Weekly Perspectives: Upward and Downward Spirals 🎢

Weekly Market Outlook For September 14 – 18, 2020 – Momo Down But For How Long?
September 12, 2020
Weekly Market Outlook For September 21- 25, 2020 – Unwinding The Gamma Squeeze
September 19, 2020
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Weekly Perspectives:  Upward and Downward Spirals  🎢

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Here is your weekly newsletter — perspectives on trading and financial markets.

Click here for the previous edition.    


 

Momo Down But For How Long? 

This past week the markets continued their downward trajectory as last week’s lows were violated setting up the continuation “momo down” move we outlined in last week’s video.

The first half of the week saw markets bounce up after dip buyers stepped up only to be met with more aggressive sellers who were able to close the markets near the weekly lows.

Interestingly the VXX which is usually inversely correlated with the SPY also ended the week near the lows after completing the reversal pattern I outlined last week.

The trading relationship between the SPY:VXX has been certainly unusual the past several weeks now so it’s worth paying attention to see how long this condition persists.

What are the markets signaling?  

With the major US indices now trading right around their 50 day MA’s and the quarterly charts still green we can expect the appearance of more dip buyers who have been very well rewarded this year.

This coming week the sellers must continue to stay aggressive otherwise risk losing the downside momentum which may once again turn into another buyable pullback.

In this week’s video I discuss:
– Trading correlations 
– Trading the market that is in front of you 
– Understanding market expectation and the difference between market expectation and your expectations 
– How the VXX reversal we outlined last week played out
– An intraday VXX short
– How time is a constraint we put on price


Now watch this week’s Weekly Outlook video to see the setups and levels we’ll be watching as well as the technical outlook for the VXX SPY QQQ IWM DIA EEM TSX TLT GLD MGC BTCUSD EEM and more for the week of Weekly Market Outlook For September 14 – 18, 2020.

 

Upward Spirals:  Understanding The Gamma Melt-up

This past week Zero Hedge broke the story that Softbank was the institution behind the recent melt-up in equities and the ensuing “gamma squeeze”.  

Masayoshi Son, the founder of Softbank and at one time considered to be the Warren Buffett of Japan, has pretty much gone full Robinhood trader. 

If you’ve been struggling to understand what exactly a “gamma squeeze” is check out this piece for the lay-options traders and non-finance folks.  


 

 

Bitcoin Correlations and More Correlations

One of the big selling points of Bitcoin (and other cryptocurrencies) was its uncorrelated returns with the equities markets.  

However, in recent months Bitcoin has become strongly correlated with both the S&P500 and more recently gold.  

Source:  Coindesk

So how should we be thinking about this?  

Correlations are based on price movements, which, especially in these crazy times, do not always respond to common sense. Prices have, on the whole, become untethered from fundamental factors and are being pushed around by sentiment. Sentiment fuels momentum, which we often mistake for a trend; it also perpetuates the directionality of prices, which can exaggerate correlations.

Yet sentiment can turn fast when investors are jittery, and there’s plenty to be jittery about. The story changes again. 

This grasping for data to back a story reveals our very human need to put bitcoin in the context of things we’re already familiar with. 

So rather than use return relationships as a narrative crutch, keep an eye on what they say about what investors are looking for. 

For short-term market movements, what we think bitcoin’s narrative is doesn’t matter as much as what other people think bitcoin’s narrative is.

Other people move the market, so we should know what asset framework they’re using. The correlation stories are useful for that.

 

Something I Am Pondering

Most of us are so fascinated by the content of experience – thoughts, images, feelings, sensations and perceptions – that we overlook the knowing with which all knowledge and experience are known.

We neglect the simple experience of being aware that remains ever-present and changeless in the background of all experience. We ignore awareness itself. We overlook the simple knowing of our own self-aware being.

In other words, we have forgotten who or what we essentially are and have mistaken ourself instead for a collection of thoughts, images, memories, feelings, sensations and perceptions.

– Rupert Spira

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Weekly Perspectives: Upward and Downward Spirals 🎢

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