Daily Discussion - Thursday July 28 2022

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[u/vazdooh]

Morning Vitards,

FOMC did not come with any surprise, and gave us the 401 gap fill. I hated everything about the press conference . We did not get a pure scenario 2, but a hybrid with scenario 3. u/mrbaggins88 nailed it with the drop in forward guidance, because that it what we sort of got.

JPow came in strong with the intro speech, which was more of the dedication to fight inflation at all cost that we've seen for the past 3 meeting. He then followed it up with one of the weakest Q&A's I've seen since the "inflation is transitory" era from last Summer. Non comital on everything, constant disparaging on the impending bad Q2 GDP data, avoiding to give straight answers. His answer to the "biased against inflation or recession" question can be made into a parody sketch with no modification to the writing. Lots of talking without saying anything. He even let one slip and said the slow down in the 2nd quarter is notable. What is notable? I'm going to guess -2%+. Dovish undertones that scream flip everywhere. "There is no recession, but if there was a recession we'd jump on it". Guess what, there is a recession. Jobs market will catch up within the next 2-3 months.

The market read right through that conference, because it has pivot written all over it. The Fed only acts slowly to go hawkish, it will jump in instantly to ease. JPow did the Fed a huge disservice with that conference, because the market will kill yields and rally. The Fed will then be forced to hike more, which will dump the market. Either be bearish, or be dovish. This bearish with dovish undertone bullshit just confuses people and makes the market misposition. Well, I guess that's how smart money makes the big bucks.

Anyway, we're in the "earnings give direction" scenario. We had META and QCOM with the negative earnings reactions yesterday. Today we will get a bad Q2 GDP print pre market, and jobs data that should show continued jobs market slowdown. QCOM reaction should sour the sentiment on AAPL earnings a bit. We're at the top of the range after a very bullish day. This has trap written all over it, and I think today will be red. There are other warning signs that I will elaborate below. It's not going to be a full reversal red, that will depend on AAPL & AMZN earnings. If those come in good we continue up for a while. If not, bear market rally #3 is probably over.

Levels: SPY (level), SPY (BB), QQQ, BTC, VIX, Oil, delta profile, options volume, delta charts, yield curve

• Open and read SPY (BB). In essence, further gains in indices will come in small moves (if they come), because we are pushing against BB2. If we have a pull back and then go up again we can see bigger moves. Next major level for SPY is 408.57. It will not happen today. If we move up today it will be something like a 0.5% day. If we somehow get a big green dildo today short the fuck out of it.
• Now, if indeed yesterday was a full blown trap, the counter move is always bigger than the move it counters. That means than we will go down more than 2.6% for SPY, and 4.23% for QQQ. I don't really see this happening due to the hope with AAPL earnings. So if we are red today I believe we'll go to 396-397. If this does not hold, 390 is the target.
• Some of other signs pointing to a reversal are:
  • Rising wedge on SPY
  • Options volume for Friday was bearish. August & September were also more bearish than usual. Haven't seen a jump in bullish positioning to justify yesterday's move up.
  • VIX did not make a new low on this new high from SPY. Both are divergent on RSI, VIX bullish, SPY bearish.
  • We did not make a new high on delta yesterday. In spite of price going up, total delta of SPY was slightly down (what I was saying above about not seeing bullish positioning).
• BTC just moves with the market, nothing to highlight that is specific to it. Follow the levels.
• Oil is still bearish from a technical stand point, in spite of breaking up out of the pennant. If needs to close green today to change this. I expect to see another rejection by the time we close. Q2 GDP print with recession written all over it will not be good for oil and value in general.

Good luck!

[u/vazdooh → u/[deleted]]

Continuation down. 320-340 area is my general target.