Monday, March 19, 2018

Pre-FOMC Selling

They are setting up for the FOMC meeting.  Selling stocks and bonds together.  Post opex weakness and FOMC coming up on Wednesday is a double whammy on SPX.  There is decent support in the 2725-2730 area .  I was considering buying the dip on Thursday but I decided to wait because of the complacency I was seeing in the low put-call ratio on the day.  We'll see how traders react to today's weakness, if the put-call ratio can get higher today than last week, I will consider buying near support around 2730. 

Still thinking about the game plan ahead of the FOMC meeting Wednesday, but I am leaning towards a rally in stocks and bonds after the meeting as I don't expect Powell to be as hawkish as he was in his Congressional testimony.

Thursday, March 15, 2018

Get Ready to Buy the Dip

How quickly the optimism fades after the Goldilocks nonfarm payrolls report and CPI.  It has been 5 weeks since the early February panic, and we've yet to have the retest that many were looking for.  If SPX goes up to 2900 next month, then it moves down to 2530 in the fall, would that be considered a retest? 

The market has been making higher highs and higher lows since the February 9 intraday panic bottom.  Nasdaq 100 has actually made a new all time high since then. 10 year yield has stabilized in the 2.80%-2.90% range.  While not very pessimistic, the general public is definitely not feeling that comfortable or complacent at this stage of the rebound. 

It looks like the February plunge did its job of shaking out the overmargined and weak hands, and grinding back higher.  Not as smooth of an uptrend as the ones in 2016 or 2017, but still strongly upwards. 

I am not a raging bull, but I am an opportunistic buyer today if we get an intraday dip to SPX 2740-2745 area.  I would hold that long for a target around SPX 2800.

Wednesday, March 14, 2018

Don't Forget About Bonds

Remember when everyone was worried about 10 year yields breaking 3%, which would hurt stocks?  Quietly, the bond market has settled down and is slowly flattening, which all things being equal, is a more bullish sign for bonds than a steepening.  When bond investors are more willing to buy duration, it means that they are more committed to deploying funds.  

Looking at Fed funds futures, currently the Jan 2019 futures is priced at 97.85, which implies a Fed funds rate of 2.15% on Jan 31 2019.  Given the current range of 1.25-1.50%, that is basically 3 rate hikes this year.  If you go out further to Jan 2020 futures, its 97.48, implying 2.52% on Jan 31 2020.  So 1.5 hikes priced in for 2019.  Beyond 2020, the curve is basically flat.  So the market is pricing in a terminal Fed funds rate of 2.50%, while the Fed forecast is 2.75%.  I believe any rate above 2% will be too tight for this economy and will quickly lead to an inversion of the yield curve. 

The pricing in the short term interest rate markets seem too aggressive, and assumes that the Fed will keep hiking even with the economy slowing down or if stocks start correcting.  I doubt that this Powell led Fed will just keep hiking if stocks are in a downtrend.  The market is pricing in a hawkish Fed and it would be surprising if they actually went through with 4 more hikes in this hiking cycle.  I would lean bullish on bonds, and that should help stocks in the medium term.  

Yesterday's gap up was a short term shorting opportunity on "Goldilocks" CPI and the market promptly obliged by selling off from SPX 2800 resistance.  There seems to be too much optimism in the short term, so there is room for a pullback down to 2730-2740, the pre nonfarm payrolls levels.  But this market is now back in an uptrend and weak hands seem to be mostly out, so it could just grind higher to 2870 by April without a bigger dip.  I would rather be buying dips than shorting rallies for at least the next 4 weeks.

Monday, March 12, 2018


That nonfarm payrolls number got some traders excited, as we are now back to post crash highs in the SPX.  The bulls will not go down without a fight.  After the big corporate tax cuts, the coming massive corporate buybacks will provide support for the market during dips.  There will have to be some notable signs of an economic slowdown before you will get down moves that last for more than a few days. 

