We’ve arrived at a significant crossroads in equities. One that must be addressed heading into May.
I’ve saved any top calling efforts for the professionals on StockTwits. However, one metric I’ve always used in this process is market speed and overall volatility.
Here are two things you need to consider, as “market speed” is at a critical juncture.
I’ve always used the ATR on the indices to determine what is normal/abnormal volatility. Anything under 20 in the SPX is normal speed. Anything above is a precursor to market weakness. Volatility at market highs suggests changes in trend are on the horizon.
With the old adage, “Sell in May and Go Away” if there is no selling this upcoming week, this market will rally for no less than 8 months from here. However, a little selling next week might be the trigger or start of a decent move lower.
This image shows where a spike above 20 in ATR has marked tops.
This image shows where a breakdown in ATR has set off a prolonged market rally.
Just focus on the detail of where the daily ATR is in reference to this 20 level. My original call that I’ve stuck to for years is that we need that last melt-up phase, and I’ve never swayed from that. Next week and into May is my confirmation of this move.
Consider a hedge, just in case.
OA
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balls to the walls, homie!
I went down to the crossroads, fell down on my knees.
Down to the crossroads, fell down on my knees.
Asked the Lord above for mercy, “Save me if you please.”
But shouldn’t a specific ATR be discounted the higher the index goes:
20 ATR at spx 1000 more concerning than 20 ATR at spx 2000.
Valid point. I think the trend of volaitlity and the consolidation of readings are a good measure as well, but this might be better served breaking it down to a percentage move of the underlying.
Love it–ATR has been consistently reliable, and bias long for sure.
Its refreshing to read an analysis of the current markets that is cautiously intelligent and insightful without all the chest-pounding bravado, testosterone and hyperbole so rampant in the twitter-stock-sphere — especially something that for once isn’t shouting “bullish to the moon” due to too much focus on conviction rather than actual analysis and discipline. Hats off to you Jeff.
You and I had a conversation long ago on a health related topic. You mind if I run a few questions by you?
Market feels frothy, but they run it up anyways. Many metrics like OEX put/call ratios are at historic extremes. This screams that we’re about to have a breathtaking move one way or another. Still holding some puts for next week, along with long stock positions. $AAPL earnings may just be the catalyst up or down for this market.
ON TOS, we don’t have $SPX. What would be equivalent spy x 10 or /ES?
Remove the dollar sign.
Duh… What a rookie I am.
OA, Given your views, would you initiate a position in FAS here? They haven’t moved yet with this whole rally.
Yes, $FAS looks good here.
Thanks, OA
Given the market’s response to recent earnings plays, and individual ATRs seem to be low, could we use the earnings plays as YOLO tries throughout the week?
IV is usually too elevated on earnings week…but won’t matter if you pick a stock that really moves. Tough task.
Gotcha, back to fading GLD then week to week.
Jeff what do you think of June QQQ puts for overall portfolio hedge? Heavy positions in AAPL, FB, GOOG
I prefer the Russell based on this divergence. TZA perhaps.
VA!! dope move
VIRGIN GETS A BONER
Holding for more?
withdraw the offer to sell….why? cuz they realized IT’S FUCKING GOING HIGHER.
hahah hope so Matt
I was going to headline that as my next blog, but figured I better tone it down.
doubling up on TRIP, and hedged with IWM puts and VXX calls
best place to short is the semi’s and gold. I just bought puts in INTC BRCM GLD and went long JDST.
These China names have been fun these last few weeks but the YEN strength has me concerned.
CHIEF – you have been missed
What do you think, Chief? Market heading lower next week?
I’m really on the fence so trying to play both sides. I’m trying to figure out where the money will rotate to if we go higher but nothing’s jumping out. If we sell next week I don;t think it will be anything major.
Thanks, respect.
I’m hoping for your $900 gold call to hit 🙂
Enjoy the weekend!
Entered no new longs today, but I booked gains and bot $SKX puts. Higher lows on the RUT but not quite higher highs. Bearish for Monday, but still overall bullish.
RE: the Brazilian airline GOL, I have flown on GOL many times and preferred it whenever possible. It was well run and usually the cheaper alternative. The Southwest Airlines of Brazil
no chance on 900 gold
You we’re saying that at 1400.
$JNUG!!!! This too easy
Jeff, i’m getting the feeling that today’s action is a trap. lure in people to press bets after a solid last week. what say you?
Same thing happened two weeks ago. If we fade these gains today, good chance we end the week underneath these prices.
But wait….what I want to know is…you still have some $GOGO? Damn it looks ripe.
buying here is chasing, son. 😎
I would never. I just want to know who to root for.
Bot TRN weekly 30 calls
Got a 3 bagger on SPLK, but the bid/ask spread on my May $65s are getting a bit too large for my tastes. How do I handle this?
By the way, DANG is getting into that DANG vol pocket too. Good call.
I do like risk/reward on EYES down here
I had my eyes on $EYES as well.
Chief – rough timing I the gold trade.
I would keep the puts on GLD but take the loss on HE AT.
Take loss on jnug I meant
JNUG has been at these prices for weeks. This isn’t anything different compared to the last few weeks.
OA,
Would you add to $SUNE on this pullback? I’ve been long since $21.93. I’m holding through earnings.
No, I did all my adding in the teens.
If you increase your position here, what happens when the stock sells off after earnings?
buy more?
market selling pretty hard this morning ..just my charts ?
also gold and mjna plays and telling some of the story
there’s goog aapl amzn and another bunch gap up to solve on the nasdaq
It is different if you bought Friday. Up 11%. I would say that’s pretty good.
Yeah, just pointing out the range though.
Gdammit was a weak early on NBG lottery ticket git stoppped out last week and didn’t buy a new one