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Stocks drop, Nasdaq five straight down days - Trading Journal (10.19.20)

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mawit07
@mawit07
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The focus for me currently are the US dollar and 20 year bond TLT ticker to determine if there is a possibility of further downside to follow with the current markets. Dollar is currently rising from a September low and that low was also when markets were at all time highs. If dollar breaks down from here there is potential for markets to get back to all time highs.

The TLT ticker is currently slightly over $160, which is also near its 200 MA.

On the weekly time frame it appears TLT is more in consolidation than down trend, but still the daily makes it look more down side to come which is bullish for stocks.

One fintwit I noticed that was interesting to was the current VIX structure is not ideal for the current all time highs. Proven point is here. In 2019 when markets hit all time highs the VIX structure was in cantango and it was easily shown as such.

Specifically the VIX around November 2019.

Now current VIX is in cantango on the first two months but once the front month moves up over the second month the VIX structure turns into a backwardation. So basically one bad president twit or negative headline running and markets could be facing headwinds.

The VIX is more helpful in gauging fear and currently as of today the spot VIX exceeded the futures VIX. This to me makes me believe futures VIX will have to be bid on to catch up with spot, however like many things in the stock market it is not with certainty this must happen.

With stimulus talks still on going and a potential $500 billion deal to get voted by Wednesday there appears to appeal traders to go long. There is also positive news on vaccine and anti-body drugs getting past testing and going into production. However covid cases are on the rise and the semi-lock downs globally is still effecting people's livelihood since March. The longer the reopening takes and the longer for people to get back to pre-covid routines the longer the financial recovery will be.

Posted Using LeoFinance Beta