1. What happened in the prior week? (NEWS!)
Last week we didn’t have a huge news influx other than earnings that came through in big tech names. The bank of Canada increased rates by 50bps, which is said to follow the US rather than be a leader, so this coming rate hike coming up in the following week might signal some kind of dovish pivot by the Fed. Maybe not a pivot this coming week from the 75bps hike but rather in the final hike of the year there might be a signal of that dovish pivot. The market is starting to price that in for sure, as the market rips into the end of the week.
This week out of the US we have ISM manufacturing PMI, JOLTS, ADP non-farm, FOMC and Feds funds rate (most important), NFP to end the week.
This is a huge week for the market in terms of news, the FOMC meeting and the Feds funds rate is going to be the centre where we expect a 75bps hike, as well as forward guidance to the future of the monetary policy. Not to mention the first few days leading up into the FOMC might be sleepier.
Then to end the week we have NFP to wrap things up, which is going to wrap things up nicely in the week.
Earnings Wrap up.
This week we had massive earnings, a lot did poorly and a few ended up saving the market into the end of the week, mainly AAPL. Tech earnings were at the epicenter of interest.
META, GOOGL, AAPL, MSFT, AMZN, next week we have chips to look out for.
META did poorly, missing EPS by 11.32% and revenue slight beat by 1.15% with expected expenses in the coming year rising by about $15 billion. Mixed with terrible results from reality labs, META managed to drop about 25% after hours, sub $100. Year to date we’re down about 75% and coming into the $93 support to try to hold, along with $81 to hold out support. Which is not a far reality. If we start breaking above $100 we can get this rally started to clear a gap if the market opens up some bullside continuation even though we have the coming data points this week.
GOOGL in Q3 missed earnings by 15.4% and missed revenue expectations by 2.21%, pulling the stock lower throughout a few days into lows of the year until the whole market was bought up on Friday. The stock fell on earnings as YouTube and Search showed us rare weakness. As it stands we dropped under yearly lows sub $95 and into the $92 region, there is a huge spike sitting at $88/$85 area where we would target the distribution low for the bears. However this recent pop could start the next little bear rally to get us going, I still want to see more downside shape up where the market prompts a sightly larger rally, which can come this week. But again we have to wait for yet another news event that’s set to come out.
MSFT earnings came out this week and they did fairly well, moving higher on the post earnings into the prior $250 resistance before the market slipped into a higher lowe now pushing back into 250. EPS beat by 1.94% and revenue beat by 0.88%. We have this strong yearly low sitting at 220 or so… Which I think will be defended but not into the end of the week.
AMZN beats EPS by 37% and misses revenue by 0.29%, this quarter we saw that net sales grew year over year and provided weaker forward guidance. We have prices that dropped heavy sub $100 into new yearly lows and popped off the ledge from $97 into $103 to end the week and pop above the distribution ledge and prior lows of the year. This can open for a gap fill and into $108. Im watching for some potential buyers to come out this week to at least start the week. We’re coming into key sell areas on the overall market though.
AAPL earnings beat on revenue 1.55% and on EPS 1.27% while the stock started the afterhours with a large sell until it was bought up into the morning session and 7.56% during the day. The iPhone sales and services were a little weaker but overall pretty solid compared to the other earnings that came out of tech this coming week. AAPL still holds out at the $134 key support area and even on earnings, started the session with a gap higher and destroyed $152 on the ledge, meaning looking for more upside this week, that ledge is pivotal and can open up some longs for the market this coming week as long as AAPL breaks 160 as well.
COMPARING THE 2008 MARKET to 2022.
Take a look at the market below, the yellow ghost candle trend is what transpired in 2008 and it’s compared to the current conditions of the market. It’s holding out well with the 2008 trend as it stands.
If you take a look at this we’re coming up into an area where prices are expected to stall, we could get a little more or a little less than the last wave in 2008 but overall I think SPX start to top out this bull move from 3980-4020 or so.
(Market Movers SPY, QQQ ES, CL, GC)
In the overall trend chart in the SPX we had a little buy signal appear on October 20th at around 364, just around a pivotal area on the SPY and now prices are up 6.86% from the region while the medium term 90EMA for the ADVDEC of NYSE+NASDAQ are start to move into the resistance of the average. We could slight peak that area but I think this is where the prices start to fail a little and maybe just above before we start the sell. The volume on the leg up was solid but nothing too impressive on Friday. Which means we have to look at the volume profiles and other part of the SPY to identify the potential move.
