Market Journal: Topping Process Continues
Market Journal: Topping Process Continues
Discussion
Some quick thoughts late in the afternoon on a day off:
BOJ was more hawkish than I anticipated, lifting the band to 100 bps, but the cross-asset market reaction today largely reversed yesterday’s move in the wake of better than expected PCE and ECI data.
Cem Karsan’s lens into the VOL market and the fact it’s “pinning” SPX is an incredibly valuable piece of evidence given the confusing cross currents in place. The bottom line: With SPX unable to break below key levels right here and now (we’ll see how the last bit of trading here plays out), EOM and BOM flows kick in going forward, overwhelming the increasingly dangerous macro realities building and likely to hit in the seasonally dangerous September/October time frame.
It looks like yesterday was the “correction before a final squeeze” I’ve been looking for, and now we wait until later in August for a spectacular shot at the short side. I’ll have more on this likely this weekend, but the set-up is in place for a 1987-like divergent high into August alongside rising rates and USD that precipitates a “surprising” move to SPX 3000-3500 by October 31.