3/7 Recap. Ugly Reversal.

This morning shortly after the open we got to hear Powell’s side of things and he now is in the camp that he may have to do more with regards to rates. He is completely lost now and you can tell he is in panic mode. The rate hikes are not working and now the notion of a soft landing is drifting further away. We reached the deepest inversion yet this cycle and while the pain typically doesn’t come until AFTER we it flattens out, the warning signs are all there. Hence my positioning so far lower and into 2024. We have jobs data later this week which could be all she wrote for the market, but until then, we are in an uptrend.

This morning I wrote this post on leverage and how I think about it in the context of the environment we are in. You can read it below if you haven’t.

The How & Why Of Leverage.

SPY

What you will see below is the line I’ve drawn from the start of the start of the October uptrend. You need to draw that line on your charts because once we close below it, it is time to scale out of longs in a big way. It may not happen, it may happen this week, I can’t predict the future, but I can tell you that when trends break, it is not time to buy the dip. The second picture is a closer look where you can see exactly where we stand. We filled the gap from Friday and we await what comes next. A move below that trendline is where I would finally begin to de-lever.

Trends

Before I get into today’s unusual options flow I want to start with a new section here where I will post the bullish/bearish trends my database has picked up over the last 2 weeks to help guide you more in direction. The results here are simply a net score derived from the amount of bullish/bearish activity that been recorded. If you notice the most popular names have ended up being some of the best performers in that timeframe reinforcing the theories that the options market can predict future outcomes. This should help you with regards to focusing on strength.