Also, on a strong nonfarm payrolls number, the 10 year yield didn't go up much, which is an equity positive.  If the bond market calms down and stabilizes under 3% 10 year, you will at least get a consolidation at the top for stocks, meaning SPX going back to at least the all time highs at 2870. 

It is going to take time to form a top like most bull markets.  It won't be as easy as making a blowoff top and going straight down like you see on some other markets.  Also, the SPX is the strongest major stock market in the world, so it is acting like what strong markets do, which is have brief corrections that lead to sharp rallies. 

I suspect that the rise in bond yields is already starting to have an effect on household borrowing.  Just look at the US personal savings rate over the last 10 years.  Its been going down rapidly since the middle of 2017.  The US consumer is not in a strong position, and if stocks happen to go into a bear market, that will be the knockout blow. 

Friday, March 9, 2018

Choppy Bottom

It has been choppy trading since the February 9th V bottom, as the market has gone up as high as 2789 and gotten as low as 2647 over the past 2 weeks.  And like most SPX pullbacks in a long term uptrend, the market has come out of the chop towards the upside.  I wasn't aggressive buying dips during this choppy period just because of my longer term bearishness.  But I sure was not going to be shorting aggressively either.

It is a tricky juncture that we are in.  The long term uptrend has been so strong and going for so long, that you just don't make a blowoff top and reverse down to where it was trading in 2016.  Maybe that is how speculative manias like bitcoin trade, but that's not how equity indexes trade.  Equities are such a huge asset class controlled by both fast and slow money, that trends take a long time to fully mature, especially on the upside. 

If interest rates stabilize, which is probably the most likely scenario, then you can see equities go back above 2800, and test the all time highs.  The markets are too far above 2530 for there to be a retest.  You had enough "scary" news to form a good bottom, beginning with the tariff talk, and out of nowhere, a huge dump in after hours on Cohn resignation.  That made no sense, and showed how nervous and emotionally charged this market is, but I still didn't buy because I was waiting for 2680, and thought there could be a little bit of panic of nonfarm payrolls and CPI next week.  Of course, it never got there.  Sometimes the market doesn't oblige your plans, and its usually best to just let it go and look for the next setup. 

SPX is back above the 2760 level, and it is looking more and more like a grind higher is in store for the next 4 weeks.  Since I don't want to chase any buys on this thing, I will just wait for another opportunity, or just stick with individual stocks.  I expect ES trading to be a lot less interesting in the coming weeks.

Wednesday, March 7, 2018

Suddenly They Care about Cohn

You cannot make this stuff up.  Who would have thunk it.  The S&P, after rallying 80 points from the Friday morning tariff panic bottom, is short term overbought, and ripe for a pullback ahead of the newly feared nonfarm payrolls report.  It is the perfect time for Cohn and his Goldman Sachs buddies to get short a bunch of S&P futures and then drop the news of the resignation.  I don't even think Cohn's buddies would have thought the market would have dropped that much on his resignation news. 

A 30 point drop on a Cohn resignation tells you how nervous investors are here.  The psyche of the fast money stock traders is fragile.  The value investors want nothing to do with this market.  The HFTs and deep pocketed futures traders are having a field day fading the fear, buying inventory as retail pukes out their stocks, and selling it back to them after the market goes back up and everyone is relieved.

The rinse and repeat cycle is near its end however.  There are only so many times you can trick retail into buying tops, and selling drops, before they just throw in the towel and stay on the sidelines, which is usually the time when the market is ready to slowly grind higher, climbing the wall of worry.  We are right around that point.  You can feel it in the growing disgust the media is spewing over these tariffs and a potential trade war.  Never mind that they've never experienced or studied tariffs and trade in their lifetime.  Everyone these days is a 5 minute expert on the latest topics that moves markets.

The corporate PR machine has completely brainwashed the media and by osmosis, the public, by denouncing tariffs and fear mongering about how bad trade wars will be for the global economy.  Completely ignoring a much more powerful force in trade,  currency devaluations.  Europe, Japan, Switzerland, etc. have been using QE to bring down the value of their currency for years.  Sure, the US started it, but their QE was to keep interest rates low in the face of massive budget deficits and huge Treasury supply after 2008.  It is clear that the main intent of the ECB, BOJ, and SNB are to weaken their currency to boost exports, which is a form of trade war.  And to say that it hasn't affected US stocks is an understatement.

