The S&P finished with another solid one-sided day. The pattern since the GME short squeeze is a bit unusual and a reminder of the emotion in the tape. The S&P 500 has posted 8 of 9 one-sided days (gap higher or lower in the day session and remain in that direction all day). Such a pattern occurred twice during the Covid uncertainty of last spring and just three times prior. The primary conclusion is that we’re ‘due’ for a few two-sided days.
The GME short squeeze illustrated how overleveraged funds are when the market heads lower and the rally showed how underexposed most managers are on the way up. Why is this period so different than the past? Passive flows and fiscal stimulus amid zero interest rate policy force investors to adjust exposure with any rate of change.
With Congress ready to send more checks for Covid and even more checks for dependents, I’m less sure why we just don’t give every newborn American 6k worth of equities and let it appreciate until retirement. Of course, maybe that’s where we’re headed.
Bitcoin is ripping faces off again–nearly hitting 49,000 in the overnight session.
USDA Grain Stocks report today at Noon ET. This even can move the market based on both US and World Ending Stocks.
Strategy and Levels
Overnight we’re at least seeing some reflection to the USD from reflation and continued gains in commodities like Corn, Copper, Crude, and China’s Yuan. Though I understand the Bitcoin phenomenon, I find it hard to believe the rate of change in these products can continue without some impact to commodity currencies and sterling.
Most of today’s gains in currencies are isolated to shorts in Eur, Jpy, and Chf but the structure for NZD, AUD, and GBP still ‘seems’ higher. Today will likely be a range day and classic ‘counter trend tuesday’ with retracements off this ‘mega move’ run from 3862 to 3891 in the S&P. In the unlikely event we remain negative during the day session, the streak noted above would extend to 9 of 10 and ensure tomorrow is two sided (consolidation within a solid uptrend for 48 hours essentially). Risk takers I talk to are looking to buy pullback entries in Platinum and Copper below 1165 and 364. Although Coffee hasn’t shown anything yet, breakout buys above 126 may be promising.
Macro & Event-Trading Specialist
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