My job – as trader (and mother for that matter) – is to first look first at the Risks and then proceed with the Opportunities.
I see Reflation as a Big Trade opportunity. But I also see the market about ready to roll over. I thought we might chop into Mid-November but I’m seeing signs of fatigue even sooner. And have you seen EPS reports tonight? A river of red. Not just because of sales, profits, guidance but because Sentiment is really skiddish. So I decided to let you know I’m feeling a tad skiddish as well on my recent positioning in Reflation and will likely pull in a bunch of trades tomorrow. Mind you, I still really like my thesis for the intermediate-term, but I wanted to let you know in case you see me lightening up.
Warned last week of potential for LQD to roll over (and with it Credit markets). LQD is rolling over:
Everything looks so bullish! And with that, Greed is printing 89 which is not where longs want to typically enter a market … as they will become first to be shaken out .
Maybe it’s nothing…
But my stock-bond ratio / Volatility at 0 stochastics (yellow arrow) is a problem for Bulls:
So is an extremely elevated ONE:CPC ratio level of 1.54 not seen since January 2018 highs…
Not what Bulls want either – a screaming higher USD, but that’s what this Double Bottom off the 200D looks like it will become…
My Point: Be on guard. And don’t forget to hedge.