Summary
- TK and I are watching the irregular, which could be Wave 2 in the larger picture. That kind of Wave 2 top make sense if yields are topping out soon.
- Watch the 2020-2021 TCB. if it continues to fall from today, and does it sharply, we have a good case of an imminent top out in yields, in 3-5 days.
- In NatGas, we are getting close to the end-game of the long trades. It would be nice to get higher highs -- and we offload longs.
- Note the very noticeable lag of the equities vs Yields. Yields have already been up for two days (NY close basis), and yet SPX is just about to make the inflection point higher.The yields will likely be the main signal for a top out process -- then we have a day or so of warning for equities.
- If you remember, we said earlier that we will use this incoming inflection point for a top where we will take out all the dedicated hedges and overhedges for the stranded short positions. We also said that if equities/yields fall as expected, we will allow the stranded shorts to ride the fall. But if no such Wave 3 materializes to the downside, we will offload all stranded positions, and square up the accounts for 2020, with the stranded shorts gone.
FEBRUARY 1, 2021
GOOD MORNING ASIA / GOOD AFTERNOON WEST COAST
vlad.4649Feb 1, 2021 3:07 AM
Robert, thank you for the Weekend Musings, they are always a great read! The crypto notes got my attention. You mentioned that:
1. Cryptos lead the stock market and
2. Growth of China Money Supply powers cryptos (through the lagged effect of Total Social Financing)
Do you think there is an underlying strong correlation between the US stock markets and Total Social Financing?
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 6:04 AM
vlad.4649 -- it does, but it is better seen under the rubric of G5 central bank balance sheets.
Looks like the market has gotten over its fright -- but let's not chase it. Lets see if we can get the RTY longs cheaper on a wave 2 test of lows.
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 6:07 AM
all PAM BUYS 288 CONTRACTS RTYH1 AT 2,058 LIMIT OR BETTER, FOR ALL FUNDS.all PAM BUYS 288 CONTRACTS NQH1 AT 12,860 LIMIT OR BETTER, FOR ALL FUNDS.
Silver has gone ballistic on new WallStreetBets coordinated attack.
Gold longs can only wish.
GOOD AFTERNOON EUROPE / GOOD EVENING WEST COAST
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 12:17 PM
10Yr Yield is probably ready to make that 50 pct correction/ retracement back to 1.044.
That should provide the wherewithal for a wave 2 retraxce in RTY and NQ, and for the rest of indices.
That should also be a good place to implement short TN futures trades (chart above).
henry.riveraFeb 1, 2021 12:38 PM
Hi Robert, could you indicate by means of a graph what is expected approximately for ES and NQ. And are you just looking for long scalpers or do you also plan to short in key zones?
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 1:04 PM
HH -- allow more market data to arrive. We do not have enough yet to make meaningful extrapolations. I can put in squiggles, but these are meaningless, with no firm foundation. We will do so when we have enough data. First of all, we want to make sure we have seen the bottom.
NQH1 EWP short term outlook
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 3:13 PM
TK and I are watching this irregular, which could be Wave 2 in the larger picture.
That of course assumes that we have seen the bottom. No definite evidence yet.
RTYH1 EWP short term outlook
That kind of Wave 2 top make sense if yields are topping out in 3 to 5 Trading Days (see chart below).
Nota Bene -- watch the 2020-2021 TCB (purple line) -- if it continues to fall from today, and does it sharply, we have a good case of an imminent top out in yields, and probably equities after 2 to 3 days lag.
bogeygolfFeb 1, 2021 7:14 PM
isn't end of Feb when tax refunds are paid out of the TCB ? would make sense that we see such a large TCB drop off then
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 3:30 PM
Note the very noticeable lag of the equities vs Yields. Yields have already been up for two days (NY close basis), and yet SPX is just about to make the inflection point higher.The yields will likely be the main signal for a top out process -- then we have a day or so of warning for equities. Lovely.
bogeygolfFeb 1, 2021 4:26 PM
if DXY breaks above 91 is that a leading indicator of equity risk off?
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 4:57 PM
Thats possible, even likely, bogey
plavacFeb 1, 2021 5:24 PM
I think the market sees this dollar growth as a mini short cover due to a possible attack by the WSB as well as on silver.
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 8:29 PM
Looks like we missed the bus, relying on the yield which did fall -- only RTY and NQ decided to go up nonetheless.
If yield fall one more time and reach 1.05/044 target, we could still see some pullback from current RTY and NQ levels.
User.49362576Feb 1, 2021 8:39 PM
GE, Robert. Could you clarify if PAM would continue keep RTYH and NQH buy order in place (all PAM BUYS 288 CONTRACTS RTYH1 AT 2,058 LIMIT OR BETTER, FOR ALL FUNDS, all PAM BUYS 288 CONTRACTS NQH1 AT 12,860 LIMIT OR BETTER, FOR ALL FUNDS.)? Thanks.
robert.p.balanFeb 1, 2021 8:43 PM
4936 -- I am not chasing the price, but your prerogative if you want to. I want to get in the market when I understand what is going on, but this one is a head scratcher. Will keep the orders for a while -- reassess at NY close.
paradigmFeb 1, 2021 9:07 PM
Maybe just the beginning of the month inflows from IRA contributions.
robert.p.balanFeb 1, 2021 9:09 PM
Spot on Collette.