There are many more important things for this market than global trade.  And even if it was as important as everyone says it is, the multinational corporations have so much political power that they will stop anything drastic from happening anyway.  After all, Washington DC is bought and paid for by the corporate lobbyists.

The price action after the 10 year yields surged higher in early February and the subsequent plunge in global markets, and the price action after Trump's announcement on tariffs gives you an idea of what is more important.  Interest rates are about 500 times more important than tariffs.

I was contemplating a short on Tuesday near 2730 but since we're probably near the end of this selloff period, I decided to wait.  As I said before, it is a time to look to buy dips for the move higher after this selloff period passes.  A dip down to 2640 would be ideal, but very unlikely at this point.  Perhaps a move down to 2660 is the most we will get, and even that looks like less than a 50% shot.  I may have to increase my limit prices to 2680 to be able to get any longs before the selloff is over and the market grinds higher.

Monday, March 5, 2018

Nearing a Bottom

I would not extrapolate too much from Friday's price action but based on the amount of time that has passed since the February 5th closing plunge and the inability of the market to get below 2640 tells me that looking for a bottom is the best approach now.  The time to look for shorts has passed, and unfortunately, I wasn't able to catch the low risk short last week.  That doesn't mean that we are going straight up from these levels, but it does mean that the more forgiving side, which is usually being long, is even more forgiving at these levels and at this time point in the rally. 

In a market with a steeply rising 200 day moving average, the selloffs will usually not last more than 1 month.  It has been 4 weeks since the February 5th panic, and that means a bottom is due almost any day now.  If I was forced to hold a position for the rest of the month, it would be long.  If I had to hold now and sell in 3 days, I would probably be slightly short. 

Interest rates are starting to stabilize, which is another positive sign for the equities.  Even with a hawkish Powell, bonds have regained their negative correlation to equities, and have done their job of providing downside protection when stocks go down.  There is still the nonfarm payrolls number on Friday and the CPI on Tuesday, but they will probably not be big market movers because the market is now prepared for any hot numbers to come out.  Very different than last month when the market was much more complacent about economic data. 

It would be ideal to have stocks dip down to strong support around 2630-2640 for a low risk long entry, but that might not happen.  If we don't go down this week, it probably will just keep grinding higher for the rest of month.  Get ready to buy this week if the last remaining weak bulls throw in the towel. 

Friday, March 2, 2018

Suddenly Tariffs?

Wow, talk about bring out the red herrings.  Let's suddenly forget about Jerome Powell, and talk about some steel and aluminum tariffs as causing a trade war?  You can't make this stuff up, these excuses for selloffs these days.  Globalization is not the reason the bull market has been going on for 9 years.  It is easy money, and eliminating corporate competition, neither of which is affected by some steel and aluminum tariffs.  In fact, those steel end users who can't handle an increase in input costs will just be more competition eliminated, ultimately resulting in a bunch of quasi-monopolies. 

It is as if the globalists think the economy has not had a recession in 9 years because of globalization.  Supposedly its a positive.  All it's done is slow down the road to total corporate welfare, which is the main goal of Trump, not creating a few steel and coal jobs. 

So why the abrupt weakness?  First, the bulls got too aggressive looking for a V bottom ahead of Powell's testimony, and they ejected quickly.  Then Powell disappointed the easy money crowd because he actually follows the mantra of data dependence, instead of just saying it.  The recent economic data has come in hotter, and he has responded by being more hawkish.  An actual Fed chairman who is somewhat neutral and not so dovish is a shock to the system after 20 years of Greenspan, 8 years of Bernanke, and 4 years of Yellen.  All those predecessors were stock market servants, delivering what the stock investors want.  Right now, there is uncertainty over whether Powell will be another stock market servant, and that is enough to get investors nervous.  He could eventually end up being another stock market servant, but the odds just went from -300 to -120. 

