Thread by @themarketradar

Let's take a moment here to understand WHAT is exactly going on in markets as people's emotions are bound to run rampant after what happened yesterday. We're going to go over $ES and what has happened psychologically to those participating...

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$SPY $QQQ $IWM $DIA

Let's start with what happened on Oct 14th, we saw the emergence of underlying shifts in the #System that indicated just maybe there was more to Risk-On than would have met the eye. By this point, it was apparent to hedge an upside move into FOMC, Midterms, and CPI...

Post-FOMC markets react poorly and slid lower. The big caveat though was in the following session the market had trouble going lower. Now, why would that be IF Powell went full hawk? They tried to bring it lower...but couldn't. This is where we enter back into the Fed day range..

and price continues to consolidate (holding the Fed day range low into the CPI print. Post CPI we saw this go vertical and in little time hit the Fed day range high. What this did was inadvertently invalidate all late shorts who pounded post-FOMC and got caught wrapped near lows.

forcing them to exit (a short squeeze). Now all those who went bear/flat into FOMC are looking at their screens seeing price exceed Fed day highs and wondering, "is the bottom in"? Due to market illiquidity metrics doing what they're doing, it suggests that people were very...

unprepared for a move like this. This is a self-fulfilling cycle until the bids lose steam and the market falls back under its own feet. The big question everyone is wondering right now though is, "when does this happen, now or SPX 4000+"? The answer to that is that a sentiment..

change we just saw will likely have to take some time to burn off, even IF the regime remains Risk-Off. Now if the regime does flip Risk-On, there can surely be more to this story. I want you to think about this...all year the market has traded like shit, 60/40s have been...

smoked & there was nowhere to go but cash (especially for PMs). Now going into the end of the year, you see terminals bobbing around 500bps and Powell go full hawk and markets DO NOT go lower. What happens next is this..."Is all the worst baked in"? / "CPI peak, nominal peak"?..

Now you have a scenario where people come under the impression that the worst is priced and downside risk becomes limited. Aimlessly bidding for the idea that they are "getting the bottom" or at least as close to it as possible. Obviously, we can't come to quick conclusions...

and we need to see how the #System trades. It does indicate Risk-Off at the moment, but an underlying buildup of a pivot towards Risk-On. This was the reason we hedged up at lows and now we wait to see how this trades to and if it can break momo (the orange line).