The collision of global markets and social mood

Friday, January 22, 2016

Friday -- Global Sigh Of Relief

S&P E-mini Futures:
Blasting higher.

Markets are green everywhere. Draghi seems to have inspired a coordinated global stimulus narrative. Even BOJ's Kuroda is phoning it in from Davos --

-- If underlying inflation trend affected, can expand QQE

-- Will continue current policy until 2% is achieved

Even so, it's way too soon to declare a victory lap for the September Vogue Reset/Reboot prediction, though it was pretty cool to see The Great Reset appear yesterday. The real signal won't be until it appears in the non-financial press, however. So maybe it's too soon to call a bottom.


Well, the D-word, for starters. No, not deflation. The other D-word . . . derivatives. The $600 trillion time bomb.

You know it's an issue when you hear Tom Lee, one of the biggest bulls on the Street, getting nervous about something. Yeah . . . derivatives.

The video of his appearance last night on Fast Money wouldn't embed, so I posted the link. Watch the clip if you can. This will eventually be a big problem.

Deutsche Bank and several other European banks are not looking good lately, and it's thought they may be over exposed to oil derivatives.

It is also unknown how much exposure China may have to derivatives. I don't think China's stock markets have hit a lasting low yet, but they could in the next few months, maybe on these same concerns.

That's why I'm showing an updated chart of the S&P below that could echo the same.

Another "great" day for Risk On except for the USD which is stronger.

These are starting to act as Fed rate proxies to me. On bad days in equities, treasuries rocket higher, signaling rates will stay lower for longer. On good days in equities, they plummet, and signal higher rates to come.

Let's not forget that treasury prices have been trending higher since 1981, so if there's a change in trend, it will not be for the "right" reasons as CNBC likes to say.

Markets are too addicted to central bank stimulus, and can't handle higher rates. No news there. But the addiction will be broken eventually. How and how soon remains the question.

WTI crude ripping higher. NG higher too.

Gold down, silver and copper up.

S&P Outlook:
Regarding the China comments above, I still think we're set up for a bounce, but maybe this scenario could be in store later on.

Also, the chart below jumped out at me yesterday. Because TRIN is calculated using advancers and decliners as well as volume in advancers and decliners --

TRIN = (advancing issues/declining issues)
(volume of advancing issues/volume of declining issues)

-- maybe this chart illustrates why TRIN never got to an extreme. While there was a lower low in the S&P on Wednesday, there was very little declining volume at that low which created a large divergence.

I'm largely a divergence trader. And this was the only divergence I could find that day. What signaled the low? The Elliott wave count and that was it. That's why I'll be on guard for a retest for probably quite a while.

Furthermore, I'm seeing a lot of wave counts showing the decline is over. If it is, great. Got a bunch of XIV for that.

If the bounce starts to look shaky, I'll have less XIV and a lot more TVIX and UVXY and OTM SPY & OEX puts.

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