One of the Scariest Topping Patterns in History
تم تحديثه
Unfortunately, SPY/Volume data does not go much past the 2000 crash, but that's still 20 years of history with which to work.
Chaikin Money Flow and Price diverged prior to every major crash: 1997, 2000, 2007, 2011, 2018, and 2020. There aren't a ton of false signals in the dataset, but some crashes ended up being pretty mild. The extent of the divergence / decline appears to have some relation to the extent of the crash.
The strength of this particular indicator is fascinating: not since the Feb 20 high has CMF fallen even close to this low relative to a previous recent high. In fact, CMF is now negative while SPY is at all time highs which has never before happened in history! The Feb 20 2020 reading of 0.08 was also historically low (remember, smart money was selling off stocks before "retail" panicked on Feb 21, 2020). If this indicator really does signal smart money, then smart money is bailing for Armageddon right now.
2000 is an interesting parallel: The market topped in late March and sold off into May before double topping later in the year.
A. Trade idea: short funds and stocks that are *already* in a downtrend (may have topped early) with long-dated puts (ideally, January 2022). That way, you don't have to worry about being "right but early"; you can always close them after a steep spring decline and reopen them on a double top. My previous chart (linked) does not rule out SPY going up another 120 points, or even 300 points, and maybe taking a few months to get there if recent history is any guide. Your puts would be utterly screwed.
1. SPACS like IPOD early in their downtrend - let's be honest, most of these are scams that are going to 0, and Chamath is a known scammer. "SPAC Jesus" LOL. You don't risk being too early with most of these. Even if the bull keeps running for awhile, you'll still probably make money shorting the ones that show a long term downtrend. SPACS are really no different than initial coin offerings in 2017. Of those, only Binance Chain, Polkadot, and Cosmos (ATOM) seem to have actually created useful products & multiplied your money.
2. TSLA (if you're going to tail anybody, it might as well be Michael Burry, and we already have a clear downtrend to work with) including a failed breakout attempt from a falling wedge that I gave a chance to turn bullish (see linked).
3. AMC / GME (pumped beyond pre-covid highs by Wall Street Bets meme activity for no reason to do with the business. Plus, there is the small problem of COVID variants resistant to the vaccines. I haven't bought any options on these because they are too damn expensive, or shorted them because they're too volatile, but I did sell some call credit spreads on GME at 257-260 with a June 19 2021 expiry. I sure hope GME is below $257 in June.
4. PLUG - the vultures are already circling this one, so you might be a little late. It's already lost 1/3 of its value, but the people in charge aren't in jail yet, so maybe there's still time.
B. We've never retested the key 3550 October 2020 top in a major dip, and a 3950 to 3550 dip would be pretty similar to the March-May 2000 dip in magnitude. I plan to buy that dip if it happens.
Chaikin Money Flow and Price diverged prior to every major crash: 1997, 2000, 2007, 2011, 2018, and 2020. There aren't a ton of false signals in the dataset, but some crashes ended up being pretty mild. The extent of the divergence / decline appears to have some relation to the extent of the crash.
The strength of this particular indicator is fascinating: not since the Feb 20 high has CMF fallen even close to this low relative to a previous recent high. In fact, CMF is now negative while SPY is at all time highs which has never before happened in history! The Feb 20 2020 reading of 0.08 was also historically low (remember, smart money was selling off stocks before "retail" panicked on Feb 21, 2020). If this indicator really does signal smart money, then smart money is bailing for Armageddon right now.
2000 is an interesting parallel: The market topped in late March and sold off into May before double topping later in the year.
A. Trade idea: short funds and stocks that are *already* in a downtrend (may have topped early) with long-dated puts (ideally, January 2022). That way, you don't have to worry about being "right but early"; you can always close them after a steep spring decline and reopen them on a double top. My previous chart (linked) does not rule out SPY going up another 120 points, or even 300 points, and maybe taking a few months to get there if recent history is any guide. Your puts would be utterly screwed.
1. SPACS like IPOD early in their downtrend - let's be honest, most of these are scams that are going to 0, and Chamath is a known scammer. "SPAC Jesus" LOL. You don't risk being too early with most of these. Even if the bull keeps running for awhile, you'll still probably make money shorting the ones that show a long term downtrend. SPACS are really no different than initial coin offerings in 2017. Of those, only Binance Chain, Polkadot, and Cosmos (ATOM) seem to have actually created useful products & multiplied your money.
2. TSLA (if you're going to tail anybody, it might as well be Michael Burry, and we already have a clear downtrend to work with) including a failed breakout attempt from a falling wedge that I gave a chance to turn bullish (see linked).
3. AMC / GME (pumped beyond pre-covid highs by Wall Street Bets meme activity for no reason to do with the business. Plus, there is the small problem of COVID variants resistant to the vaccines. I haven't bought any options on these because they are too damn expensive, or shorted them because they're too volatile, but I did sell some call credit spreads on GME at 257-260 with a June 19 2021 expiry. I sure hope GME is below $257 in June.
4. PLUG - the vultures are already circling this one, so you might be a little late. It's already lost 1/3 of its value, but the people in charge aren't in jail yet, so maybe there's still time.
B. We've never retested the key 3550 October 2020 top in a major dip, and a 3950 to 3550 dip would be pretty similar to the March-May 2000 dip in magnitude. I plan to buy that dip if it happens.
ملاحظة
Finance Masters here. Here are some tips on being a smart bear when literally everyone is laughing at you: Going short does not mean losing money if inflated assets chop. Key emphasis is on long dated puts (2022 or even 2023)
1. Sell OTM puts against your LEAPs - eventually your cost basis could go to 0 or even far below it.
2. The market is a ticking timebomb, but 4300 is very possible (see linked). It’s also possible that bubbly assets fall or remain stagnant while SPY rises. Actually this is my ideal scenario; it gives me time to run #1.
3. When we do tank, which we will when nobody is prepared, this strategy could mean we are short for free and perfectly prepared when no one else is.
4. Topping can take many months as it did in 2000. Plan ahead. Don’t try to time the market
ملاحظة
While it may seem on the surface Jpow was pumping the markets with his optimistic forecast, he was really underhandedly pumping treasury yields (bearish). There are too many average people making money in the stock market right now, which would defeat the whole purpose of the “pandemic”
ملاحظة
SPY touched the lower trend line at 3840 without an upper touch in between. This, combined with divergence worsening and VIX correlating with SPY, raises the possibility of the ascending wedge breaking down before the upper touch everyone is expecting. ملاحظة
It's almost time to drop the hammer. Just a few more points to go. تم فتح الصفقة
Short from top of the channel / ascending wedge
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