The historical record will show that the typical futures-to-cash premium during the middle of the contract period varied from +16 to -2 points. Typically, the +12 to +16 range was the result of the new contract. After Covid-19, we saw the first contract rollovers of greater than +20 point premiums. But now look at this one.
As of today's S&P 500 cash close, the premium is a full 50+ points. And this is after letting things settle in from those who rolled on Friday.
This makes little sense. Something very, very unusual and atypical is going on. Once or twice because of Covid-19 and the resulting economics - maybe. But we're now a couple of years out, and for some reason, the market really wants people to 'pay up' for the (sic) privilege of owning the futures? Is the speculation that rampant? It doesn't seem justified to me, and I would really keep an eye on things.
Have a good start to the evening,
TraderJoe
I think they are pumping it as hard as they can now, offloading to the retail buyers who believe the hype. I read that inflation numbers in September will be MUCH higher than the market is expecting (due to fuel/oil/gas), and the Fed may then add to that shock with further tightening. The rug will be pulled I suspect. Stay frosty folks.
ReplyDeleteLooks like the re-trace of the September high can only be a b or second wave. No luck so far with viable alternate counts.
ReplyDeleteIs the month of September (so far) a "classic" 5-wave impulsive drop, with a 3-wave correction of just over 50% and (partial) gap fill?
Deletehttps://www.tradingview.com/x/NCSyyVo7/
It looks like that to me. Does this count violate and EW rules or guidelines?
Looks OK, so far. Thanks for posting. TJ.
DeleteJust a thought on Fib ratios.
ReplyDeleteIf you use a monthly inflation adjusted SP500 chart, the July peak is very near the 61.8% retrace of the decline from the ATH back in Dec 2021.
This is one of the things that bothers me about the current best counts, that the '2' or 'b' has retraced over 78.6% of the '1' or 'a'. But with fiat money, I think the ratios get distorted. You can really see that when you look at the patterns from the 1970s.
https://www.macrotrends.net/2324/sp-500-historical-chart-data
Thanks for sharing this chart Dan. I've never seen it before probably because we haven't had the need to adjust for inflation and your thesis is compelling.
DeleteDow/Gold or SP/Gold does something similar to adjust for 'real money'. Just remember the instruments you trade may not be so adjusted. TJ.
DeleteTotally agree. Official CPI Inflation may not be the best measure, but I think the overall premise is sound and CPI itself is pretty diverse if a bit lagging the real world. The 70s are a real eye opener, where the nominal market value went sideways for 14 years, but real value declined 65%. I saw a similar chart of the German markets during the Weimar hyperinflation period. One would be inclined to think they were in a huge bull market just looking at the chart with no other context. Of course, they were not.
DeleteZero Cpi fear.
ReplyDeleteVolatility continuously crushed even when markets lower.
What's your instrument of choice when betting against volatility? Long VIX options or long Vix ETFs (VXX, UVIX)? They're both bad for financial health, particular the ETFs as they continuously roll over futures contracts that are in contango. They're designed to go down over time and counting EW on these charts is tough.
DeleteVolatility instruments are vehicles of fraud, IMHO unless one is day-trading the price action. They are wholly useless as any kind of market risk measure, supposedly their purpose.
DeleteSVXY has been the play, Short VIX Leveraged ETF. It scares me though to take such a trade.
Deletehttps://www.tradingview.com/x/58NQaNRE/
I bought 20x vic 35 calls expiring in November. Including broker mark-up, they were 0.70 each. I know they'll probably expire worthless, it's a punt rather than a trade. But if we get a big one, vix could go to 150+, so that would be OK, call premiums probably go 100x -200x higher (or more). Good luck all.
DeleteSPY 15-min: looks like all three-wave sequences down, of the right length for an expanding diagonal, but can be just the corresponding triple zigzag instead. Watch the low of day and the high of day from here.
ReplyDeletehttps://www.tradingview.com/x/XTDeI930/
P.S. It's a mess, but it's the market's mess. Not mine.
TJ
18 ma held, again
ReplyDeleteA new post is started for the next day.
ReplyDeleteTJ