Key Takeaway: Optimism wanes, and pessimism builds as the II bull-bear spread narrowed last week to just 1.2%, down more than 4% from the previous week. That brings the spread to its smallest difference since early April 2020. But it’s not until bears outnumber the bulls that we reach levels associated with significant market bottoms. Nevertheless, a surge in pessimism could become reality with active equity managers continuing to reduce exposure, consensus bulls dropping, and major equity indexes testing their respective January lows. Whether sentiment has completely unwound or is still in the process of unwinding is yet to be determined.
Sentiment Report Chart of the Week: Unwound or Unwinding
At All Star Charts Crypto, we've emphasized the value of on-chain data that allows us to peer inside the blockchain to find reliable and actionable signals.
It seems almost every day in this blossoming asset class, there's a new dataset, indicator, or some other avenue to analyze price action with incredibly high resolution.
Alongside the on-chain data that's supplemented our traditional analysis, we're taking an increasing interest in incorporating order flow into our work.
We're beginning to find it provides considerable value in fine-tuning our approach, making for better executions, and helping skew the probabilities of success in our favor.
We'll walk through one of the many ways we use order flow in this post. Today we'll be discussing volume, or more specifically, volume delta.
Markets continue to be "messy" and it's tricky looking for positions to take aggressive stances in. And with VIX hovering at or near the 30 level for the better part of the past week and a half, the option trader in me continues to look for opportunities to sell premium.
A smarter man than me once told me: "If something is working, find ways to do MORE of it!"
Well, selling premium on balance has been working pretty well since January, so...
Chatting with the team this morning, one pocket of strength we identified that has been holding up relatively well in this slop is the banking sector. And while there weren't any individual names we were willing to bet the farm on, the financials sector ETF $XLF caught our attention as a good possible candidate for a delta neutral credit spread.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Despite the trendless nature of the major forex pairs, there’s still plenty of information coming from the exotics right now – particularly emerging market currencies.
The Chilean peso – and its relationship to copper – now has our attention.
Let’s take a look.
Here’s a chart of the USD/CLP cross overlaid with Copper Futures $HG_F with a correlation study in the lower pane:
Chile is the world’s largest copper producer, which explains the strong negative correlation between the USD/CLP pair and the price of copper.
You can see this relationship in the chart, as USD/CLP tends to peak and roll over at the same time copper bottoms out, and vice versa.
No, it’s not April 15th just yet. But I’m getting into that zone where I need to start sending relevant info to my accountant to get the ball rolling for my 2021 tax return.
I hate that I have to farm out my tax return preparation to a professional in order to get them done. I wish the US tax code wasn’t the way it was – who doesn’t?
But let me relate a little story to you that might get your mind right about whether or not to go it alone when doing your taxes…
I don’t remember the year, but it was somewhere around 2003-2004 when I first moved to Chicago. I had been using an accounting firm to prepare my tax returns since I began trading in 1998. But this year, I thought to myself:
“Sean, you’re smart. You’re college-educated. You almost minored in accounting, and you had straight A’s in all your accounting classes. You should be able to handle the filing of your own taxes!”
So I don’t remember if it was out of an act of curiosity, boredom, or just trying to pinch a penny, but I decided that year I’d prepare my own taxes.
Yesterday's report, which you can read here, laid the groundwork for today's note.
To summarize, we're of the strong view that there's little to no edge in pushing directional bets in this tape.
Because Bitcoin's lost all momentum, we anticipate more weeks of ranging and contracting price action that's likely to involve a high concentration of whipsaws.
This is not a market conducive to aggressive moves.
The vast majority of crypto investors are better served by not pressing trades.
However, in today's note, we'll discuss market-neutral trades that can quietly yield results in periods where absolute price trends hold little edge for directional bets.
I was in a meeting a couple of weeks ago where I was going over the geographic locations of all the members of our team. These places include California, Florida, Colorado, Venezuela, Canada, Australia, New Zealand, Mumbai, Delhi, South Africa and the list goes on....
The gentleman asked me how I was able to find all these people.
When I told him I just sent out a tweet whenever I needed to add someone, he almost fell out of his chair.
For me this is just common sense. Others are still coming around to the power of social.
We are a team of almost 30 people now.
And we're looking to add another one, if you or someone you know is interested.
The market hasn't been easy off late and a sideways move means that market participants get trapped more often than not. Today we have a trade setup from the Chemicals that has some eyeballs on it. We thought this might be a good time to check it out.