Based on the volume profile chart, we have the start of a massive profile ledge to hold out resistance into 390 up to 396 with areas at 392 just in the middle where we have resistance. I don’t see price moving too much above 396 before we start turning, which means we could have a little more upside. We have ripped into the positive greed area in terms of investors, VIX is getting destroyed and the market breadth is opening up and not just turning yet, its moving into oversold area but just not yet, until we flip or hold above its going to be hard to identify the shorts on the swing which are coming out, so for now looking for some long continuation to start the week. Looking for a 3-7 point move higher on SPY before we start to see some sell. Eyes on FOMC this week, the first 2 days the bulls have to continue the trend before we get the potential rollercoaster which is going to be decided on the forward monetary policy guidance.
I took some shorts on the swing which went well on the session and the following session, before the Friday pop, a lot of those puts are taken off, short and medium term but the smaller portion are getting hurt. Which I will look to add to into the end of the week if we get the pop this week.
In terms of VEXLY in the market maker positioning for SPY, we have the following:
● Positive delta from 370 to 400 for the first two strikes of the week (Monday, Wednesday)
● Largest delta spikes at 375, 390, 400.
● First area of major resistance that will most likely try to reject at 390 (delta).
● Positive gamma positioning from 385 to 405 (strong spikes).
● 385 first key gamma support with 390 spike sticking out a lot for the first possible rejection into FOMC.
● Net delta positioning positive until 365/367 (massive flip area that’s holding out for the longs this week)
● Net delta positioning is stronger on the positive side than on the negative side.
● Largest volume on call/put side remains at 358.
The QQQ manages to sustain the 270 area really well this week especially into the end where the distribution block starts off and opens up to 295/296 before we get trapped in the large distribution block. We have a strong resistance shaping up at 283/284 from the 281 area. We could even see 290 on QQQ before the sellers come in but with overall tech stocks being weak it’s going to be hard with just AAPL taking this ETF higher. Still looking a little longer to start the week but the question is how much before exhaustion forms. I don’t think this is the start of the new bear rally but the ending portion more so.
Vexly on QQQ:
● Consistent positive spikes of Delta in the first two expirations of the week with the threshold at 275.
● Two largest early week spikes sit at 290 and 292 (massive targets and resistance)
● Gamma spikes on the week at 290, 292 which allow traders to find the massive resistance area.
● The 285 and 280 gamma levels are going to act as a range area resistance and support.
● Net gamma is skewed to the negative side.
● The largest call/put volume is 274, massive support, fairly close to price
ES on the 30-min entered a lot of distributions to the upside this week and we moved to start above 3740-45 which we held as support nad from there moved above the 3805 after a first failure, and even into the low distribution block between 3835 to 3885, before breaking and holding above into 3923 to close out the week, we have the end of a larger distribution block at the 3930 region and above the start of the distribution is 3960 up to 4002/05. Which is where I want to cap this upside move, which is about 80 points higher, there is still room, this is where I want to see the price fail but until then look for continued longs to hold us out to pop above 3930, we could look for longs from 3895-3905 to hold or the 3880-85 final pullback to pop this higher. Remember we have FOMC so the bulls would want to take this early in the week before the uncertainty comes out.
(Canaries & correlations AAPL SMH IWM AMZN GOOGL)
We’ve talked about MEGA cap tech above due to the earnings season, so we’ll focus on VIX, IWM and SMH here.
VIX got absolutely crushed this past week falling from the 34/35 region where we didnt even see that much upside on the market dropping into lows. But this week we rip down to the 25 region and I think we could see 22-20 this week potentially where the VIX starts turning and so does the market.
SMH holding this week above the 188 area, the next logical distribution block is the 205 region and first level of resistance 200. Keep in mind we have the chip earnings this coming week which can either propel the market to more upside as well as SMH or pull things lower. We have to consider what happens with the FOMC.
IWM has showed strength all week long which is a huge canary for prices to continue the trend, rather than looking for the fades, wait until we start to see IWM weaker, we rallied above the 179 resistance point and are still running, logiscailly we would want to see the 189 if this bull continues. The sellers need sub 178.50 for the cotninued down move and really under 176.
2. Market Breadth & Heatmaps
(last week 734)
The breadth is getting really overbought which is going int the sell zone, it can stay here for a while, but we are starting to consider that topping, with info tech not sitting at max breadth.
R3TW- Getting into sell zone as well above 85 twice now, even on the Friday rally we are sustaining the top of this oscillator and potential topping, until we dont break back below 75/70 its going to be a little difficult to call the top that well.
3. The COT Report
There is still a flat line in the commercial paper after a little pop last week, there isn;t as much buying as when we saw the last 20% bear market rally. I don’t suspect that we get too much of the upside on this little buying, would have to see more to get the continuation. The retail buying (green line, bottom chart) hasn’t gotten too heavy yet which is usually the inverse positioning of the commercial paper (red line, top chart).
