Wall Streets Hidden Trades Uncovered…

Summary

The video discusses the unusual calm in the stock market with over 41 days since a 1% drop, speculating on potential volatility spikes in July influenced by election years and VIX ETF dark pool activity. It examines market breadth, sector performance, and technical indicators, suggesting a possible short-term pullback but a resilient market driven by buybacks and economic data. Key stocks, commodities, and cryptos are analyzed, with a focus on potential market reactions to upcoming economic reports.

Takeaways

• 📉 The market has experienced a significant absence of volatility, with over 41 days since a 1% drop and over 300 days since a 2% drop in a single session.
• 📈 Despite the lack of volatility, there are signs that the market might be setting up for a potential increase in volatility, especially with the upcoming election year and large dark pool transactions in VIX ETFs.
• 📊 The VIX is suggesting an increase in volatility, with large transactions hinting that a spike might be imminent, similar to the pattern seen in 2020.
• 📉 The 25-day put-call ratio indicates a potential market correction, as it has dropped to levels last seen in March, which preceded a 5-1/2% correction.
• 📊 Market breadth is showing signs of weakness, with fewer stocks making new highs and more making new lows, particularly in the materials and energy sectors.
• 📊 Historical data suggests that after a negative week in June, the market tends to rebound bullishly, especially in the middle of July.
• 📈 The first trading day of July has historically been positive, with a 90% uptrend over the last 21 years, suggesting a strong start to the month.
• 💹 The market's resilience is attributed to powerful global forces, including AI-driven concentration and the potential for a continued strong performance driven by buybacks.
• 📈 Buybacks are accelerating, with major companies like Morgan Stanley and Goldman Sachs projecting continued market strength through 2026.
• 📉 Technical indicators suggest that the market may be getting extended and could be due for a pullback, especially if key support levels are breached.

Q & A

What is the significance of the 41-day period without a 1% drop in the S&P 500 mentioned in the script?

The 41-day period signifies an unusually long stretch of market stability, which is historically rare and could indicate that a period of increased volatility might be approaching.

Why might the lack of volatility be concerning for investors?

The absence of volatility could be concerning as it may suggest that the market is complacent, which can lead to sudden and sharp corrections when the market eventually reacts to underlying economic or geopolitical factors.

What is the 'VIX' and how does it relate to market volatility?

The VIX is a measure of market volatility, often referred to as the 'fear index'. It tends to rise when investors expect large changes in the market and fall when they expect stability.

What is meant by 'dark pool activity' in the context of the VIX ETFs mentioned in the script?

Dark pool activity refers to large, private transactions that occur outside of public exchanges. In the context of VIX ETFs, it suggests that significant, potentially market-moving trades are happening behind the scenes, which could influence the market's volatility.

What does the script suggest about the potential for a 'volatility spike' in July?

The script suggests that due to various factors, including election years and the VIX's current structure, there is a possibility of increased volatility in the market during July.

How does the script describe the current state of the materials and energy sectors in the market?

The script describes the materials and energy sectors as having been hit hard recently, with both sectors experiencing significant declines and returning to important support levels.

What is the significance of the 'put call ratio' mentioned in the script, and what does it indicate about market sentiment?

The put call ratio is a measure of the number of put options to call options traded. A high ratio can indicate bearish sentiment, suggesting that investors are expecting a decline in the market.

What does the script suggest about the potential impact of 'reinflation trade' on the market?

The script suggests that signs of reinflation, such as increasing CPI in various countries, could lead to a shift in market dynamics, potentially causing certain sectors to perform differently as investors adjust to changing economic conditions.

What is the importance of the 'first day of the trading month in July' according to the historical data presented in the script?

According to the script, the first day of the trading month in July has historically been positive, with a 90% uptrend over the last 21 years, suggesting it could be a good day for investors.

How does the script discuss the potential for a market crash, and what factors might influence this?

The script suggests that a market crash is unlikely due to powerful forces driving the market, such as AI and concentrated market behavior. However, it also notes that if certain sectors, like financials, start to fall significantly, it could be a warning sign.

What role do 'buybacks' play in the market strength according to the script?

The script indicates that buybacks have been a significant factor in the market's strength over the last decade, suggesting that without them, the market would not be as robust as it currently is.

What does the script suggest about the potential for a short-term pullback in the market?

The script suggests that a short-term pullback could provide an opportunity for investors looking to enter the market after a period of historic growth, but it does not indicate a major market concern.

What is the 'wof distribution' mentioned in the script, and what does it imply for the market?

The 'wof distribution' is a technical chart pattern that suggests a potential reversal in the market trend. The script implies that this pattern could indicate an upcoming change in market direction.

How does the script discuss the importance of watching the levels of support and resistance in the market?

The script emphasizes the importance of watching support and resistance levels, such as 5450 and 5525, as they can indicate potential market movements and trigger significant trading activity.

What does the script suggest about the potential impact of large transactions on market volatility?

The script suggests that large transactions, particularly those involving dark pools and major indices, could be an indicator of increasing market volatility and potential price movements.

What is the significance of the 'reinflation trade' and its potential impact on commodities like oil and gold?

The 'reinflation trade' refers to a market shift towards expecting higher inflation rates. The script suggests that this could lead to increased investment in commodities like oil and gold, potentially driving their prices up.

What does the script indicate about the current state and future potential of the crypto market?

The script indicates that the crypto market has been experiencing a series of lower lows and highs, with key support levels being tested. It suggests that the market needs to solidify its base and make a new high to attract bullish sentiment.

What economic indicators and events are highlighted in the script as important for the upcoming week?

The script highlights several economic indicators and events for the upcoming week, including Fed Chair Powell's speech, JOLTS job openings, ISM Services PMI, FOMC meeting minutes, and the non-farm payrolls report, which are crucial for understanding market direction.