Blue Horseshoe Loves This Finance Blog

Just to add on to some of my previous posts about growing market stress, here's a look at VIXY (long Vol ETF) vs the SPY over the last 5 days... A couple of things worth noting: 1) the VIXY is a levered vol ETF so the scale isn't consistent with the non-levered SPY but the point is clear that perceived risk in the market is rising and 2) the S&P tested support levels today but didn't break down while volume remains light.  This suggests to me that the market is waiting things out and there are two potential catalysts between now and the end of the year... the election (which everyone will be glad to finally have over) and the two final Fed meetings of 2016 (one of which will conclude on Wednesday).

IT'S NOT LOVE I'M RUNNING FROM, IT'S THE HEARTBREAK I KNOW WILL COME I just wanted to make a quick entry today as I see some very interesting patterns forming across asset classes. Since September, my models have been pointing to ever increasing probabilities of an equity market correction but the correction does not appear to be contained to equities.  Here's a look at the relative performance of treasuries to equities and it's clear that they've been getting hit harder than stocks since the end of the summer (treasuries are represented by the blue line)... Corporates have also been taking a bath and now high yield bonds look like they may be turning over too... Other notable safe-haven assets like metals have also been stressed - although gold has moved into a short-term bullish pattern. This is all happening on the backs of a renewed dollar rally as the Fed is seemingly running out of excuses to keep rates at rock bottom levels. Why is this happening?  Many F...

ARMS & THE COVENANT   In 1940, then Harvard undergraduate, John F. Kennedy penned his college thesis on the cause and affect of England's torpor in the face of mounting fascist aggression just beyond its own shores in the 1930s.  The thesis was a reconnoiter of Churchill's While England Slept, which was originally published under the title, Arms & the Covenant.   In his subsequent examination, Why England Slept, the young aristocrat was careful not to lay blame at the feet of those who have come to be associated - justly or otherwise - with history's cursory allocation of abetment.  Perhaps the conspicuous omission was prelude to a fateful temperament that would save humanity or perhaps it was because one of the damned was his omnipresent benefactor and father, Joseph P. Kennedy. Today, domestic equity indices are staring down increasingly ominous signs that threaten their 7-year bull market with reminiscent apathy. Obviously, the modern threat of a needed co...

Oil is breaking down beneath resistance as tight moving averages are beginning a negative expansion.  The 20-day will most-likely cross the 50-day on Monday which will line up the metrics in negative succession (100-day over the 50, 50 over the 20) all with negative trends.  If the dollar catches any kind of bid next week, oil could test long-term support levels.

The S&P is forming a technical pattern that suggests an increased likelihood of a market selloff in the near future.  The 20-day has crossed below the 50 and is acting as a resistance level.  Both moving averages are now trending negative and the market has been unable to sustain any type of positive momentum since dropping 2% on September 9th. Volatility prices are still low, however, so this may be a good time to buy some insurance.  This is also a good time to take profits on any short volatility positions and look for new buying opportunities should the market turn.

Markets finished off a wild week today with the S&P losing -0.92% on the rising possibility of Great Britain leaving the European Union; more commonly referred to as the 'Brexit.'  The move comes just one week after the U.S. printed a payroll report that was disappointing to politicians and economists, but welcomed by the market as it gives cause for the Fed to kick the monetary policy can even further down the road.  Market chatter is now suggesting the next Fed move may likely not come until December... a full year after the last rate hike.  Britain's shenanigans will only serve to complicate matters further; but for now, the U.S. dollar has been subject to some dramatic whipsaw volatility as a result. Today's price action served as a stark reminder that global macroeconomic risks still pose a threat to domestic markets as they attempts to breakout to new all-time highs. GIMME SHELTER Here's the USD chart: Last Friday's move shocked the greenback out of it...

Based on the moves in the dollar over the past month and the fact that there is still global glut of supply, I've developed a bearish view on oil at its current levels. Earlier, I posted a call ratio backspread on the SCO (a levered inverse oil ETF) approach to capturing a downside move, but oil is still in a technical bullish trend pattern and has plenty of support to break through before it forms a bearish breakdown pattern.  While that trade would not have lost much, it's looking less likely that it will develop the momentum necessary to be a winner. Therefore, I now suggest capturing some call premium by entering into a vertical bear call spread on the September USO call options.  Here's the trade: Short: September USO $12 Calls at $0.84 Long: September USO $16 Calls at $0.11