PM Weekly Market Commentary – 09/11/2020

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  • Mon, Sep 14, 2020 - 05:37am

    #12

    JAG

    Status Platinum Member (Offline)

    Joined: Oct 26 2008

    Posts: 528

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    Completed Excess Speculation Signal

It looks like the big boys are back and the markets are preparing to soar back to the all time high.

There is some good news for the bears, however. Last week saw a big pull back in the speculative call buying. This completes the primary signal of excessive sentiment.

I expect this week will bring a new spike in speculation, but the signal is baked into the cake at this point.

Here comes another beautiful chart from sentimentrader.com that shows what happened in the past after completed signals of excess speculation:

This signal really nailed the major tops over the last 20 years. Will it work again? We shall see.

  • Mon, Sep 14, 2020 - 08:34am

    #13
    phusg

    phusg

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    PM Weekly Market Commentary – 09/11/2020

If I’m reading this right the first chart is just for small traders right, does it also hold overall? Or is the second on the basis of only small traders? I’d imagine the demographic of small traders has changed a lot in 20 years.

  • Mon, Sep 14, 2020 - 10:47am

    #14

    davefairtex

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    interesting signal

So the big money comes 12 months from now.  2 out of 3 times.

FWIW this feels a bit more like 2000 than 2008.  And definitely it doesn’t feel like 2012.  So – probably a valid signal, and probably case 2000.

If history rhymes, we may re-test the highs in SPX, but not in NDX.  So the thing to short, probably, is NDX, since it has definitely outperformed.

But maybe wait for a re-test of the highs?

I’m not 100% sure we get there.

I re-added my TSLA put on today’s rally.  Should be fun.  Only October though.

Musk tweeted today about exciting battery news coming soon.  That guy is a one-man pump-and-dump operation.  He still has that secondary to finish, I guess.

  • Mon, Sep 14, 2020 - 12:13pm

    #15

    JAG

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    PM Weekly Market Commentary – 09/11/2020

phusg: If I’m reading this right the first chart is just for small traders right, does it also hold overall? Or is the second on the basis of only small traders? I’d imagine the demographic of small traders has changed a lot in 20 years.

Small options traders (like me), those who trade in orders of 10 option contracts or less are considered the ‘dumb money’. When they get cocky or scared (showing extreme conviction in their bets), you want to take the opposing trade. The signal applies to the markets in whole.

The ‘dumb money’ has been right for awhile now. They have moved to trading options on a daily timeframe, hoping to be nimble enough to avoid any major losses I suspect. They are getting very desperate and seek to scalp whatever is moving in the market.

ETF Fund Flows

There has been quite a move into 3X Leveraged Fund Flows over the last five days. While QQQ has seen money moving out of it, TQQQ (3X long QQQ) has seen money pouring in. The 5-day ratio has never been greater.

For this reason I decided to buy an OTM put on XLK (tech sector). So far it is in the green. I’ve only bought put options once before and that worked out great! Remember UAL, DF? What could go wrong?

 

 

 

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