Post Fed – Dec 15

Yesterdays downward bias post Fed was very welcomed but it seems the momentum is gone and we’re probably melting up to the 2300/2320 area for end of year. This may mark the top of the market short term (through H1 2017). My guess is RUT tops at 1395 area (perfect yearly pivot), SPX at about 2320 and DJIA at about 20030. This means there will be more strength in the large caps vs the small caps and then we should putter out into inauguration and be met with probably some unknown volatility causing events which should be reasonable given the tweet storms and world economical issues present already and not to mention issues (potential china devalue?) from a rising dollar + rate rise.

But who knows re any of those calls, this is an interesting time re metals, bonds and currencies and anything could happen (China devalue?). The insanely strong USD can cause many issues and the rate rise yesterday caused a big dump of china bond futures. US is really the first to break away and raise rates and no matter how you slice it, this will cause the unraveling and pain in other countries who haven’t followed suit. That can and probably will cause contagion and come right back around full circle. The 2nd largest economy in the world is directly affected by a US rate rise, rising(exploding) USD and this probably will have consequences on the equities market eventually.

I’ve got some ES futures on as upside hedges but if we truly do melt up, there’s no profit to be had until some sort of pull back. I hope that things don’t continue to follow the script (Santa rally) but it probably will. As is usual, any trades that I started before the last rally are now 7% above its starting point and are essentially fighting for a break-even result. When will this market environment end. We’ve had massive up moves on Brexit, Trump election and now the standard impending Santa rally. Sick and tired of 7% up cycles each and very time. When we have any period that’s 5% or less on the upside, I’ll be rejoicing as will my P/L. Until then, patience and smart trading knowing that volatility shall soon return and HOPING that perhaps this marks a major market top soon and we have many years of bearish volatility 🙂

Any new trades I start now (pricing is bad, so probably not) would then have another 5% before too much trouble on the upside. The problem is, in this type of environment, pricing is shitty all across the board, you pay more, which means you have more upside risk AND if the market does fall apart, vol increases and those same positions get relatively cheaper. Lose-Lose. Fighting two issues (Vol and negative delta). So not only are the current trades crap until we sit below 2250, but pricing may be weak to start new ones. Any dips or increased vol would be welcome both for existing trades and for starting new ones.