In German we have an expression: ‘Vom Regen in die Traufe’, which loosely translates as ‘from the frying pan into the fire’ – you get the idea. Looking at the insanity we just left behind and exchanged for a prolonged sideways churn across almost every market vertical I’d say either expression applies.

The triptych above may be a bit too condensed to appreciate in full detail, so please click on it to see the larger version. So where do we stand in equities right now?

• After a slow six-week crawl higher the SPX is now a bagel throw away from the magic 3k mark.
• The 100-week SMA has already been conquered.
• The 25-week SMA has also been conquered.
• Clearly the 3k mark is what separates the wild bulls from the BBQ ribs.

Implied volatility seems to be normalizing and after a surprise spike higher last Monday the SPX churned sideways and then closed just a few ticks away from last week’s expected move.

That’s pretty awesome and once again confirms some of the statistical data that Tony and I have collected over the past few months.

Tech remains on fire and it’s become clear that COVID-19 has been pretty damn awesome for big tech.

Except for a big flashing warning sign pinned at the October contract even the VX futures curve seems to be in the process of normalization (i.e. approaching backwardation) again.

So what’s the big problem then? Well, glad you asked. We do have indeed a problem, which is that anyone and their grandmother seem to be focused on only one small slice of the tradeable universe right now, which effectively is big tech.

If you remove the NDX from the SPX then what you get is the chart above, which has us effectively lower than in mid February. Judging from that chart tech has increasingly been in favor but the COVID-19 epidemic has only amplified this trend.

Heck even junk is being bid up again. Admittedly it’s still far away from its former glory.

Meanwhile everything else but tech has been as active as a Hertz rental over the past quarter:

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Consumer staples – sideways with a droopy bias.

Financials – sideways with a droopy bias.

Bonds – just sideways. No surprise there as China is not buying anymore leaving only the Fed and its cronies as the bidders of last resort.

Gold – as always it’s ‘complicated’. Not sure how this one is going to resolve. That inverted H&S looked primed for a punch higher but for now it’s looking pretty embarrassing with candles dangling all over the place.

The Dollar – also no surprise there. Well, let me revise that. Actually that’s a damn bullish chart given the fact that the Fed is doing anything they can to inject unlimited liquidity into everything.

The only reason it’s not sitting at 80 or lower right now is that there’s a massive Eurodollar squeeze internationally, which is a privilege the U.S. Fed continues to abuse.

Bottom Line:

Summer is approaching quickly and I have an inkling that we are looking at the sideways churn from hell until early fall except perhaps in equities. I don’t mind playing along of course, and neither does Tony.

But I strongly recommend you to always maintain a delta neutral portfolio as there’s no telling when the last sucker tries to find a bid in an over crowded market and can’t find anyone to hit it.

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