The ADL line seems to be signaling strength for the future with a confluence past bear market bottoming patterns. The ADL line made a significantly lower low in October compared to S&P low. Both divergence points lend to the idea of market moving down dramatically taking out lows for the final leg of this bear market.
Should we note that HYG bonds are lining up similarly?
Let me put forth an alternate thesis professor. Options drive the market way way more today than 3 years ago. This was because of a couple major factors, Tesla and Gamestop Meme stock revolution. If you follow the money you see that max pain for Frida options was 145 on TSLA and we had a 102 low of day a couple weeks ago caused by a margin call on the richest guy… But an equally powerful operator the market maker has sold insurance… options. 3,000,000 of them for this Friday the monthly OPEX. Partial proof is that even though TSLA gave a $7500 discount and then bumped it up to $15k crushing margins and signaling a huge slowdown in demand the stock turned around and went up. Now max pain is down to 133 and we are at equilibrium. We may have some overshoot, but to get TSLA up you had to buy short dated calls in TSLA and AAPL. If you look at the quant you can see them. Who wants so many short dated 200 calls on TSLA? someone that wants the market maker and algos to react. With our ETF centric markets that did not really exist at this level 10 years ago it becomes easier for the seller of these 3,000,000 options on TSLA and the other trillions of dollars expiring to move the markets to expire the majority worthless in the middle of the calls and puts. In other words follow the money. While pumping the most important and by far greatest set of options, the market maker also brought up so many other stocks via ETF blind buying and selling according to the math. If you see Ken Griffin and Citadel you know. He’s got 8 homes over $100,000,000. His mom just got one as a gift, $400M. This guy doesn’t lose. So even though Tesla is self destructing he is so selfish he is pumping the market to save his option writing operation. We should see a little overshoot to the high side as retail traders get carried away and then the rug pull will hit when the options are sold and the dynamic hedging unwinds from the short dated calls. it is a different world now and we have to be careful looking at historical data without accounting for what is driving today’s market dynamics. Other than that crazy, but likely correct thesis, great work Peter. Very helpful tip.
The ADL line seems to be signaling strength for the future with a confluence past bear market bottoming patterns. The ADL line made a significantly lower low in October compared to S&P low. Both divergence points lend to the idea of market moving down dramatically taking out lows for the final leg of this bear market.
Should we note that HYG bonds are lining up similarly?
Let me put forth an alternate thesis professor. Options drive the market way way more today than 3 years ago. This was because of a couple major factors, Tesla and Gamestop Meme stock revolution. If you follow the money you see that max pain for Frida options was 145 on TSLA and we had a 102 low of day a couple weeks ago caused by a margin call on the richest guy… But an equally powerful operator the market maker has sold insurance… options. 3,000,000 of them for this Friday the monthly OPEX. Partial proof is that even though TSLA gave a $7500 discount and then bumped it up to $15k crushing margins and signaling a huge slowdown in demand the stock turned around and went up. Now max pain is down to 133 and we are at equilibrium. We may have some overshoot, but to get TSLA up you had to buy short dated calls in TSLA and AAPL. If you look at the quant you can see them. Who wants so many short dated 200 calls on TSLA? someone that wants the market maker and algos to react. With our ETF centric markets that did not really exist at this level 10 years ago it becomes easier for the seller of these 3,000,000 options on TSLA and the other trillions of dollars expiring to move the markets to expire the majority worthless in the middle of the calls and puts. In other words follow the money. While pumping the most important and by far greatest set of options, the market maker also brought up so many other stocks via ETF blind buying and selling according to the math. If you see Ken Griffin and Citadel you know. He’s got 8 homes over $100,000,000. His mom just got one as a gift, $400M. This guy doesn’t lose. So even though Tesla is self destructing he is so selfish he is pumping the market to save his option writing operation. We should see a little overshoot to the high side as retail traders get carried away and then the rug pull will hit when the options are sold and the dynamic hedging unwinds from the short dated calls. it is a different world now and we have to be careful looking at historical data without accounting for what is driving today’s market dynamics. Other than that crazy, but likely correct thesis, great work Peter. Very helpful tip.
Great data points ADDITIONALGAMMA. What other newsletters to you subscribe?