Market Report/Chat Comments (June 24, 2020): Preparing To Sell Equities Again, Looking For A Mini-Seasonal Trough Very Soon

By Robert P. Balan, Predictive Analytical Models

Original article here:

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robert.p.balanLeaderJun 24, 2020 4:42 AM

GOOD MORNING ASIA / GOOD EVENING EAST COAST/WEST COASTJune 24, 2020

PAM SELLS 96 GCQ0 CONTRACTS SHORT SCALPER POSITION, AT BREACH OF 1776, FOR ALL FUNDS.This order has been cancelled.

PAM BUYS BACK 48 CONTRACTS GCQ0 AT 1779.50 (SOLD AT 1783.90) SHORT SCALPERS FOR ALL FUNDS -- DOWNSIDE NOT READY YET.

This order has been cancelled as well.

stecbeckJun 24, 2020 4:50 AM

Robert is sell NQ at 10380 still the plan?

robert.p.balanLeaderJun 24, 2020 5:46 AM

Yes Gail

stecbeckJun 24, 2020 5:52 AM

thank you

robert.p.balanLeaderJun 24, 2020 6:14 AM

We may have several more up days in equities, after a couple of day of sharp dip, if the models are not lying (see chart above).

robert.p.balanLeaderJun 24, 2020 6:19 AM

That may be true for yields (see chart below).

We now have to keep a watch for an intermediate peak as we get into NY trade today and tomorrow.

robert.p.balanLeaderJun 24, 2020 6:24 AM

The yields have probably stabilized for now, and should be rising as we go into NY trade today.

We will take some profits if we see another uptake in equities today. Then we look take off the rest of the long hedges if we see that dip probably by tomorrow, or next day.

robert.p.balanLeaderJun 24, 2020 10:26 AM

GOOD MORNING EUROPE / GOOD AFTERNOON ASIAJune 24, 2020

robert.p.balanLeaderJun 24, 2020 10:28 AM

Not a pretty sight this morning.

robert.p.balanLeaderJun 24, 2020 10:47 AM

Here is the historical correlation of Gold with TCB liquidity -- TCB vs. 2020 Gold and 5yr average of gold (bullion). Gold prices shown in inverse.

robert.p.balanLeaderJun 24, 2020 10:49 AM

Simply put, Gold tends to fall over the next 5 to 6 Trading days (gold shown in inverse)

robert.p.balanLeaderJun 24, 2020 12:39 PM

If equities are going to fall from here, it will be because the historical seasonality is asserting. This is what to expect from historical seasonal influence of Bank Reserves and SOMA transactions.

robert.p.balanLeaderJun 24, 2020 12:43 PM

There is a tendency to weaken over the next two to three days as liquidity outflows occur (seasonally), then a market rally as liquidity comes flooding back until early July.

From the Datastream system, today is TD 126. Trough of weakness is TD 128. Top of liquidity flows seasonality is TD is TD 151 to 159. Then we have liquidity drought which makes a trough (optimal) in TD 199.

We use the same analytical platform -- and substitute the 10yr yield for the SPX. And we add the TCB for good measure.

robert.p.balanLeaderJun 24, 2020 12:53 PM

It is obvious that the 10yr yield gets most of its cues from the TCB (historical). You will also note that it is during late June - early July period when equities tend to rise, and yields tend to fall, due to the varying impact of the Reserves/SOMA on equities, and TCB on yields.

The yields tend to bottom on TD 178 (optimal), and then start to rise. It is at this time that equities are still falling (to a trough on TD 199). This, again, presents potential for divergence between yields and equities, as they go on to a convergence sometime in TD 220, and move on positive covariance until year end.

So what does that implies for our current trades?

The 2020 liquidity profile suggests perhaps two days more of up day for SPX and 10y yr yield, but perhaps institutional memory remains strong for a market weakness over the next two days. If we do not get relief for falling yields later today, PAM will lighten up on the long overhedge (where it is possible), otherwise-we will just add to the short positions to get a balanced hedged situation (neutralize the overhedge).