Dealers are adding heavier to shorts, meaning long positioning is starting (last week), while the asset managers are opening up some longs as well taking off much more shorts for the next leg up early last week. Even leveraged funds (hedging) adding to shorts, suspects long movement into the end of last week (which came true) as well as in the coming week to at least start before the FOMC comes out.
4. Analysis of the week (Options Positions)
● Tech positioning is really spiking negative this week for net gamma, opening potential for the shorts to continue, just AAPL keeping this up, with earnings getting shot down, the small rally on Friday can bleed a little higher into the start of the week into the FOMC. We also have semis with negative positioning and a spike but not as much as we saw in the summer months. High beta and china is naturally negative.
● With banks, the net gamma positioning isn’t necessarily really negative, rather we’re seeing a little slow down in selling and that shows well with the spike in GS and JPM this week amongst others. While energy is still strong with expectations to continue like this into the end of the year.
● Looking at tech (GOOGL, META, AMZN, AAPL)
● Looking at banks (JPM, GS)
● Looking at ETFs (SPY, QQQ, IWM)
Im looking for some upside in the general tech side of things to start the week into some key resistance points which may just be day trades to be honest, before opening up the potential for a short trade on the swing, does depend on the Fed, if they present the opportunity for a pivot or how they display their future monetary policy and inflation gauges which affects mega cap tech a lot.
GOOGL still like downside targer into 87/88 however, the longs can run up into the 100/101 ledge, the gap fill would be around 103/104. Watching to see the rejections start coming out at the 100/101 region.
META poor earnings sent it 25% lower, building out area around VP ledge 93 key, above the 100/101 has potential to start the gap fill or even into 116/117. There are longs building up on META as well on the net gamma/delta positioning with some buyers, if the market continues into the FOMC chances are we see some of these longs even in the fallen META.
AMZN huge rally on Friday from the 97 ledge on the profile after the ER slipped into new lows for the year, coming into the 104 resistance but back in the ledge created for teh year which can open up some room to the 109/111 region for the longs, which I like to start teh week, the 113 ledge would like to hold out resistance EOY.
AAPL holding the whole market up yet again, whats new here? We had an initial drop on earnings to start then by the market open the stock was gapping higher. Carrying the whole market up as we broke through the 152 region. HOWEVER there is a lot of opened shorts on AAPL with the expectation to turn. There are two parts to this, either we can run to 160 ledge fail there (more likely IMO) or break back down sub 152 to start.
JPM ran into the 116 ledge, and I took a short which I tok a loss on, now we’re rallying up into new resistances. I still like the potential shorts on banks but the positioning is starteing to lessen on the short side on net negative gamma. However there are shorts getting opened on the large money side. There is a ledge that I would entertain if we start to see failure and rotation around 128 up to 132. I still like these shorts into the end of the year to get crushed on higher rates.
GS made a higher lower on this rally and now coming into the top of the distribution block of 345/347. Would like to see prices start failing there rather than back at the prior lower high around 360. Targeting sub 250 into end of year or start of next year.
SPY I do like longs on this to start the week but I find it difficult to open swings right now as prices started to run already, there is potential to lotto swing into the 393 and 396 region but I am a little more keen on opening that potential for a day trade and looking to open new swings and add to older swings short on the SPY closer to 393/396. Keep in mind there is a hust delta and gamma level at 390. The positioning is still positive for large money on this since middle of last week and that hasn’t changed. When it does there is going to be a short on SPY.
QQQ still a little weaker than SPY, especially with the overall massive gaps to the downside in earnings that we saw on big tech, other than AAPL. we do have some room higher though, I think there is a little more upside potential in QQQ to try to catch up to SPY. The massive areas of interest are 290/292 where there is a massive VP ledge for the shorts to open.
IWM longs evade the drop through the massive support ledge at 162/163 area before this last rally into 183. With small caps being this strong its hard to imagine a market reversal and a potential pulldown in overall equities until this IWM turns around. The next logical resistance and VP ledge is 187/189 where I think we can target before attempted sell.
Update Long Term thoughts (Portfolio/Passive & Active)
This week I’m looking for some more sell, october generally comes with big sell which can also bring capitulation but we would want to see a catalyst for that to shape up and global macro economics, the fed and now big banks globally on the brink of potential collapse we could see that catalyst.
It’s hard to time market bottoms but we could start nibbling in ETFs and leverage into the 340/335 region before 320 in SPY.
As long as SPY holds out resistance this week sub distribution block under 366/367 the sell should hold. There’s an immediate level at 362 as well.