Rotation Station

If you could see inside me
would you want to ride
inside my mind?
-unknown
As Trevor Denman would say “”Aaand awaay they go…”

The market found support on March 6th and it has staged a quite impressive rally in a very short amount of time. I have been very bearish on equities. Keep in mind, I am a trader. To be successful at what I do, I have to be nimble. I am constantly re-assessing market conditions. I am willing and able to switch from bearish to bullish or vice versa. I am not trying to be correct all the time. I am trying to be correct sometimes. When I am correct, I need the correctness to pay for all the times I am not correct.

At this point, I’d say the likelihood that the recent March 6th low was THE low is not very likely at all.

That said, the underlying demand of the market is better now than it was at the November lows. This could be the beginning of a much larger retracement than we saw off the November lows. Below is a weekly chart of the S&P 500. If this rally turns into something more meaningful, we could rally to some of the retracement levels shown in this chart.

$SPX Weekly

There are a few things that I am keeping a close eye on. First, the dollar. As equities have rallied, the dollar has pulled back. If the dollar does not find support here, it could add fuel to the equity rally. If the dollar does find a bid, it will assuage the demand we have been seeing in equities.

USD

Second, US Bonds. Bonds have not sold off too much as equities have rallied. On a longer term weekly timeframe, bonds are still in an uptrend. I am bullish on the Ten Year and have an option position that should pay quite a few times my risk if my thesis of bond prices finds the right timing. If bonds cannot maintain current support levels, this could also add fuel to the equity rally.

10 Year US Treasury Note

Third, If this is the beginning of a new bull market (which I very highly doubt), there will be plenty of time to put money to work.

Those are my thoughts here and now. Stay tuned.

Peace