*WARNING: LOTS OF READING*
tldr; LONG TERM: This is bullish.
DO NOT mistake me for thinking that I am about to say below is saying we will crash all the way down to SPY 200.
Now... onto the post below...
From my previous update:
I was looking for a break of the falling wedge around the 448 level, but that obviously failed.
I was also looking for a bigger bounce from the EOM/BOM flows (yesterday and today) into the higher end range of this falling wedge. Neither of those happened.
Clarification:
When I mention EOM/BOM flows, I do NOT mean that markets will rocket. It's not as simple as that.
Rather, it is to say that the markets are propped up from too significant of a decline.
This applies to pretty much every month of the year where the cycle repeats ON AVERAGE:
-EOM (End of Month) and BOM (Beginning of month) flows support the market until Friday preceding OPEX week(market can move higher if there are two consecutive closes at 1 STD above the 20sma during this period). Most recently in terms of market dynamics: the 20SMA is where market battles between bulls and bears happen the most. They try to claim the 20sma for their side.
*Any 2 consecutive closes at 1 STD above the 20sma for the bulls during window of supportive strength can lead to even higher market prices.
*Any 2 consecutive closes below the 20sma (note nothing to do with STD for the downside) during window of supportive weakness can lead to lower market prices.
-VIXperation Wednesday (usually is when stage 1 of the unwinding of supportive flows begin). Depending on price action, this can have opposite effects. Usually, if this month is heavily hedged (via VIX calls, SPY puts) and price action isn't pushed to the downside, then those contracts will expire worthless and MM delta neutral hedges will unwind, causing price to push to the upside because of short covering. If price action is already pushing toward the downside, price action can actually snowball more to the downside.
-OPEX Friday (stage 2 of unwinding of supportive flows). Similar to the above. Depends on price action and where contracts are placed.
-Week after OPEX Friday leading to EOM (stage 3 and the most critical). Supportive flows are not as present, meaning decline of price action is very much possible in this time period. Two consecutive daily closes below the 20SMA will lead to further decline.
Let's summarize end of February price action:
February VIXpiry Wednesday 02/16/22: Hedges unwound and we squeezed significantly to the upside. *Short covering rally/squeeze
February OPEX Friday 02/18/22: Unwinding of current contracts and hedges, led to significant decline to the downside.
February week after OPEX Tuesday 02/22/22- Thursday 02/24/22: SIGNIFICANT market decline into a sharp reversal on Thursday, leading to Friday and eventually this week EOM/BOM.
Yesterday and today, the supportive flows did NOT move us significantly higher. We haven't even reached the 20sma. Again, this period of supportive flows is where bulls have the opportunity to take control over the 20sma. They are failing to do so at the moment.
This is ominous for the bulls.
This supportive period ends effectively on 03/11-03/14 (start of opex week), so we have a lot of work to do.
Not to mention that in addition, we have FUTURES roll date on 03/10 (not going to get into that...), FOMC speakers, Biden SOTU, etc... things are not looking hot.
*Keep in mind that the big guys can front run the flows any which way, so the market structure above is NOT all-exhaustive.*
---------------------------------------------------------------
What is my plan?
If you didn't know already.... I'm majorly bearish into March OPEX and even beyond. The reason I put downside targets of SPY 404 --> 398 , etc., is because I think that ultimately, we will trade there within the next couple months.
I am primarily cash while playing minor plays to the downside upon ANY rally to the upside. No rally thus far since January has been sustained. Every significant rally has been faded.
Primary position: 03/25/22 SPY 400p
Intra-day plays: Hedge with weekly calls to the upside to endure any squeezes to the upside. Take profit and sell at resistances.
----------------------------------------------------------------
You have to function with the mindset that Mr. Market will do whatever it takes to F*ck the most amount of retail investors possible. That is why you will have extremely volatile swings to both the upside and the downside, while ultimately maintaining a downtrend.
Retail investors from 2020-2021 have been trained by the FED (due to unlimited liquidity) to just BTFD. You can NOT do that anymore. Please listen.
You have to be using VERY little leverage here because price can go against you in an instant.
You should be PRIMARILY cash.
You can play the downside, but put very little money to do so. Trust me, you don't need to put a lot of money in to reap a lot of rewards to playing the downside.
Can SPY Reach and even Break 380's? Absolutely. Will it then lead to a cascade waterfall downwards to SPY 200?
No.
I think what may happen is that we have a capitulation candle, where all retail long call BTFD bros get slaughtered. I can definitely see a HUGE wick below the support line drawn, and then we may have a reversal back above into the falling wedge pattern. If the support line breaks, I foresee retail being forced to capitulate and buy puts at the lows (as retail always does.... which is to buy high and sell low). Once retail has bought puts at the lows, market will reverse upwards.
-------------------------------------------------------------------
Be nimble.
Watch the 20sma.
Watch the FED course. Everything is dependent on the FED.
Hawkish behavior will lead to the inevitable decline.
Do NOT be a perma bull or a perma bear.
Respect the price action and ride it.
Best of luck traders.