User.49362576Feb 2, 2021 9:14 AM
GM, Robert. Are we keeping RTYH and NQH buy orders in place (all PAM BUYS 288 CONTRACTS RTYH1 AT 2,058 LIMIT OR BETTER, FOR ALL FUNDS, all PAM BUYS 288 CONTRACTS NQH1 AT 12,860 LIMIT OR BETTER, FOR ALL FUNDS.)? Thanks.
robert.p.balanFeb 2, 2021 9:19 AM
We let those orders expire EOD, 4936, and will reassess.
vjapnFeb 1, 2021 9:09 PM
Robert, it seems to me that when GME was not rallying, market was breathing a sigh of relief that their would not be any forced liquidation.
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 9:10 PM
That too V -- nice observation.
paradigmFeb 1, 2021 9:11 PM
john.c.yipFeb 1, 2021 10:07 PM
FWIW, today is 64TD after Election Day.
paradigmFeb 1, 2021 9:11 PM
I grabbed this from a free newsletter, gunner24.com.
robert.p.balanModeratorLeaderOwnerFeb 1, 2021 9:12 PM
Very nice! Thank you.
paradigmFeb 1, 2021 9:25 PM
Very unusual too that the equity market is ignoring the move up in the dollar.
john.c.yipFeb 1, 2021 10:07 PM
FWIW, today is 64TD after Election Day.
FEBRUARY 2, 2021
GOOD MORNING EUROPE / GOOD EVENING WEST COAST
robert.p.balanModeratorLeaderOwnerFeb 2, 2021 9:03 AM
This is the reason why silver is getting hammered.
CME Hikes Silver Margins By 18%: Paper-Physical Disconnect Set To Explode
The Empire strikes back.
We definitely missed the bus in the long NQ and RTY long trades. My fault -- I was overly technical with the long entry points.
However, I am leery of chasing these two long trades as we are probably in the last few percentages of the forecast rally.
That is where NQ is now (above) . . . this is where we think NQ is going, as illustrated nearly Mon
We are heading towards an important topping out inflection point in yields and equities, if the models are correct.
If you remember, we said earlier that we will use this incoming inflection point for a top where we will take out all the dedicated hedges and overhedges for the stranded short positions. We also said that if equities/yields fall as expected, we will allow the stranded shorts to ride the fall. But if no such Wave 3 materializes to the downside, we will offload all stranded positions, and square up the accounts for 2020, with the stranded shorts gone.
Cutting to the chase, we are now on the lookout to sell and hopefully get a good ride down with a falling Wave 3. Trading Waves 2s (and Wave 4s, countertrend moves) is always difficult. We are lucky to get such a simple countertrend action with the irregulars this time around.
robert.p.balanModeratorLeaderOwnerFeb 2, 2021 12:09 PM
That's a Wave 3 illustration in the YMH1. YM will be our main vehicle to the downside.
john.derFeb 2, 2021 12:41 PM
USD in particular seems to be pointing to risk off.
robert.p.balanModeratorLeaderOwnerFeb 2, 2021 12:57 PM
Agree, John -- the DXY market looking very well bid.
robert.p.balanModeratorLeaderOwnerFeb 2, 2021 1:05 PM
In NatGas, we are getting close to the end-game of the long trades.
Maybe not more than two weeks period for a final rally - and we are out of longs NGs and long EQTs.
It would be nice to get higher highs -- and we offload longs.I think that is not a wild hope, given the sharp rise to backwardation in both short term and long term calendar spreads.
NatGas M1-M12 curve was in a severe contango, now moving towards backwardation
The M1-M3 curve now moving towards deep backwardation.
This is what is driving up the NG price higher.
Natgas Prices Jump 11% As Weather Models Point To "Widespread Cold"
"The pattern ahead as we get deeper into mid-February supports a widespread colder than normal look across the US we haven't seen since February 2014."
So we are looking at the end-game of the NG price evolution process, which I described in a NatGas Seeking Alpha article which was published July 14, 2020.
Natural Gas Gets Set For Prime Time: Tracking A Possible Rally Until February 2021
However, this coming top in NG prices may just be followed by a shallow consolidation -- Inadequate inventories may drive NG prices higher until late in the year
robert.p.balanModeratorLeaderOwnerFeb 2, 2021 1:28 PM
We (I and my wife) will likely hold our long EQT investments for the longer run.
fourscoreFeb 2, 2021 2:44 PM
RB, based on your earlier prediction around mid-Feb was the probable high point. Would it make sense to take profit then, in expectation of a better price during the consolidation period, or might this more likely be better as a hold situation in your current view?
robert.p.balanFeb 2, 2021 2:50 PM
From a futures point of view, I believe it would best to get out. The leverage is more friendly in EQT, so we are holding out for the longer run.
(TO BE UPDATED AFTER NY CLOSE TODAY, TUESDAY, FEBRUARY 2, 2021)
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