Minute By Minute

Or maybe day by day

I suspect that readers of this substack fall into the camp of investors who see markets as complex adaptive systems driven by a combination of macro factors, company fundamentals, market structure and investor sentiment. [Feel free to ping me with anything you believe I left out]

The proliferation of compute, algorithms and “democratized” access has allowed any changes in the above factors to be reflected in prices at an ever-faster pace. Made me think of the Doobie Brothers from their Michael McDonald period and the song Minute By Minute from the 1978 album of the same name. [This was also the time that legendary guitar player Jeff “Skunk” Baxter decided that sitting in a chair centerstage was the epitome of cool as seen in the video.]

Hey, don’t worry, I’ve been lied to, I’ve been here many times before

I know I could turn, blink, and you’d be gone

Then I must be prepared any time to carry on

But minute by minute by minute by minute, I’ll be holding on

Through the close yesterday, this week had that kind of “limit down” vibe. Mag 7 were getting hit, then semi stocks and the whole South Korean market. Not everything was going down, but definitely risk off among the stocks that had been leaders. Folks concerned that Micron’s earnings might crush that stock and lead to more bloodshed. But that particular “bellweather” went the other way last night. From a $1048 close to as high as $1250 overnight. Enough to get all the major indices back in a good mood.

Assuming the Micron “bounce” persists through the close, we would expect to see some positive impact on the volatility complex. What we see from yesterday’s finish is no change in the composite VIX Mix, still sitting right on the border of Neutral and Bearish. Also no change under the hood - 8 bearish components and the other 9 in the yellow.

We pointed out yesterday, that equity market action since the start of June has been a significant departure from the rally off the March lows. And that has corresponded with poor readings for the Mix. Most recently, our 10-day moving average has rolled over to take the wind out of a short rally from the most recent low.

Our friends at Tier1Alpha are pointing out that dealer positioning has shifted from positive gamma to the negative side, an indication that we might expect an increase in volatility. Our own dashboard has the same look. As you can see below, one of our favorite market “tells” notched a fresh sign of potential weakness yesterday. Meaningless by itself, but the second time this month and something we will be watching very carefully.

What’s your preferred timeframe for investing/trading? I’ve trained to be comfortable with the day-to-day, week-to-week and month-to-month. I’m also associated with a tribe of traders who thrive minute-by-minute. Having perspective on multiple timeframes can be very valuable if only to recognize the potential for turbulence. Allowing yourself to be surprised can lead to bad behavior that can damage long-term performance. You can do better.

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