Live updates on Twitter. If you have any questions, ask away :)
@seneslulz
tldr; LONG TERM: This is bullish.
DO NOT mistake me for thinking that I am about to say below is saying we will crash all the way down to SPY 200.
Now... onto the post below...
From my previous update:
I was looking for a break of the falling wedge around the 448 level, but that obviously failed.
I was also looking for a bigger bounce from the EOM/BOM flows (yesterday and today) into the higher end range of this falling wedge. Neither of those happened.
Clarification:
When I mention EOM/BOM flows, I do NOT mean that markets will rocket. It's not as simple as that.
Rather, it is to say that the markets are propped up from too significant of a decline.
This applies to pretty much every month of the year where the cycle repeats ON AVERAGE:
-EOM (End of Month) and BOM (Beginning of month) flows support the market until Friday preceding OPEX week(market can move higher if there are two consecutive closes at 1 STD above the 20sma during this period). Most recently in terms of market dynamics: the 20SMA is where market battles between bulls and bears happen the most. They try to claim the 20sma for their side.
*Any 2 consecutive closes at 1 STD above the 20sma for the bulls during window of supportive strength can lead to even higher market prices.
*Any 2 consecutive closes below the 20sma (note nothing to do with STD for the downside) during window of supportive weakness can lead to lower market prices.
-VIXperation Wednesday (usually is when stage 1 of the unwinding of supportive flows begin). Depending on price action, this can have opposite effects. Usually, if this month is heavily hedged (via VIX calls, SPY puts) and price action isn't pushed to the downside, then those contracts will expire worthless and MM delta neutral hedges will unwind, causing price to push to the upside because of short covering. If price action is already pushing toward the downside, price action can actually snowball more to the downside.
-OPEX Friday (stage 2 of unwinding of supportive flows). Similar to the above. Depends on price action and where contracts are placed.
-Week after OPEX Friday leading to EOM (stage 3 and the most critical). Supportive flows are not as present, meaning decline of price action is very much possible in this time period. Two consecutive daily closes below the 20SMA will lead to further decline.
Let's summarize end of February price action:
February VIXpiry Wednesday 02/16/22: Hedges unwound and we squeezed significantly to the upside. *Short covering rally/squeeze
February OPEX Friday 02/18/22: Unwinding of current contracts and hedges, led to significant decline to the downside.
February week after OPEX Tuesday 02/22/22- Thursday 02/24/22: SIGNIFICANT market decline into a sharp reversal on Thursday, leading to Friday and eventually this week EOM/BOM.
Yesterday and today, the supportive flows did NOT move us significantly higher. We haven't even reached the 20sma. Again, this period of supportive flows is where bulls have the opportunity to take control over the 20sma. They are failing to do so at the moment.
This is ominous for the bulls.
This supportive period ends effectively on 03/11-03/14 (start of opex week), so we have a lot of work to do.
Not to mention that in addition, we have FUTURES roll date on 03/10 (not going to get into that...), FOMC speakers, Biden SOTU, etc... things are not looking hot.
*Keep in mind that the big guys can front run the flows any which way, so the market structure above is NOT all-exhaustive.*
---------------------------------------------------------------
What is my plan?
If you didn't know already.... I'm majorly bearish into March OPEX and even beyond. The reason I put downside targets of SPY 404 --> 398 , etc., is because I think that ultimately, we will trade there within the next couple months.
I am primarily cash while playing minor plays to the downside upon ANY rally to the upside. No rally thus far since January has been sustained. Every significant rally has been faded.
Primary position: 03/25/22 SPY 400p
Intra-day plays: Hedge with weekly calls to the upside to endure any squeezes to the upside. Take profit and sell at resistances.
----------------------------------------------------------------
You have to function with the mindset that Mr. Market will do whatever it takes to F*ck the most amount of retail investors possible. That is why you will have extremely volatile swings to both the upside and the downside, while ultimately maintaining a downtrend.
Retail investors from 2020-2021 have been trained by the FED (due to unlimited liquidity) to just BTFD. You can NOT do that anymore. Please listen.
You have to be using VERY little leverage here because price can go against you in an instant.
You should be PRIMARILY cash.
You can play the downside, but put very little money to do so. Trust me, you don't need to put a lot of money in to reap a lot of rewards to playing the downside.
Can SPY Reach and even Break 380's? Absolutely. Will it then lead to a cascade waterfall downwards to SPY 200?
No.
I think what may happen is that we have a capitulation candle, where all retail long call BTFD bros get slaughtered. I can definitely see a HUGE wick below the support line drawn, and then we may have a reversal back above into the falling wedge pattern. If the support line breaks, I foresee retail being forced to capitulate and buy puts at the lows (as retail always does.... which is to buy high and sell low). Once retail has bought puts at the lows, market will reverse upwards.
-------------------------------------------------------------------
Be nimble.
Watch the 20sma.
Watch the FED course. Everything is dependent on the FED.
Hawkish behavior will lead to the inevitable decline.
Do NOT be a perma bull or a perma bear.
Respect the price action and ride it.
Best of luck traders.
Live updates on Twitter. If you have any questions, ask away :)
@seneslulz