hope Robert will guide. Perhaps you have a view Tim?
TimK123Dec 9, 2020 12:27 AM
I think tonight, but it will require MOTU cooperation I would think. There looks like some kind of large sell order was initiated at 3713 to stop futures accelerating overnight so I think maybe we see 3715 as a last gasp higher then down. I wouldn't stake my life on it though.
Also not saying this is the final top either, just a local one.
artbriskDec 9, 2020 12:29 AM
Yes. I also expect and refer to Dec top
TimK123Dec 9, 2020 12:29 AM
The diagonal will have a time limit, it can't hover at the top for too long imho.
artbriskDec 9, 2020 12:34 AM
I tend to err on a bearish side. With my private equity mindset I pay too much attention to company 'fundamentals'. Clearly an incorrect approach with public market, especially after QE regimes and now extreme call option exuberance
TimK123Dec 9, 2020 12:37 AM
Yes it's been risky trying to find the top lately it seems. I think vaccine news has encouraged some of the sovereign wealth funds to deploy some of their cash regardless of PEs. And the Softbank whale was at it again until recently I think, may contribute partially to the large number of calls, but I don't really know at all on that, his contribution might be less now as he's got into hot water for gambling his company's cash.
artbriskDec 9, 2020 12:43 AM
Yes with all the liquidity - TINA effect.
Some 'options gurus' (area where my knowledge is limited) talk about increasing vanna and charm flows (and also volatility oversupply) which would apparently make it difficult for a significant correction until after Friday. Things should change next week according to them.
Alan's point on the tax drain from the 15th is interesting.
https://rc-cdn.seekingalpha.com/file-upload/uHiYs4LtBtXi3TAqX/2020-12-08 23_00_54-Window.png
Perhaps some stars will align for us and we see a decent sized leg down
TimK123Dec 9, 2020 12:50 AM
Good thoughts. It's potentially the final Brexit decision day tomorrow, so EUindices might be risk-off in advance of the outcome. The pattern does say a top is potentially here for technical reasons.
That said a peaceful deal could cause strength, that won't be know until tomorrow after hours at the earliest.
artbriskDec 9, 2020 12:51 AM
I've seen some estimates that retail call options activity is responsible for between 20-30% of equities volume these days. No idea about methodology of these estimates.
Would also be interesting to know what proportion of the total call options volume was Softbank (will be scaling down now)
TimK123Dec 9, 2020 12:53 AM
Yes, I tried to find out a figure for the Softbank positions still open, yesterday, but drew a blank.
artbriskDec 9, 2020 12:54 AM
These kind of deals have a tendency to always happen last minute. My view that it's kind of priced in.
In case of a no-deal Brexit the move down could be violent and serve as a trigger we are expecting.
TimK123Dec 9, 2020 12:54 AM
Yes Softbank has said he will let the options expire and only buy pure stocks in future.
artbriskDec 9, 2020 12:55 AM
Good. I approve.
TimK123Dec 9, 2020 12:56 AM
I think they will get an agreement, but I couldn't say for sure
artbriskDec 9, 2020 1:04 AM
Yes, last minute deal is the most likely outcome. BJ would probably cave in - on fish waters, etc.
EU won't do much compromising - they made a point to make it difficult for Britain to warn possible future others.
If EU proves to be too unreasonable in their final demands, I see a slight chance that BJ may walk. Don't know enough details to assess probability, but can't see it being more than 5% I guess.
But it's a 'nuclear effect' type of one - probability very small but impact very large. Perhaps not so much on the markets but certainly on the UK
TimK123Dec 9, 2020 1:09 AM
Yes agreed. Things will be a lot clearer in a few days.
Comments
Log in or sign up to join the conversation.