Tuesday, Dec 3rd (charts showing order flow transactions have been removed)
 
Examining an overvalued US Stock Market

Narrative: It’ll become evident at some point soon that the US economy is starting to show ominous signs of impending or ongoing slowdown/downturn, and we’ll see a risk-off as we’ve never seen before in recent memory. The levels we are at are unjustified given the reality on the ground. There you go again Wall Street! 

Overbought Sectors:

1.) Technology (No brainer) YTD + 41%

2.) Consumer Cyclicals YTD + 29%

3.) Industrials YTD +32%. These gains are unsustainable. 

And yet we’re seeing moron Perma bulls (a lot of retail and pros alike are going to get caught with their pants down) buying into the idea that there will be further gains. They believe that further gains will be added on top of that already unbelievable gain. That’s insane and reminiscent of the late stages of a bubble-like expansion or the Tulip Mania that’s going to end with a Trump-branded rug pulled out from under it at some point.    
 
1.) Technology-Recent Notable Activity

• AAPL- Notable trade on Nov 21^ 88757 AAPL 01/17/20 260 C 2% 98% 0% 23.5% +0.7OPENING  88620 AAPL 01/17/20 260 P 0% 98% 2% 22.8% +0.7OPENING (Tuesday, Dec 3rd)
• Delta Hedge of AAPL trade 3.00m AAPL 261.9750 -1.30 -0.5% FINRA-ADF 14:10:57.598 - Tied to Options – COMPLEX 3.00m AAPL 262.2250 -0.76 -0.3% CHX (MIDWEST) 10:58:25.391 - - COMPLEX

On Nov 21st an institutional trader seems to of bought to open a mammoth 85K Jan 260 straddles for roughly $19.00 or $161M in premium PAID. Trade is linked to a 6M share delta hedge. This intuitional trader is basically telling us he believes volatility (and specifically tech vol) will return between Nov 21st and end Jan 21st and he’s willing to pay 19.00 to be levered on both sides for 60 days till exp. 

2.) Consumer Cyclicals-Notable Activity Today - Sharp Call Buying on WYNN

• WYNN-Notable Trade on Dec 2nd (Today) Large singular intuitional trader bought at least $3.3M worth of June 125 calls. 
• Although WYNN’s total options activity appears normal at 1.1x.

Normal, today's activity strikes me as a suspect. Over the past year, I’ve backtested this theory that when ITM *calls*, in particular, are bought in large dollar amounts (precisely like today) particularly on WYNN and always at least 60 days of time value; WYNN tends to do very well in the subsequent days and weeks. It’s like a golden signature.

3.) Industrials - To be determined (Probably an oil and gas producer) 

Recession Model Forecast: 11-01-2019 What is it?

It’s a 26 - variable model that has a diverse set of explanatory variables and is quite robust. Each of the explanatory variables has predictive power individually; when combined, the group of indicators is able to identify early recession warnings from a wide range of diverse market-based, fundamental, technical, and economic sources. The cleverest traders know that order flow will only tell part of the story. It is sometimes reactive in nature like when we drop 2% and every trader and their dogs will buy puts but that doesn’t give off any material information to trade-off. So I use Trader Edge’s Aggregate Recession Model to monitor the US economy as a whole. If you’re going to use it I want to point your attention to the alarming rapid reduction in the number of variables with increasing slack (cushion) the economy currently has.

Do I sense the beginning of an end of the year sell-off? I hope so and vol premiums are so low it’s almost a no brainer in my head.