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Week of Jan 21

New All Time Highs!

You are going to see this headline plastered all over the news for the next few days - but from here - where do we go now?

I am flat the market currently and am looking for a confirmation of the breakout - although I suspect this was as last push to run the shorts out and force all the money mangers in long due to career risk.

This could prove to be a massive bull trap as the market makers use all these bulls as exit liquidity to reverse the market - so the theme for this week is going to be patience.

DXY:  Last week, DXY rallied almost 1%. This aligns to my bullish DXY thesis as the Monthly charts still show us in a bullish consolidation/back-test. We are respecting monthly levels and I still expect higher DXY moving forward - especially if the stock market starts to reverse and sell off. This will continue to apply pressures to commodities such as oil as well.

DXY has had a classic ERL to IRL move here and the next stop should be those equal highs up at 104.234 before another back-test.

Energies:  Despite 2 hot wars, and disruptions to shipping in the Red-Sea, Oil is the same price it was 2.5 years ago. To ME - this speaks to declining global demand as we enter a global recession - otherwise all of these supply disruptions would of truly done something bullish to the weekly charts. I still don't have a clear weekly view on energy, and it's hard to have a bullish view on something that is flat for almost 3 years despite global wars and supply chain issues. If you add this atop the rising DXY - I just can't see anything truly bullish on Oil for the near future.

Interest Rates:  No real weekly change on the 2s/10s curve thus far. We are still inverted from record levels and still in record duration of inversion. I expect to see SOMETHING happen with the curve by March as the BTFP (Regional Bank Bailout Program) come to a close - but that is another story.

Fundamentally (which we don't trade) - global debt is an absolute disaster. We have insolvent banks sitting on RECORD losses to their bond books - that nobody has had to realize just yet. Commercial Real Estate is a total disaster, and will continue to be a sinking ship into the next 2 years as all these insolvent commercial lenders start throwing in the keys.

Just last week, 60 Minuets put out a great 15min video going over the magnitude of all of this. The ONLY people that are bullish real estate in ANY flavor right now, are trapped real estate investors. For now, we wait to see where this thing bottoms.

VIX:  This was a 4 day trading week - so it was an abbreviated one. For all the VIX gap ups - this set the scene for a bullish week as they crushed VIX into Fridays OPEX and filled some downside gaps. We still have more to go which can be bull fuel in the short term - but keep an eye on where we are once that VIX gap finally fills.

SPX:  Fresh new ATH on the Dow, S&P, and Nasdaq this week!

We here at Baero prefer to buy low and sell high - and we have never been higher than where we are right now. The market has been sideways for a month from mid December until now - so we were waiting for a move one way or another.

From here, I am waiting to see what the 1h and 4h charts produce. For this to truly be a sustainable bull run- we need to back-test and run out some IRL imbalances that we have created during our 12 week sprint up here (only 1 red week during this time).

I want to see the 2024 lows hold for the bulls - but if we take those our we are looking at a Market Structure shift that could take us back to the October lows before any bullish resumption. That would be a 15% drop from here and would surly scare the children - but that is also the setup you look to buy.

The daily chart has a little more promise for the bulls - but they MUST hold 4800

For NOW- we are in wait and see mode and are flat the market. I am slightly bullish on SPX from the Higher Time Frame structures, but we need to see a confirmation to really get long the market up here from ATH.

So here is the setup for this week;

  • Patience! We can't do anything until we see a market structure shift on the 1hr / 4ht charts - this will translate up into the higher Time Frames.

  • The VIX gapped up last week - and still has some work to do to close the gap lower - this can be read as bullish fuel

  • ES is now at ATH and we don't buy at ATH. We need to see a retrace to 4800 and HOLD , or else we are in for a much deeper correction.

Until next week - We'll be watching.

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