A Peaceful, Easy Feeling

A Peaceful, Easy Feeling
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Market On Open, Wednesday 22 May

by Alex King

Volumes in the major indices have been exceptionally low in recent days; a function of bigs just waiting it out until the Nvidia earnings print due today after the close.

Now, this does not, in my view, mean that Wall Street’s finest are sat around waiting for Jensen to proclaim that EPS was this or that, and guidance will be this or that. Because if they have done their work correctly, they can make a pretty good educated guess about that. A better guess than can the poors, anyway.

What it means to me is that, bar some kind of huge surprise to the upside or downside from Santa Clara (in which case all bets are off and folks will be scuttling every which way but loose), the market will head off in the direction that bigs intend it to anyway once the news is printed. If you look at the equity index charts below, you can see that the four major US indices are all at local highs, meaning a goodly extension of the first move up from the April 19th lows. They aren’t at crazy-high extensions thereof. So calling direction is tricky. Take the S&P500, for instance; it’s currently at a typical level vs. that April 19 low which can lead to a fairly quick sharp drop back. But it’s not so extended that a drop is all but guaranteed; bullish order flow from bigs can push the S&P up further before a selloff. Personally I am positioned net long in the indices, but with enough short hedges in place that I hope to make a little money on any near-term selloff if it happens; if wrong and the market moons, net long means I can win anyway. The power of hedging and overhedging.

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