It is interesting to see that bonds after the initial selloff on the Powell testimony, has made back all those losses plus more, while stocks just keeping selling off.  A hawkish Fed chair can actually be better for the bond market than a dovish Fed chair, contrary to popular opinion.  If you slow down the economy, 10 yr rates will go lower, not higher.  People miss that point when debating whether Powell will hike 3 or 4 times this year.  If I was a long term bond investor, I would much rather have Powell aggressively hike the US into a recession than be dovish and hike too slowly keeping the bubble going. 

We hit 2660 yesterday, which was quite a drop.  And we've got the gap down today.  Its risk off Friday, so who knows how far they will sell it down.  I see strong support at the 2630-2640 zone, but will wait till next week to look for a dip to buy.  There are too many events coming up in the next 2 weeks for me to jump the gun and buy here.  I would wait till at least next week for those dip buys. 

Thursday, March 1, 2018

Powell Aftershock

Well it wasn't enough for it to get down to 2740 to adjust to the new Fed chair.  Even with bond yields going lower on the day, the S&P lost another 1%.  In a straightforward manner, he implied that his put strike price is much lower than Bazooka Ben or Dovish Yellen.  He has bought into the inflation economic boom hype.  As I mentioned before, March is loaded with economic data and meetings that could scare the bulls.  Usually, ahead of the uncertainty, the market sells off, especially when it is this skittish. 

If Powell doesn't back track from Tuesday's statement, that tells you that he isn't as sensitive to stock market volatility as his predecessors.  That would be a gift for us traders, as the central bank put has made trading S&P futures much harder than in the past.  It would be refreshing change to see a Fed chairman who doesn't placate the stock market when it has a tantrum.  But its still too early to tell, and his March meeting will provide us a lot more information than the Humphrey Hawkins testimony.

This week, I played it too conservatively, and totally missed the screaming short at 2780-2790 sell zone.  I believed the media hype about Powell being Yellen 2.0 and that made me scared to be short of his Congressional testimony.  It seems like I wasn't the only one afraid to sell ahead of the event.  Anyway, I missed the short, and if somehow the market trades higher by Monday up to 2750-2760, I will look to put on a swing short for a move back down to 2640-2680. 

From a timing perspective, the peak of the fear should be late next week, perhaps next Thursday.  It depends on how the bond market behaves.  If the 10 year yield goes back above 2.90%, the S&P will have a hard time rallying and will probably drop below 2700.  The bond market is driving the equity train right now, so that is the market to watch to get a read on equities.  It should be like this until the FOMC meeting in 3 weeks. 

SPX 2700 is fairly strong support, and with first day of month inflows, it would not surprise me to see a rally today, perhaps back up to 2730.  I would be surprised if we rally above 2740 today.  But this is a crazy market, so anything is possible, and the bulls are that stubborn, so you can never rule out an irrational rally.  On the downside, you are looking at 2680, which was the bottom post Fed minutes last week.   Below that, 2640 area near the bottom post CPI panic a couple of weeks.  It would be quite shocking to see it bust through that 2640 level, but it could be possible if the 10 year goes above 3.00% and stays above it for a few days.  But I am not that bearish on bonds, so I would fade a move in both stocks and bonds if we approached that 3.00% level. 

Wednesday, February 28, 2018

Powell Shake Up

Jerome Powell is not as careful as his predecessors.  Unlike some analysts, I believe he was intentionally trying to send a signal that the Fed will not be passive and will react to short term data.  I believe that will work both ways.  I don't know if it will be a good or bad thing, but I see Powell overreacting to short term economic data and the stock market.  He seems to have bought into the fiscal economic boom hype that is all the rage these days. 

It will be interesting to see if he overreacts when the short term data goes the other direction and suddenly stops rate hikes this year if we get a few months of bad data.   That is very possible because this over leveraged economy will be feeling the burden of higher rates this year.  Since he comes from the investment world, I am sure he will be quick to cut rates and provide accomodation if the market is going down enough to scare the crowd. 

