Musings

Following a brief thought exercise last night about a bearish read on the way the month of May could play out, I wanted to further contextualize this perspective below. Here are my thoughts:

• Overhead supply at the highs will act as resistance. People that bought the highs and got decimated in August 2015 volatility are awaiting a chance to sell, if they haven’t stopped out already.
• People who chased the Fall 2015 rally and got fucked January/February 2016 are awaiting a chance to sell, if they haven’t stopped out already.
• The visceral nature of the August 2015 and January/February 2016 volatility (I believe) still has people PTSD spooked. If you traded through that action, it was nauseating, unforgiving, rampant fuckery. It was a setback to augmenting interest in market participation on the long side. Cyclically people become sworn off the market (never again will I…), and either those people have already succumbed to either of the two aforementioned market drops and were removed from their shares via booked losses, or they are waiting for an attempt at breakeven to cut ties and move on.
•  Earnings season risks (see here)
• Indices starting to tag and commence riding of the upper Bollinger band on the daily charts and Stochastics getting overbought.
• OA (this man is fucking brilliant- too many links to post but check this one) has educated the iBankCoin community on the Mamis sentiment chart. At this moment, it seems to be tagging ‘Anxiety’ which should lead into May ‘Aversion’. I believe a good chunk of bulls sat this recent rally out, too spooked by the previously mentioned upticks in volatility. Now that we are approaching titillating news headline ATH fomo, latecomers who are induced to chase typically get fucked. If you’re in the camp that the market is setting up to top for good and an epic rollover and bear market commencement (I’m not), then sentiment could be gesturing towards an ‘Enthusiasm’ moment where we briefly clear the highs, suck in bulls, get sharply rejected, top out and reverse lower. Either way, downside ensues.
• The ‘sell in May and go away’ construct: Based on the way the 2016 market narrative is playing out, should this classical, dominant mode of institutional market engagement (selling at the end of May) be met with a market melt up in May conveniently and neatly in time for the struggling hedge funds (see here and here ) to bank coin and sell into strength before Memorial Day? Let me ask you a question. Does the market really work like that?

My prediction: May will induce shifts into low beta, fixed income, and treasuries (ARK). Volatility will have some minor spikes (nothing like August 2015 and January/February 2016), but the action will predominantly backfill. Oh, and we have the presidential election and pre-Brexit chicanery in the fold as well.

I am no expert, just a surviving trader working to improve. Formulating scenarios and market maps inform my approach. If you want to see some trades, I share swingtrades (good and bad) in realtime on stocktwits / twitter (also see results here).