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Please Disperse. Nothing To See Here - Morning Market Squeeze

Key Tactical Takeaways:

> S&P futures are at 9-day lows this morning. If this weakness continues through the open, look for a massively important test of SPY ...


> After reaching our tactical profit taking target of $47.00 on Thursday, crude futures, which have been highly correlated to the S&P recently, are falling with stocks this morning. Right now, the initial outlook is for a healthy corrective decline to ...


> Following through on the bullish energy that resulted from Thursday's stellar 30-Yr auction, Treasuries are finding a safe-haven bid this morning. The 10-Yr yield now faces a critical test of its near-term trailing stop at ...%. This remains the case against ...%.


> Given the corrective risk in equities, we'll be looking to take some profits on our biggest winners (PSX & WMG) at the open, while looking for opportunities to implement bearish credit spreads on ... stocks.


Some Quick Thoughts:

We've been busy little beavers behind the scenes in recent weeks, making major enhancements to our published products in preparation for a broad push to a retail base. One of the enhancements involves incorporating a tactical timing system to help readers manage the trade ideas contained in the assorted products we'll be rolling out early next year. This system has been warning of a tactical profit taking opportunity on our current USO long in the area of 32.00. USO closed at $32.11 on Thursday, after a nearly 3-sigma intra-day rally by crude oil to $47.74. As a reminder, these big-volume overshoots were at the core of my tactical, contrarian decision making process during my days on a leveraged trading desk. Therefore, look for at least a couple of days of ... in oil...


For stocks, the narrative has been that the equity market's tendency to forecast 6 months ahead meant that the anticipated spike Covid-related cases, hospitalizations and deaths that are now coming to fruition, and the small business apocalypse that is the result, would simply serve as the backdrop in that famous scene from the movie The Naked Gun. You know, where Frank Drebin is trying to hide the fact that the city of Los Angeles is exploding behind him by shouting "Please disperse, Nothing to see here." While we've come to accept that global central bank manipulation of risk assets could certainly achieve this, along the way tactical resets are needed to bring in fresh buyers.

For a second straight session, the VIX is poking its head above its downside trailing stop at ..., after positively diverging against higher highs in the S&P 500 for the past several days. While close above this level would certainly take the short-term focus off of the VIX's widely publicized test of the 20 level of late, ... is ultimately the level that, if surprised on a closing basis, would mark the start of a sustainable period of increased volatility.


Earlier this week, we began advising our students that, even though the trend is still higher, reducing equity exposure during periods of such bullish froth is prudent. As a correction finally seems to be taking shape, we're advising them to pay close attention to the ... level for the S&P 500, since any failure by sellers to force a close below this level would leave the bullish trend well intact. Should support fail in the coming days, however, it would confirm the recent highs as a false breakout, thereby opening the door to ...


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