The market is prone to overreact to the Fed's short term leans but with nonfarm payrolls and CPI and Powell's first FOMC meeting coming up over the next 3 weeks, it will be sell first, ask questions later.  I am a bit surprised they ran the market up ahead of Powell's testimony.  Didn't they learn their lesson from running the market up ahead of last week's Fed minutes?  It tells me that there are a lot of short sellers daytrading this market, as they seem to be the one squeezing the markets higher ahead of events and economic data.  They did the same thing ahead of CPI as well. 

But next month, after this big rally off the lows, gut feel tells me that they will be selling ahead of the events, not buying.  After all, the stock market doesn't like uncertainty, and suddenly the market is worried about economic data coming in too hot and the Fed's reactions.  This period will soon pass, but probably after some more volatility in the coming weeks.

This week's high near 2790 should be the top of this V bounce.  I could see one more move higher this week as the first of day equity inflows come in, but that will be the point to short.  I am eyeing a short either tomorrow or Friday, if it gets up to 2775-2780.  Could easily see a move to 2640-2680 in the next 2 weeks.

Monday, February 26, 2018

Stock and Bond Correlation

Stocks are being dragged around by the bond market.  This is not a common situation, and usually doesn't last long.  The stock and bond markets have had a slight negative correlation since 2008, but before then, were often positively correlated.  Usually, stocks and bonds have had this kind of tight correlation when investors are fearful of higher interest rates, which bleeds over from fixed income into equities.

The inane belief that stocks will do fine even if 10 year yields go up to 3.5% or even 4%, is based on a market where stocks were priced at about half of current valuations (2010-2011).  No, when your stocks are at nosebleed valuations with so much corporate leverage, stocks will not be fine if the 10 year goes back to 3.5%.

It seems like last week's Fed minutes was the scare of the week, as the close on Wednesday marked the bottom of the move.  Its been a grind higher since, helped along by 10 year yields finally finding a bottom at 2.95% and moving lower since.

We have reached what I viewed originally as a good shorting zone of 2760.  But I am afraid that Powell will be more dovish than people expect tomorrow and that could put in a last gasp rally up to 2780.  I will consider putting on shorts at that level.  With the current worry about higher interest rates mostly priced in, stocks don't have much downside from current levels, perhaps down to 2640 at the worst, but more likely 2680.  So the general range now should be between 2640-2780, in a bearish scenario, or a more bullish scenario, 2680-2800.

So it is back to the 2017 approach to trading ES:  Only shorting absolutely perfect setups as investors get too optimistic or just buying dips on momentary scares.  Can't rush it on the short side just yet, unless bonds seem like they have made a short term top.

Thursday, February 22, 2018

Fed Minutes Reaction

The Fed minutes didn't reveal anything new.  And it shouldn't really mean much, because it was Yellen's minutes, and she's no longer the boss.  What will matter much more for this market will be Jerome Powell's first FOMC meeting in March, and that is where the uncertainty remains. 

It is the reaction to the news which is meaningful.  Investors were waiting for the Fed minutes to sell.  Or they just delayed their planned sales till after the Fed minutes, no matter what.  This is why you often see a rise ahead of the Fed meetings announcement during the day because those who wanted to sell ahead of the meeting usually did so the previous day or even earlier.  Sometimes you have investors who want to wait till after the event before buying, like what happened with the CPI report last Wednesday.  But this time, the market was very complacent and viewed the Fed minutes as a opportunity to sell into, not buy in to.  And thus the big selloff afterwards. 

I was hoping for a bit stronger rally to short into this week and it just hasn't happened.  It got close to my short target zone of 2750-2760, but barely missed it before plunging.  Rarely do you see such a big move on a Fed minutes announcement, but this market is a nervous market, and it saw the bonds selloff and followed that market almost tick for tick.  At this point, I don't know if I will be able to get a low risk short opportunity before the market bottoms, so I will change my approach to looking for a low risk buy opportunity in the coming days, if the SPX can get to 2640.  I know that's a long ways away, but its possible in this jumpy market.  What I do doubt though is that we'll see a big move down to 2540 to retest the lows.  I don't think the bond market will stay weak enough for that to happen.  The 3% 10 year stands as a very tall barrier and it looks like bonds are stabilizing at current levels and reluctant to go much lower. 

