Summary
- Several good price developments pre-market NY. Foremost is jdefp EWP measurement that of ES=3338.38 as the 161.8 fib off the 2018 end of year decline.
- If that's valid, then we'll very likely see a top today. That level is just a few points away. Lets see if EWP can deliver the goods in ESc1 today.
- JNK, HYG, LABU, XBI are collapsing in pursuit of the declining 10yr yield. You wonder how long NQc1 can stay aloft, with Biotech and Junk sectors collapsing.
- There is now a full scale divergence between the Biotech sector and the Nasdaq. The affinity of Biotech and other "junky" sectors to the bond yields are obvious, with junks of all types lagging behind the yield by one or two days.
- It does look to me that ESc1, and NQc1 still need to complete their wave 5s, and therefore could make new higher highs, but it seems to me that RTY and Dow futures are done rallying wave 2s structures (wave 3 downside) and should be sold.
(This actual Market Report was written pre-NY market opening, on January 22, 2019, and was updated until the NY market closed. Seeking Alpha has been encouraging SA service providers to become more transparent, and show actual reports and interaction between providers and subscribers. We are providing this report to showcase what PAM provides to the members of the community).
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robert.p.balanLeaderJan 22, 2020 3:05 PM
GOOD MORNING
Market Report At The Chat, January 22, 2020
jdefpJan 22, 2020 12:49 PM
fwiw - I have ES=3338.38 as the 161.8 fib off the 2018 end of year decline.
robert.p.balanLeaderJan 22, 2020 1:23 PM
jdefp -- that's beautiful!
Several good price developments pre-market NY. Foremost is jdefp EWP measurement that of ES=3338.38 as the 161.8 fib off the 2018 end of year decline. That is just a few point away,
If that's valid, then we'll very likely see a top today. That level is just a few points away. Lets see if EWP can deliver the goods in ESc1 today.
Also we have had highly defined price action since yesterday, and so we are having this EWP possibility in NY today as well.
robert.p.balanLeaderJan 22, 2020 3:13 PM
Lets see if EWP can deliver the goods in ESc1 today in the same manner that it delivered the end of the Gold correction yesterday.
A market top today is supported by the systemic liquidity situation
More importantly, all of these EWP projections and given the plethora of analyses we have done pointing to an impending significant peak in equities, from a liquidity point of view (see next two charts below), we are indeed confronted with the likelihood that we are seeing an equity market top today.
The situation in yields is what the most significant price development since Friday. If 10yr yield follows the trajectory of outlier 2014 yield or five-year ave, yields will fall sharply. Otherwise, the 10yr yield may bottom late this week, following the 10yr yield five-year average.
But we go for the liquidity condition that is consistent for both equities and yields, of possible trough in mid-March.
-------------------
There are other EWP price evolutions that are waiting resolution
We illustrated the WTI CLc1 likely correction higher, as in the chart below:
robert.p.balanLeaderJan 22, 2020 3:16 PM
This is what we got in pre-NY trade:
robert.p.balanLeaderJan 22, 2020 3:17 PM
We should get another uptick, and hopefully it will stay there long enough to sell on.
robert.p.balanLeaderJan 22, 2020 3:21 PM
There is now a full scale divergence between the Biotech sector and the Nasdaq. The affinity of Biotech and other "junky" sectors to the bond yields are obvious, with junks of all types lagging behind the yield by one or two days.
Here is a full panoply of those relationships:
robert.p.balanLeaderJan 22, 2020 3:26 PM
JNK, HYG, LABU, XBI are collapsing in pursuit of the declining 10yr yield. You wonder how long NQc1 can stay aloft, with Biotech and Junk sectors collapsing.
Lets add the Russell 2000 to the mix -- as PAM member @flamark has pointed out, RTYc1 has been collapsing as well.
robert.p.balanLeaderJan 22, 2020 3:31 PM
Therefore jdefp point that an important EWP Fibo level is about to be hit, should be watched carefully. We might just pinpoint the top of the market today.
Here is comparative performance of the major indices (in their first futures contracts) versus the 2-year yield.
robert.p.balanLeaderJan 22, 2020 3:41 PM
It does look to me that ESc1, and NQc1 still need to complete their wave 5s, and therefore should make new higher highs, but it seems to me that RTY and Dow futures are just completing wave 2 structures (wave 3 to the downside) and should be sold.
Mr. TK and I will look into that matter later, and we could initiate buying TZA (bear RTY) ETFs again. We just need to see a good rebound, and a move of ESc1 to new higher high will trigger the new sell equity 3X Bear ETFs.
PAM had a good experience with the RTYc1 as lead indicator for reversals sometime in early September 2018. We saw RTYc1 breaking down ahead of the other indices, and we took heed of its message and we did well shorting the rest of the market at that time.
robert.p.balanLeaderJan 22, 2020 3:50 PM
We could be seeing the same development. It will probably another day before this becomes completely apparent. Mr. TK and I will look again at any rebound in RTYc1, and if conditions look good we will start buying TZA Etfs again later in the day.
robert.p.balanLeaderJan 22, 2020 3:53 PM
There goes Clc1, but this decline is puzzling. I still believe we will see yet another uptick before further sell-offs take place.
robert.p.balanLeaderJan 22, 2020 3:56 PM
It has been quite a ride in Gold but it should rise further. It should get more traction once resistance at just below 1560 is breached, and I believe it will happen later in the day. If yields fall further and equities fall in earnest aas well, Gold will soar (see chart above).
robert.p.balanLeaderJan 22, 2020 4:02 PM
NatGas seems to have completed a 5-wave series. Wave 5 is a little too short for comfort, but yes it does look like a 50 pct retrace is on the way (see chart above).
@all
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robert.p.balanLeaderJan 22, 2020 4:14 PM
I just uploaded this email:
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jdefpJan 22, 2020 5:14 PM
robert.p.balan - Any thoughts on Copper as a short opportunity?
robert.p.balanLeaderJan 22, 2020 5:22 PM
Copper is a short candidate alright, but finetuning the level to do it is essential.
robert.p.balanLeaderJan 22, 2020 5:24 PM
That is where I would do it in the copper futures (HGc1)
jdefpJan 22, 2020 5:30 PM
Thanks, Robert.
jdefpJan 22, 2020 5:39 PM
Another quick observation, just noticing that there was a significant gap up in VX at the futures open last night.
robert.p.balanLeaderJan 22, 2020 5:55 PM
It is a regular blood-letting exercise, when the level of VIX goes too low on sheer stupid exuberance. But do not chase. Even if we are seeing a real topping out process, The VXc1 surge will most likely halve before a real downmove in equities (and rally in VX) gets really going.
ippy04Jan 22, 2020 6:33 PM
SPX hit 3337.77 before pulling back 11 handles...
robert.p.balanLeaderJan 22, 2020 6:53 PM
RTY and the Dow are being destroyed. I still believe we would have a small uptick to improve levels where we can do TZAs.
User.12932881Jan 22, 2020 8:56 PM
I see three separate forms of liquidity injections now (1) repo (2) increasing bank reserves so that IOER - EFFR goes back to positive and reserve demand curve flattens (3) funding gvt deficits on TCB cycle.
MARKETS CLOSED
Disclosure: I am/we are long bonds gold euros. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Disclosure: I am/we are long bonds gold euro.
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