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Hello Traders, it’s been a while since I did a post, been on the Road a lot lately. We are getting close to wrapping up another year, and as always, the talk starts about the Xmas rally. Now I do see that the theme of the market is bullish and has been for a while now. Before we get too carried away in a sled led by bulls, I am pretty sure we will get a nice visit from the bears giving us a nice pullback before Xmas. There have been several signals dropping these hints. The first hint for me was that for some time now I saw an irregularity in the implied volatility. When I first noticed it earlier it was on the 8th of December but as we get closer it has spread to the 5th of December as well. The next signal was the change in leadership to the upside and the divergence in big tech. The financials are now leading the charge to the upside in an environment where rates are confused at best. The Fed seems to want to hold at current rates, the bond market, because of lack of interest in the treasury market, could be poised for another push up to a possible break through recent highs. Then the public and talking heads are calling for a rate hike which should only be possible if economic activity drops and falls hard into recessionary measures sharper than anyone expects.
The Monthly outlook is bullish, closing above 456.4, with possible retracement of around 453 area to even the 448 area. We have Dissonance between the tech side which is (bearish) and the Quant side which is (bullish) which tells me we could be in for a surprise (a pullback deeper than the 453 area).
The weekly outlook is bearish, closing below the new open of the week, with possible retracement of around 455 area or below at some point this week. We have harmony between the tech side which is (bearish) and the Quant side which is also (bearish).
This is definitely a holiday season to stay on your toes. The theme is bullish but the risk/ reward for getting or staying bullish here sucks. Which is why Friday saw me take on a decent number of bearish positions.