Ever since the CPI number came out, the put/call ratios have been coming in fairly low.  Yesterday was also low, despite the late day plunge.  It seems like we need to shake the tree at least once or twice more before the V bottom players throw in the towel and the market can bottom and sustainably rally higher.  At 2705, the market is right in the middle of my new range, 2640-2760, so not much edge here.  Waiting for an overreaction towards either side before putting on a trade. 

Tuesday, February 20, 2018

$258B in Treasuries

The stock market usually could care less about how much Treasuries are up for auction in a week.  But since the biggest worry these days is about rising interest rates and big budget deficits, it is catching investors' attention.  Since when did investors care about the T-bill auctions?  It's a sad state of affairs for the US government, when they are so reckless with deficit spending and tax cuts that it actually scares the bond market.  The bond vigilantes were dead for the last 30 years, and somehow they have been brought back from the dead, in an economy with such low growth.  What a mess.

For the stock market, along with rising 10 year yields, it doesn't help that the dollar is strengthening over the past couple of trading days.  No, the US is not that much different than the rest of the world when it comes to weak currency/strong stock market.  The correlation works just as well for the S&P 500, because the global stock markets have just become a mercantile index, measuring how much extra companies can make from exports with a weaker currency.  Just like Japan and Europe.  The currency is the only variable that actually changes from time to time, thus its effect on the stock index.  The domestic markets aren't a changing variable, because there is hardly any growth. 

I know the current news headlines are all about inflation and higher growth, massive Treasury debt supply coming, and rising interest rates.  But the growth is just not that high, and actually weaker than what we had in 2014.  The market needs to latch on to a story that it can run with, and since there's nothing else to talk about now, with tax cuts and the budget already passed, it gets all the attention.  Unlike the pundits who believe there was almost no inflation for the last 10 years, I actually see how prices have changed.  The biggest expense for most people is housing, and that has not seen low inflation as many claim.  Same goes for medical expenses.  Really the only thing that hasn't gone up in prices are commodities and electronics.  The price for services and education is way higher as well.  The CPI and PCE are a joke, and using those figures to determine inflation is playing right into the government's goal, of being able to suppress interest rates by pretending inflation is low, and also reduce payouts for CPI indexed entitlements. 

We have a rare gap down after a 3 day weekend, so close to that V bottom from less than 2 weeks ago.  This market just doesn't seem like it wants to break 2750 until the bond market settles down.  Bonds were strong on Friday and stocks followed.  Today, both are weak.  The negative stock/bond correlation is broken.  It makes for a more unpredictable stock and bond market.  A nightmare for risk parity funds.  This too shall pass, but it probably stays with this market till we hear explicitly (not Congress spoon fed babble on Feb. 28) from Powell at his first FOMC meeting on March 21. 

Still waiting to short, didn't expect the sellers to come out so quickly on Friday and beat it down after the 3 day weekend.  Any bounce in the bond market should provide an opportunity to short the S&P if it bounces towards 2750-2760 again this week.

Friday, February 16, 2018

Furious Rally

Fast and furious on the way up.  There was a selling panic on the way down, and since the Friday afternoon bottom, it looks like a buying panic.  Now the last 9 years of S&P trading are probably popping up in the minds of at least a few money managers, thinking, is this another V bottom?  I am not in that V bottom camp, even with this furious rally, just because of the overextension higher in January, the speculative froth at that point, and the late stage of the market cycle that we are in.

That being said, I am not so sure we'll get a retest of last Friday's lows like many believe.  It could very well be a retest of the daily closing low last Thursday towards 2580, or perhaps a bit higher towards the December post tax cut bill low at 2625.  There is still a lot of speculative demand to BTFD, so that should provide good demand if we get anywhere close to 2600.  On the other hand, so many weak hands have gotten in since the beginning of 2017 that I can't picture a V bottom higher, especially after a 340 point drop from peak to trough, a 12% drop that hasn't been equaled since the panic in early 2016.

