Benny B and Timmy G

This is Volar with an update on sentiment. Today, you may be getting what’s on my mind. Sentiment is not extreme by any means – and likely divergent. So we could be in the process of setting up a top in the coming months. The end of this post talks about some “fundamental” data – so read it, but for Heaven’s sake don’t trade on that info!

For clarification I am still holding my swing trades on RUT and GOLD since the 17th of March. I will cover both trades when bucky gives any signal… I have sold CALLS on GOLD and I am long VIX futures (in some fashion) for RUT. Looking for an exit signal right now- do not have one yet.

On to what I am watching:

First- shorts through the 15th; this is NYSE + Nasdaq Short interest.

This looks interesting, but I wont know for 2 weeks whether or not they are still short at new highs…. If so it would be what I have been anxiously waiting for, but if it is not the case- we have a $1billion dollar squeeze or so on our hands. Still very bearish longer-term.

On to the ISEE (Equity C/P)

The ISEE is certainly not extreme, but I also don’t see much call buying for a new high? Remember the CBOE looks the same way. None of the put call data says there is too much call buying.

Here is my index:

and the change in the index..

If we were in a bear market, I would sell here, but new highs in every index would beg to differ.

I am watching the summation… If she breaks out she will have some steam.

Now I will throw some COT your way tomorrow (Naz, PM, and FX), but lets look at some commodity sentiment (silver unchanged at 90 %FYI).

US$

Gasoline Futures

And speaking of fuel…. here is what OIL does to the “employed” US citizen. Nothing to do with sentiment, but just thought it was a good graphic on how bad crap could get on the margin front. Yes, Tyler Durden called this one.

This just goes to show that real fuel prices are very very high relative to incomes. Moreover, very possible fuel ends up killing the little income growth we have. Notice how much real net personal incomes grew in the 90’s with low fuel (those days are over- thanks to Alan G, Benny B, and Timmy G).

and keep this in mind too:

Ben, we know you want bucky to go lower and we know you want to prop up everything- even bonds. However, don’t push your luck. (A) this nonsense continues and commodity parabolic price action kills consumers or (B) things get so crowded the DX spikes and we get a liquidity crunch.

Ok and FWIW I am watching the trend in M2. Chart 1 is YoY % change in M2. Chart 2 is a the second derivative of M2 (change of change). Key here is that a contraction of money supply does lead to crap hitting the fan- but it takes time to develop. The Grey areas are recessions.

Yoy % change

2nd derivative

Markets love liquidity- we used to get it from jobs and lending (good and bad lending), but now we get milk from the helicopter. The key here is that liquidity is in the market- and until that slows on some longer-term fashion, the market does have some fuel.

Best of luck trading- will get back to price action on some other post- but was transferring computers- aka no trading platform to chart today.

-Volar