Market Update For Week Ending 2/19

 


Background on dark pools can be found at this link.

Recap from Last Week

My portfolio continues to be long, and I've been concerned about a dump coming soon.  SPY has risen too far, too fast since bouncing off the daily 50 SMA.  About $2B came in as late Friday prints totaling $4.2B at 388.  Then they bounced most of the week between 388 and 392 with a short squeeze on Friday.  The range is getting tighter and the prints are starting to add up after very low volume lately.  My scanner shows $11.2B at 390.5 and $10.3B at 392.

This Week

Monday was a market holiday.  Tuesday showed another $5.5B at SPY 393 and a large VXX print ($119M for the day).  After seeing that VXX print, I unloaded all high beta longs and picked up a little UVXY.  Wednesday, Thursday, and Friday had another $8B at SPY 392.  The boys appeared to be selling the market every day and then would let off when they hit a $3 target.  They were also selling volatility when that $3 SPY target was hit.  Combining SPY prints at the highs for 2 weeks gives us about $35B total.  At the end of day on Friday, they printed another VXX trade for about the same amount as Tuesday at the exact same price.  Then price hit an old demand zone and they printed about $15B in that demand zone (at the lows of the week).

What's Next?

The data can be interpreted 2 different ways.  You could say that all the prints were distribution and that they are loading up on VXX for a run down.  Another theory is that they hit their $35B goal for distribution, hedged longs at the highs, and then took off hedges before loading up $15B SPY at the lows of the week.

Many times, this same pattern presents during a distribution phase.  If retail is bullish (like they are now), you may only see a 2% drop in SPY.  If retail is not so bullish, SPY may drop 5% or even 7-10% at an extreme.  Smart money constantly accumulates and takes profits.  Contrary to popular belief, dark pools don't buy the bottom and sell the top. 

For next week, watch that late Friday print as a pivot.  If price continues to go over that and the pivot holds, we have started another accumulation phase, and could see another 5% gain in SPY before another distribution.  

Question of the Week

I got the same question a few times the past couple of weeks about Biden's stimulus and my thoughts on how that will affect the market.  Simple answer is that my best trading happens when I don't follow the news or Twitter.  My view is that the market goes up when the big players are long and goes down when they are selling.  The data frequently shows the boys at mission control selling into a bullish news cycle and buying into bad news.  I still feel sorry for all those WSB traders that bought AMC, GME and SLV at the highs and sit on heavy losses.  I have personally never see so much smart money selling into a "good news" cycle.

I welcome more questions at brian@royseonline.com.

Weekly Pivots

393        R2
392        R1
390.23   Pivot
388.16   S1
386       S2

If you want to look at the data for yourself, a Google sheet can be found this link.  Retweet or follow me if you want to see more posts like this.

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