ALL TIME HIGHS!!! - Trading Journal (12.04.20)

The current uptrend in market indexes is one to remember. How fast and strong it has risen since March is all but remarkable. Yet some may still believe that trouble in the future is brewing and it is very understandable.

Market cap and P/E ratios are near their highest levels ever, while the country and globe is still fighting a pandemic on top of economic troubles. The bigger issue is once the pandemic is over the wealth gap will have significantly widen. This will lead to further tension among the population. I bring this up because the reality of most American are facing financially challenging times. Today's employment numbers for November were 250k jobs, half of what was expected. For the past three months the growth of new jobs have slowed leading many to believe that the economy is slowing.

Yet here we are with markets continuing to rise and hit all time highs. Some hidden reasons as to why?

The derivative market is this year's hot ticket and many bulls who bought shares near March or any time after basically scored big. The derivatives I am mentioning is the options market. Multiple stocks are lifted due to the demand in call buying from mostly retail investors. The demand for calls have never been this high and is shown in the chart above. Just imagine all those calls expiring and having to roll out to a further date. Goodbye Bulls?

The magnitude of an option moving the market by the people who created them is saying should be zero. Yet here we are with a strong bull trust. My full belief is that the call option buying spree is the cause of showing stock price action being so positive in the mist of all the negative head winds. The Bulls that keep bringing up the fact that current uptrend is so strong that it is historically considered the start of a new bull market may not be wrong, but who is to say history will not repeat itself? That is when everyone has bought, who else is left to sell?

NYSE is the oldest stock market in the US. This is showing exactly what I am trying to describe. If in fact that most have already bought, where volume advancing is nearly all the volume then who else will be able to buy when there is nothing to sell? The ratio of volume advancing to total volume is not at its all time highs such as that seen in June but it is making a double top look. Will there still be more buying ahead, it potentially still has some room left, but will it get there before it falls?

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