Morning!

Slight gap ups to begin.
VIX down but still over 20.



If this holds with any momentum there will be a bunch of places to make a buck.
For me still staying on my toes and playing smaller/scaling in until we recover the 8 & 21 EMAs.
Volatility can be your friend or your foe.

I say let's run a bit.



Trade wisely!

If we stay above 4251.25 we should get a bullish Harami today and then maybe a big move up tomorrow. Fall below that and I think we continue the slide for another couple of days.

Edit - forgot to add: Morning FJ

La Bamba said:

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Yeah it's 3:38 AM Texas time. FJ getting his premarket scan on. I'm having withdrawals from the US market but I guess the sun in Maldives is an adequate alternative.

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#humblebrag #drinkoneforme

Also great choice to have a pint and wait for all this blow over!

Tuesday Macros

Yesterday we talked in a Youtube TV with TD Wealth interview of the possibility of a "reversal Tuesday" , something we have seen many times...equities started to bounce overnight, but quickly reversed on the Apple News of postponing the return to office... But equities tried to make a comeback and are back higher, but off the overnight hits... Treasuries backed up to 1.215, but at 4 am, they went 5 basis lower to 1.16, in a very short time frame... Illiquid markets are always part of the problem, but there are real fears of where new Delta variant of Covid is taking the global markets and economies... We have to take our hat off to guys that predicted that when we did not see it...

Rates... Very choppy but the moves now on a technical basis has removed many of the bears... And while it is taking us kicking an screaming, we see a magnet at the 1.18-1.20 area... Inflation is out there and real... And while it is not going away, it is not the focal point of the markets at this time... Risk off strategies are clearly in place for now... A colleague wrote last night that their credit risk proxy of "probability of default" equity basket saw a 3 standard deviation upside move yesterday... Fear is rampant and panic not far behind...we have 10 year resistance at 1.12.. And then at .99... Long bond at 1.75...but the move past 134-14 yesterday on 10 year futures kicked in another 49 billion of buying from CTA's... The good thing about a potential correction back to 1.42 10 years is that everyone is long... But Fed rate hikes are being built out after being raised due to inflation.

We have seen corrections in the Russell 2000 and the transport... Still quite not close from the three big indices... US equities posted their single biggest daily loss of the year yesterday, and commodities fell sharply. Crude got crushed. Many markets broke key chart levels, which accelerated selling.... We saw de-leveraging and margin call selling...Once the margin clerks get control, markets get very dicey...that has to subside before markets can stabilize...Could this be the big correction we were looking for? Could happen, but we think the Delta cases will subside, and the amount of money on the sidelines remains massive,,, equities now look even cheaper than bonds and big players do not seem overextended... Weaker hands are being forced out now, but there will be a buying opportunity.. Maybe that was yesterday, as equities seem to have stabilized since we started writing... So expect more chop... We do not think this is the "big" correction that we were looking for after the Jackson hole meeting, but everything happens more quickly in the last year, so the jury is out...

Credit spreads are stabilizing... CDX HY was out about 12% wider in the month of July late yesterday . It was 300 at the time... Now 295. The Junk bond index posted it biggest single day loss since last year... While it seems small, the loss was just under 1/2 percent... Which is a big day move.. Yields jumped 22 basis points to 4.02... Spreads also widened 22 basis,,, CCC are still below 6% at 5.95, but treasuries are much lower. The yield of the BB Barclays HY index is back above 4% at 4.02.

Expect another choppy day... But we expect the worst of it to be over by the Fed meeting next week... But that does not mean we do not see 1% 10 years and another 3-5% lower in equities first...

ELOX with a nice rebound.

Scooped up as much WWR as I can handle

Destination: Moon '22

$30,000 Millionaire said:

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Watch for bull trap guys. The pattern has shifted to gap and fail and you need to confirm it's not otherwise.

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It would be a great trap. Everyone expects buy the dip, retail gets herded into the chute, balls get removed.