Indulge The Hangover, Or Keep Drinking?

This is the market's major challenge for the day!

Nov 06, 2023

∙ Paid

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Now What?

All four US equity indices put in a blowout week last week. In each case technically they have made a new Wave 1 up from the October lows; this means at some point we will see a Wave 2 correction, possibly a sharp one, which it would be good to catch on the short side then commit further to longs at the Wave 2 lows.

This is what the indices looked like in the smaller degree at the close of Friday last week - here we show hourly charts to illustrate the extent of last week's move and therefore the precipitous nature of the current levels.

S&P500

Nasdaq-100

Russell 2000

As for Grandpa, well, the Dow actually is just straight up so it's hard at this stage to measure the move.

This is a tricky point in the market. There is every possibility of a melt-up in my view and if so, it would be unfortunately to miss that by selling longs or adding too much in the way of short hedges. Equally those are huge short term extensions which one would expect would be sold, and quickly.

In staff personal accounts our answer to this has been to add very light hedges in each of the indices (see ratios long/short outlined below). As I have said many times, in this bull market I am nervous and impatient with shorts, relaxed and patient with longs.

Remember, if you want real-time trade alerts in index ETFs - long and short - join our Inner Circle service, here.

Let's Get To It

Paying members, scroll right down for our latest take on markets. As always we look at the 10-year yield, the S&P500, Nasdaq-100, Dow Jones and the Russell 2000; we add Bitcoin and Ether futures pricing for good measure.

Note - to open full-page versions of these charts, just click on the chart headings, which are hyperlinks.