Starting last week, we talked only about the pain trade being up. Up into, and post Fed. Nailed it.
In fact, on the big rally we had on the 15th, I recall saying…
This was the first rally in weeks that I saw pretty much everyone pass over. Not much buying activity into this. If anything, I am being told all of the great prices I could short the market at here.
I would wager that if I polled all of you, none of you would think that this could continue into tomorrow.
Market kept going…I then said…
“For the day, I think we all ought to really ponder what the worst case scenario is here, for everybody. Set your biases and differences aside, even though you are pissed that literally everything is rallying today…and tell me what is the scenario in the next 48 hours that hurts everyone?”
Later that day, I warned we’d get squeezy….and then blogged this the morning ahead of the Fed…
http://ibankcoin.com/option_addict/2015/09/17/well-joe-whats-your-next-move/
A snippet of that post…
As I mentioned, the pain trade here is up. Today’s move will pop folks in at awful prices, and will trigger some short covering. Play it at your discretion, but nearly all the models we’ve run in After Hours with Option Addict suggest a move lower a week from now is highly likely.
My final thoughts last week going into the weekend…
What you just saw was exactly what needed to happen. We were up pretty good on the day, and into that strength we saw more breadth stats that have not been seen since 8/8/2011.
In that move, you triggered some big short covering and got longs involved too high.
The $NYMO was as high as 76 (that I saw) and as Fly mentioned, Exodus printed overbought yesterday.
Cool off on the longs for a bit. If you are in cash, start buying in about three weeks from now.
We talked about some chop for this week, but only got one day of it before sliding lower.
We made it through financial armageddon Wednesday, and after which I blogged about an important step in the process of finalizing all of this mess here. An excerpt…
HOWEVER, to effectively get out of this shit stage of market mispricings for the longer term, we are going to need to set out a trap. Two of them, actually.
This week has worn down bulls, and it’s only Wednesday. To really KO them, you’ve gotta give them a good trap around here. Perhaps a gap down and strong reversal, or a real strong trend day here in the next day or two. Once that happens, you’ll drag in a lot of tired and worn out bulls. Best case scenario from there is to see that rally faded hard the following day, and for the market to trade lower over the next few days…closer to or beyond 1900. By doing this you’ll kill a lot of the remaining bulls and force bears to participate from lower prices.
The same scenario played out in 1998, naturally…
I called out yesterday as the reversal day about 45 minutes after the open…and here we are with a gap up and fade going into the weekend.
On the day I hope we see a small late day push to make you feel great about going long into the weekend. Then I hope we gap the fuck lower on Monday to get this all over with next week.
If anything I have written was unclear, I apologize. I’ve tried to blog more about movements on the horizion rather than just making observations in real time. In choppy ranges like this, the moment you’ve found comfort to make a call, is the exact moment you are on display in front of all to be wrong.
Think of this market as a mechanism that is out to break everyone and it starts to become a little more clear.
After the final blow next week, I doubt we’ll speak of market direction for a very long time.
Big thanks to bottom feeder, but here’s an updated look at the 98/15 comparison…
OA
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So when to start legging into spy puts is the question..
I got in a little early today. down on it but comfortable holding thru this mess
Wow that 1998 comparison is scary similar so far. hat tip.
What’s even scarier is how long I’ve been talking about this scenario.
pretty…pretty…pretty good
extra larry david
fo sho. nice work.
I remember oct ’98 very well..I was still uberbullish during that flush
i am NOT uber bullish at this point in time ..color me neutral really
the economy was SO MUCH Better in those days
but i love the analysis..will be fun to see this play out
You’re right. Most people you’d ask would agree that the economy is shit, the market is rigged, and this price action is very un-bullish.
I’m too inexperienced to do anything in this market, I’ve been in mostly cash for the last month, I’ve gotten smacked each time I’ve dabbled or sold too early missing out on bigger wins. I’m probably sitting out for a little while and just watch. Your analysis is tremendous and is helping me a great deal.
Blood Moon on Sunday to put everyone in an apocalyptic state of mind…
lol
Plus the Russell is red today. Warning sign.
curious if you are shorting sp 1960 today , as i read yesterday ?
If we rally into the close, I’ll pop some puts.
what if we just stay around these levels thru close? Still worthy of a short no? This rally seems really tepid. As you mentioned, IWM is red. Tech super lagging. A lot of names still down.
Bro, I’ve laid this all out for you. Dinner table is set man…up to you if you want to eat or not.
oh trust me. It’s because of you’re laid out plan that i got puts this morning. saving my ass and I thank you for that.
This big decline came a little earlier than I thought tho.
Thanks OA.
Sure thing.
Thanks very much.
Thanks for the recap.
Dude OA you’ve called an entire day’s action several times early that morning. Then you started calling two days in a row. Bravo man. What were your first clues to start using 1998 as an analogue?
2012, and in 2013 started discussing it in forums, then blogging about it, etc.
Wait you knew that 2015 would be 1998 all over again way back in 2012? Now that’s a hat tip good sir.