The way I see it, this weakness comes to pass after June 26. Then we get the benefit of what RM13 calls wall taping days ahead of the quarter end, and the upsurge in liquidity flows. So if we do the neutralize action, we lift the shorts after June 26, and let the original situation stand, and benefit from a historical rally until mid-July.

robert.p.balanLeaderJun 24, 2020 1:15 PM

This is where the potential Gold weakness comes in. Gold tends to fall during sustained equity falls. Gold is telling us therefore that there is a potential market weakness ahead.

robert.p.balanLeaderJun 24, 2020 2:12 PM

all PAM SELLS 98 GCQ0 FOR ALL FUNDS. XXX DISCRETION.

GCQ0 -- DONE AT 1789.4 SOLD 98 CONTRACTS GCQ0 FOR ALL FUNDS.

prosurfrJun 24, 2020 2:15 PM

lol Did XXX just cause that tail spike?

vjapnJun 24, 2020 2:26 PM

Robert, so this is a net short position in gold?

robert.p.balanLeaderJun 24, 2020 2:28 PM

V -- YES

fourscoreJun 24, 2020 3:37 PM

Is buying long NQ still in the cards with markets down?

robert.p.balanLeaderJun 24, 2020 3:40 PM

Meaning you want to buy NQ now?

fourscoreJun 24, 2020 3:47 PM

why not? i am underhedged.

fourscoreJun 24, 2020 3:55 PM

ok my bad

robert.p.balanLeaderJun 24, 2020 3:56 PM

No 4score -- I just wanted to make sure. Of course you can buy if you want a full hedge -- I was just tending to something else.

jdefpJun 24, 2020 4:05 PM

Robert - At what level/indication would you begin to consider this down move in equities as a wave 1 of a larger correction?

robert.p.balanLeaderJun 24, 2020 4:10 PM

That low will bring you to June 26 or sooner.

Did not have a chance to short and neutralize the overhedge.

PAM will start looking at buying from below 3000 anyways,

3 repliesJune 24, 2020 5:34 PM

vjapnJun 24, 2020 4:26 PM

Robert, I think I have misread your prior comments. I thought you were looking for equities to rollover after 2 days or so. However, this chart shows a rally after 1-2 days?

robert.p.balanLeaderJun 24, 2020 4:32 PM

Gee -- It is historical vs current -- which one wins, I HAD no clue, but it looks like historical is winning. In which case we make a low within two days, and then rally in July. If current liquidity profile wins, then we HAVE two days higher, and then market will probably keel over into September. That illustration is historical, but by no means THE version which will eventually win. 

fourscoreJun 24, 2020 4:37 PM

decided to wait and see!

erluluJun 24, 2020 4:53 PM

yields .697

fourscoreJun 24, 2020 5:23 PM

Looks like wave 5 to me, with retracement at ES 3050-3060. What sayeth thou Captain oh my Captain

PAM will start buying at 3065 - 3055 anyways,

robert.p.balan not today?

robert.p.balanLeaderJun 24, 2020 5:28 PM

4 score -- let it settle down. We will not know until we've seen a bottom.

PAM will start buying at below 3000 anyways,

looking for the move to stabilize at those levels.

wc.happyJun 24, 2020 5:34 PM

Could also be a 1-2 I-ii to the downside in ES

robert.p.balanLeaderJun 24, 2020 5:49 PM

We were here Monday morning.

Here too

Scott007Jun 24, 2020 6:23 PM

Close to critical support on equity

flytightJun 24, 2020 9:42 PM

Robert Master Robert, Do you by chance see a serious bounce back tomorrow?

robert.p.balanLeaderJun 24, 2020 9:49 PM

Let's see how low the next sell off goes. then we talk abt it.

flytightJun 24, 2020 9:56 PM

ok thanks Robert. I trust your judgement.