CME Fed Futures Rate Hike Odds

'The CME Fed Futures puts the greatest odds all the way out to January 2020 that interest rates will remain the same, though there are also odds that when rates do move, they will move lower, as futures puts 22.6% odds this will happen by January 2020, vs 0.8% odds of a hike by the same month. Odds prior to Thursday’s retail sales data were about even between a hike and a drop in rates.' 

SPY now

The trend is up, no hedges.

Look at things as they are...

Look at things as they are, not as your emotions color them. In strategy, you must see your emotional responses to events as a kind of disease that must be remedied. Fear will make you overestimate the enemy and act too defensively. Anger and impatience will draw you into rash actions that will cut off your options. Overconfidence, particularly as a result of success, will make you go too far. Love and affection will blind you to the treacherous maneuvers of those apparently on your side. Even the subtlest gradations of these emotions can color the way you look at events. The only remedy is to be aware that the pull of emotion is inevitable, to notice it when it is happening, and to compensate for it. When you have success, be extra wary. When you are angry, take no action. When you are fearful, know you are going to exaggerate the dangers you face. War demands the utmost in realism, seeing things as they are. The more you can limit or compensate for your emotional responses, the closer you will come to this ideal. ~ The 33 Strategies of War by Robert Greene

Markets.

The world economy is deflating, and the S&P is rallying, these two things don't go well together. When the economy deflates the stock market dives.
 
Investors hope the US and China will agree on a trade deal. Any rally caused by government stimulus and trade deals will fade away and the stock market will decline to new lows. The difficult bit is knowing when the decline will resume. Government interventions can support the market for longer than we can expect.  
 
Inflation is falling which is in line with the start of deflation, I expect goods, services and asset prices to fall in the months ahead. Right now some people are talking about a possible recession in the US. It will take a long time, months before the recession starts and then some time before the depression starts.
 
At the end of the depression a new crisis will emerge, the dollar will collapse. The economic crisis will have taken its toll on the dollar, this will probably cause a run on the dollar and this will trigger a collapse in bond prices. The result will be inflation. The dollar will lose purchasing power, the stock market will be considerably lower and it could take a long time, a decade or more before the stock market reaches the bottom.
 
This will not happen in a straight line, governments will intervene along the way and in the process they'll create some huge rallies like the one we are having now.

Vanguard founder Jack Bogle, who passed away last week, began his book Enough with the following paragraph.

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds,“Yes, but I have something he will never have . . . enough.”

Enjoy your day !!

Good example, LFVN mentioned yesterday.

There are still stocks that are working, like LFVN's break-out today, but got to be fast and nimble in this environment, as lots of them reverse and reverse hard after they break out.

Looks like the machines can't handle VIX above 20 for a long time !

It’s a good idea to keep your eyes on the VIX relative to its 200-day moving average.

Briefly stated, the VIX is the “implied” volatility of the S&P 500. It's where market participants believe market volatility will be over the next 30 days. The VIX doesn’t look backward (historical volatility does), it looks forward. 

The VIX has been above its 200-day moving average since early December,  For long-only traders, it’s been treacherous since early December. For the short side traders, and long volatility traders, the past month and the first few days of January have been a bonanza.

The VIX will eventually move back under its 200-day moving average again and as it does, market behaviour will likely change back again. 

For now, expect heightened daily volatility. And please be careful here because as you’ve seen over the past month, there are a lot of smart people out there, and none have been able to pick a bottom. 

Good luck.