2.1 Market Plan
Alright, so we finally got the fundamental tailwind to back the negative market technicals today and if you read the Sunday report the technical read was bearish - this just backed it giving it some wind in the sails for risk-off.
The positive thing (and there are many) of a top-down approach to investing is you learn to see thee entire chess board because you use this approach. Most Retail Traders are not applying that; they’re microscopic - punting around at price levels unaware of why or how the floor beneath them is shifting.
And today the floor has shifted with that meeting, his words and this market being technically set for selling.
The morning session had 3 day trading issues which I covered in the Premium recap last night and in the AM Traders call in DeltaOne:
BA 0.00%↑ long
AMD 0.00%↑ long
UPS 0.00%↑ short
The first two worked out well to start the day and Crude oil breaking down extremely hard post the EIA report was ideal as well.
I picked up 2 trades there and am carrying some QM (Mini) overnight with me into London session but overall we’re still bullish - this is just a checkback on price.
The real issue is S&P and Nasdaq. They both tried to ramp and failed - Nasdaq failed at a key spot and as of me writing this S&P is at it’s key spot - $4870. If that breaks below that to start the month then look out. Same with Nasdaq as it’s already below that and we still have NFP on Friday but the fact is that doesn’t matter at this point - it might be reactionary and we may spike but Powell wants this all lower.
That Nasdaq sold off pretty well in about 18 minutes from that speech as he made sure to let the markets know what was up: put simply, he does not want it higher.
This meeting and what he had to say changes my macro-outlook for a lot of sectors right now so that brings on more trades that have been tracked in the LongVol Report.
There is ZERO reason to be a new net long here on the markets at large (certain sectors excluded) - and we came into this week with that read on SPY 0.00%↑ and QQQ 0.00%↑.
Again, I find it weird that people want to track options flow on the market as if that is the driver - it’s not, but retail trading is OBSESSED with it. What the Fed says and what they do has a cause and effect on every asset class in the world. We run on a system that is debt-driven and every person, corporation and Government (whether you like it or agree with it) is affected by Central Bank policy. Yes, trend lines and call flow do work - for example; you could look at call flow on oil stocks a month ago and see that there were buyers - but they were buying because they understood the tailwind - Retail are buying on their call flow because they don’t understand the tailwind just that someone else is buying so that must be good.
Think about that as we get into the heart of Q1 and what you want your returns to look like this year.
Here’s an example of why top-down matters.
You can simply look at RKT 0.00%↑ mortgage from October until end of year and see investors getting ahead of a potential rate cut.
Amazon is set to report tomorrow and I am going to say what I’ve said for years (and borrowed this line from a friend) - No market is an island. Whether AMZN 0.00%↑ reports positive guidance or not if the Nasdaq is risk-off it’s going to drag down tech with all of it and just like the TSLA 0.00%↑ cult never believed their stock could be drug lower by the market, it can and it did. Why? because of rate hikes that affect every sector/stock/asset class - sure there are other factors as well but the driving run is rates.
So regardless of this AMZN 0.00%↑ earnings or AAPL 0.00%↑ if the Nasdaq cannot keep it together none of it matters and I find it hard to believe it does after that meeting today and the veracity of this rally we’ve had since October.
Do we get a bounce? Maybe but I could care less - energy is printing and continues to do so plus you’re picking up dividends.