Nasdaq - The Great Bear Trap

已更新

In recent analysis on the state of the markets, I note that the notion that we're "in a bull market" is actually really dangerous, and how, if you really want to see healthy markets into the future, you don't want to see a new all time high print yet, because we're just too far over the trend:

Nasdaq NQ - A Fundamental and Technical Warning Signal

Nasdaq NQ - A Fundamental and Technical Warning Signal

Moreover, Q2 just finished strong, and with a new quarter, comes a new deployment of the algorithms. The infamous "JPM Collar" is something I discussed in a recent post:

SPX/ES - An Analysis Of The 'JPM Collar'

SPX/ES - An Analysis Of The 'JPM Collar'

Namely that I believe it forecasts a serious correction in the markets. But at the same time, it has until September to even start, really.

And it's dangerous to be long right now because the VIX is so low and we've been in a bullish impulse inside of bearish market conditions for so long, which I note below

VIX - The 72-Handle Prelude

You can see the first manifestation of this principle has begun in both the VIX, and the UVIX 2x leveraged bull ETF:

You might look at that and think "lol it gave all its gains back" but this is actually what you want to see if it's going to run a bit.

I also have open calls for Tesla, which are short term, albeit significantly, bearish.

Tesla - What To Expect Until September?

And an open call on Netflix where I actually believe it will retrace to the 170s during the next major correction.

Netflix - I Hope You Like Catching Knives

Netflix - I Hope You Like Catching Knives

So where we're at with Nasdaq futures is that it made lower highs while the SPX made higher highs:

The divergence is noise for the short term, but if you ask me, it means that in the long term, if we see a dump, and then a bounce, that Nasdaq will actually take out the high while SPX will be a laggard.

What Friday's price action showed is that both SPX and Nasdaq have begun to dump. If you ask me, this is because before we can go higher, we must go lower.

Sells have to be matched with buys and buys have to be matched with sells, after all.

And at this point, we haven't seen any downside in the markets since March. It's too extreme.

Two important areas of note is we have the daily pivot around 14,800 and the gap around 14,500.

Both of these are places that I expect to see attempts at bounces that will not come to fruition. Because you need to give people a chance to buy the dip and then for them to get stopped out.

I believe that the reason things will dump, and they may dump violently, and fast, is to crank the VIX and have all the permabears finally see their "opportunity" emerge to get short for "the crash."

Only for markets to bounce through the end of August while everyone with money is at the sea side and VIX dies a slow death back to a 9-handle while volatility gets sold off for free money again.

By then, nobody will want to be short anymore. Everyone will have capitulated. Then the fireworks can start, and early bears will miss the move, much to their consternation.

So, I believe that Nasdaq and tech stocks give the opportunity to short through the next few weeks.

On Wednesday, we have CPI, which has not mattered in months, but may matter a lot now while the markets pretend to care about whether the Fed hikes rates again.

Then we have FOMC on July 25 and a Nasdaq 100 "rebalance" on the 24th.

A recovery through the end of July and all the way through the end of August is a very likely scenario.

Until then, I believe we will see violent and significant downside, and it finally gives an opportunity trade puts and bear ETFs until you see really significant bullish movement in price at key levels, and then look for longs.

But the next time it's time to go long, it's only a scalp.

After Q3, the remainder of 2023 and the early part of 2024 is likely to be quite dangerous.

There are more important things in life than making money. Make sure you take good care of yourselves and your family and friends.

Make sure you make up for your regrets as soon as possible, lest you find yourself with no further chances to set right what was set wrong.

注释

I had the theory about Monday's potential SPX price action, which is on the left. Namely that we do the usual dump to 4,000, pretend it's support, go back to the gap at 4,060 by Monday close and make bears hate life thing.

But Nasdaq notably does not have this gap in the same portion.

And that is really a huge divergence.

注释

There's a notable divergence that emerged since yesterday between SPY and QQQ:

Namely that QQQ made new lows while SPY has not.

I think that's a big signal that the rally may be very short lived and CPI tomorrow may not be very blessed.

注释

I'll leave this here because the SPX has been a lot stronger than the Nasdaq. But shorts are in order for at least a few days, in my opinion.

Note that last Thursday's dump candle took out the low of the pump candle that led to the end of June high.

Then the Friday candle tried to go higher, but was rejected.

Since, we've just retraced to the 79%~ of the range and taken out an obvious pivot where short sellers give up:

Unless it can set a new high, downside targets have to be the 4367 pivot and specifically the 4288 breakout area/gap/August 22 high play.

注释

A huge divergence I just saw, because I'm blind (l o l) is that the Dow actually started making lower lows and lower highs while the SPX and Nasdaq are still bullish.