Also, I am looking at a market that is going higher, now around 2735, but the VIX bottomed out yesterday at the open, even though the SPX was at 2715 at the time.  Since yesterday, the VIX is inching higher even as the market goes higher.  Obviously there is demand for volatility at these levels, even as the market keeps going up.

I previously stated that a top to bottom range of 2540 to 2740 was likely in the coming weeks.  We broke the 2740 area overnight, so I am wrong about the range.  But I still believe the upside is limited from here in the short term, thinking a possible top of range at the start of the panic and gap fill zone at 2760, from two weeks ago.

Also from a timing perspective, post Presidents Day/ Chinese New Year holiday last gasp buying could propel us to a short term top next week, hopefully for a potential good risk reward short around 2750-2760.

It looks like the bond market has stabilized for the moment, despite hot CPI numbers, so I don't expect another rout in the stock market like we had last week.  But we should still have some leftover nervousness and choppy trade as investors adjust to the new higher volatility regime.

Thursday, February 15, 2018

A Little 2000 and a Little 2007

I sold too early yesterday at 2694.  I can't help myself.  At this stage of the bull market, I am just a nonbeliever when it comes to the long side, which makes me want to sell rallies quickly, before they peak.  Even though I know that I am selling too early based on past experience.  These rallies off panicky V bottoms usually last longer than I expect.  But those past experiences were in the middle of a very strong bull market.  The market will act differently near the end of a bull market compared to the middle of it.  That is why I am nervous holding longs in this market.

I know it is presumptuous to assume that we are near the end of the bull market, but almost every anecdotal, fund flows, retail trader volume, and valuation metric supports that assumption.  I still can't get over the fact that most CNBC guests brushed off the 340 point plunge in the SPX in less than 2 weeks as just technical selling.  Of course the huge rally in the first 3 weeks of January was all fundamentals.  The selling is viewed as irrational and technical, just some overleveraged traders blowing up, and algos causing panic.

I haven't seen so much confidence in fundamentals since 2000.  Even in 2007, near the top, there were worries about a housing bubble and credit problems from subprime.

I have an acquaintance who is an on again, off again stock investor, buying into Chinese equity mutual funds in 2007 and after that debacle, finally buying stocks again in 2017 after a 10 year break, and to boot, investing not in bitcoin, but altcoins (because they are cheaper) near the end of 2017. 

He has been bragging about his 2017 stock gains, mostly in tech stocks, and while he was shocked by the big drop last week, he viewed it as bots gone wild, and and refuses to sell because fundamentals remain strong. 

Deep in my gut, I have a feeling that 2018 is a mix of 2000 and 2007.  Like 2000, you had a huge rally in tech and growth stocks.  Interest rates were going higher.  Globally, it is a lot like 2007, with real estate speculation at all time highs in parts of Europe, Asia, Canada, and Australia. 

A lot of times I let my big picture ideas get in the way of short term trades.  But I often find the path of least resistance, and thus the odds, favor those who are on the right side of the trade long term, even if it is a short term trade idea. 

We got a relief rally even after the CPI came in high.  It tells you a lot about the market positioning ahead of an event.  A lot of shorter term traders and investors were nervous about the CPI number and either sold or hedged ahead of the event, or right after the event, which meant the market really only had one way to go after the dust settled, which was up.  It was similar to the bad nonfarm payrolls report that came out in early October 2015, when the market gapped down huge on a miss, only to rally huge from the opening bell all the way to the close.  That NFP report happened to come right after the market had bottomed, similar to the CPI number yesterday. 

A big gap up today after the big bad event(CPI) is over.  It just happened to gap up into a strong resistance zone near 2720.  You are getting the fade off that strong open today, which makes me think that its going to be difficult to go up much higher from these levels.  Waiting for a possible short next week, if the ES is between 2720 and 2740.