Deep dive into your favorite stocks.
ES (S&P 500 Futures)
Finally, we reached the moment we’ve been waiting for and playing for. A new ATH. Phenomenal recovery in the S&P 500 index from the March lows. The question now on everyone’s mind is of course “Where do we go from here”.
Well to begin with, as we say in every newsletter, we have no intention of shorting into strength. People thought a full recovery from March was impossible, and then that turned into “No way we make another ATH” and now inevitably human psychology points to “The next pullback is just around the corner”. Maybe it is; Maybe it is not.
We aren’t interested in guesswork. As the facts stand, the market has shown phenomenal strength. On the COT data we see both hedge funds and retail at pre-COVID levels long. If there was only one thing concerning this rally, this would be it. In just a few weeks the entire retail world went from severely short, to severely long. The transformation is extreme and sudden as you notice on the graph. As it always is, small specs are once again late to the party, but they showed up big time. Going forward, that’s the only reason for concern. When everyone is greedy…
You know the rest. On the TA front if we get a pullback we are looking at 3280–3300 level to hold. Below that there is 3180. If 3180 breaks and gets back-tested as a seller’s area we switch our entire perspective. As things stand all the strength is still in the technology sector. However, do remember what we always say. Technology is not simply technology. There are multiple industries. We have IT, clouds, semiconductors to mention just a few. Clouds showed up in a big way this past week especially Thursday as we warned about the rotation in real time. Please utilize the watchlists of sectors and sectors divided by industries that we shared to catch rotations in real time. We do think the next rotation will be money flowing out of technology and into financials and industrials and are patiently waiting for if/when that happens to be the first ones to capitalize on it.
SPX: 3450C are long for 8/28 while 3290P and 3255P are long for 8/24. We could see a reversal on Monday followed by bullish continuation into Friday. SPY Darkpools: Above: N/A ; Below: 335.83, 334.90, 333.00 and 332.80
Some buying action on the side of hedge funds in VIX futures. Gap below on VIX futures. Contract rollover. We are still cautious with VIX this high of course and will continue to monitor further. VIX futures are still trading above the breakout so it does pay to keep either the index itself or the futures in mind.
U.S. Dollar is still relatively range-bound. On the COT report, there are no major changes with hedge funds mostly undecided/slightly on the sell-side. We still have our longs on the Dollar and intend to keep them for the time being if nothing else as a slightly defensive play.
We scaled out half at 40% so there is no rush on liquidating the rest. On the TA side, the Dollar is still sitting on a lower high. RBR printed in between so we might be focusing on that as a continuation, if the low breaks might just decide to sell the longs completely out in profit and just wait out the next entry. For now, the reversal is still in play.
Looking at the COT data the hedge funds are undecided on the Japanese Yen largely. The % of positions reported long/short on the side of the fundies was 0.01 to the short side which honestly isn’t saying anything. Small specs are net long still overall.
On the chart the Yen is following an upper trending channel, but unless it manages to hold the highs of 8/7 as a new buyer’s zone it’s a risky buy. If, or when that happens we will look into it.
Two ways to interpret this. Either the Euro is backtesting a breakout for a further continuation up, or hitting the top of a multi-year downtrend for another selloff. Off the COT data, we can see that both hedge funds and small specs are essentially net long and we are looking for a continuation up more so than anything. No position at the moment however if the Euro can defend 1.65 and/or establish 1.2 area as a new buyer’s zone we might become interested in a longer-term long on this currency.
Unbelievable run-out of AAPL and the first company to break the 2 trillion market cap. Members made great gains on swings from Thursday into Friday when AAPL made a massive run from 476 to 498. Buyers are convinced this could go higher before the stock split with calls long from 525–560 for 8/28. On the flip side, if it does not hold 495, AAPL could revisit 475.
Darpools: Above: N/A ; Below: 497.50, 490, 489 and 478
It’s going to be a very interesting week with AMZN. On the weekly chart, it’s breaking out of a weekly bull flag and after AAPL and TSLA announced stock splits, it’s only fair to speculate this giant will be next. A large massive bullish bet was made on Friday with $73M in Nov 20th 3300C. With everyone anticipating the market to have a sharp correction, this market maker thinks otherwise, and bears may get their shirts ripped off their backs. Other speculative bets include 3500C for 8/28 , 3620C 8/28, and a very odd 3800C which is likely playing for gamma.
Darkpools: Above: 3305, 3310 ; Below: 3275, 3250 and 3200
Post the earnings release, BABA did not get the same reception as other tech names. Given that it did not fly like others, BABA is by far the cheapest Tech stock out there.
Over 52 week highs, potentially we may see it squeeze to 290–300 price range. Options flow point to bullish outcome in the next few weeks with 300 call strikes of 09/18, 11/20 and 12/18 gaining interest.
Still reading? For even more analysis into Facebook, Fiserv, Microsoft, NVDIA, Tesla, Uber and many, many more, be sure to check out Echelon 1’s Weekend Report Vol X.
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