I’ve studied a lot of market years, cycles, comparisons, etc. You start to recognize similar conditions over time.
Wow. That’s impressive
“”• Cash beats stocks, bonds for first time in 25 years
• Investor bearishness is at 15-year high—which is bullish””
Some of today financial headlines
IBB getting crushed …RUT diving now…fade might be more like a quick slide into the close.
wow. bios are seriously getting ripped to shreds. !0%+ declines across the board it seems
hmm…now what do we do. market succeeded in confusing us once again
I’m not confused.
thatr’s why ur the pro. haha
big money dumping into the weekend dude it’s all happening
naa it’s just a regular selling cycle inside a downtrend ( bear cycle ) that you see @ the close..liquidations occurr @highs
top of this friday aft it’s easier to push or pull things then other days
when short fuckery start to press the pedal it’s also when some shorts are late , (bear) trap happen this way
I’ll take it – I got long volatility and short SPX at the right time it looks like (I hope)
good luck
GPRO following sentiment on daily, at bottom of discouragement to me. On my shopping list for next week.
Although I’m sure you’ll be thoroughly mocked for remaining the uber-bull as we approach the August lows, you’ve called this last month’s action masterfully.
I haven’t done anything today and it feels good. Gonna buy with both hands lower.
I think we get another crack at banging NFLX later next week when she comes back in to the lower end.
Looks like market got ahead of itself a bit with the selloff. I’m waiting for the break below Aug 24th lows next week to buy for longer than a day trade.
I don’t think we break below the lows, but we will go down and test the mark.
Last piece of the 98 analogue puzzle plays out next week. An extraordinarily elegant – no homo – hat tip to OA for calling this one step by step.
FOR THE RECORD, I AM SAVING MY ENERGY TO WAIT FOR MY PITCH TO BUY, RATHER THAN TO GET HURT IN THE CHOP TRYING TO SHORT. I STILL HAVE $VXX AND $BIS THAT I WILL REMOVE NEXT WEEK.
good heads up OA you’ve been extra great to us
Vxx has been a gift. Boiner quitting with the threat of gov shut down in Oct Sent us down (imo)
Off the top of my head, the stocks to target next week should we get a false breakdown and then rally, are:
Housing / Insurers
Stocks that have held up well like ZG
EROS
BITA
I basically just want to look for stuff that would work in a change in interest rate policy in the event we’re in a 1998 scenario where the retest is the bottom and we rip hard from there.
My gut instinct is to only expect a mild bounce from there.
Don’t think I’ve seen anyone calling this current market better, OA. Kudos – and thanks for the insights.
I appreciate that comment, thank you.
What a call (or series of calls). This post is one for the ages.
Thank you.
will be nice to not have market direction concerns,,and back to picking stocks,,this has been a grind
I now know what Blue Star looks like.
https://www.youtube.com/watch?t=210&v=0TvJy2Ot48M
As for the unearthing of these reads, unreal. Nothing comes close. No words.
Appreciate the comments, thank you.
I want to have your baby.
LMAO
We’re retesting lows like Aug 2014, it’s not rocket science.
Unfortunately most folks have blown up their account day trading and will not be able to participate in the parabolic move upward.
Started too early with my weekly call purchases this week – should have waited for folks to get back from Rosh H (and OA’s timely bottom call) before going balls deep in weeklys. Managed to make most of my losses back with FB puts yesterday and similar to OA am waiting with bat on shoulder for next fat pitch.
From a lending perspective, my business is finally seeing better credits come off the sidelines (credit quality has deteriorated since QE ended last year) and are businesses are moving onto Phase II of the replacement / upgrade cycle now that the 3 & 4 yr notes from Round I have been paid off. Should Congress extend Bonus Depreciation exemption again this year, Q4 GDP could exceed 5%. Still of the belief that our best years are ahead of us.
Hi Jeff,
http://charts.stocktwits.com/production/original_43210608.png?1443373026
Glad I own the $BIS.
I am trying to find any earlier years that matches current Biotech price action .. i don’t see any thing that happenend like this in the past . .. Looks like this all together new phenomena. Jeff can you reference any year for biotech ? Any rally in the biotech space .. i will short it .. atleast 2 weeks .
Biotech is the equivalent to the internet stocks in the late 90’s.
OA, is GILD in bio group as a big picture?
Do you like it as a long term hold? Thanks.
I held all my long term biotech positions from 2011 to 2013. Not sure about long term entries here.
OA – are you walking around your office in a turban this morning? http://3.bp.blogspot.com/-7rwQ4uhvb9k/T99iT5WdSFI/AAAAAAAABTo/Ly2k0i4t7bc/s1600/Carnac01.jpeg
Odds of the mother of all flash crashes is increasing as liquidity dries up. I’m putting low bids out on several things in case this happens. On August 24th I tried buying aapl at $95 but couldn’t get any orders in and I tried calling ahead of time but their phone lines were busy. Might as well try this way
Pres Obama speaking – could see some bouncing around here.
First 1/3 of $FSLR position here.
$BABA up when all the other stocks on earth are down, go figure.