Burry Goes All In!
Daily Plan 8.16.23
Folks -
Last night my bearish Scenario 1 was an exceptional call as the majority of folks that I know about were bullish at the close last night on backs of that NVDA upgrade and action yesterday.
I thought as long as we remained below Scenario 1 level, we could retest 4490s AND a break of 4490 could target the lows from today which were spot on!
This underscores the contrarian nature of this newsletter as well as OrderFlow as a methodology. A lot of graph based methodologies are focussed on one dimension- chart patterns alone. OrderFlow on the other hand is more nuanced and takes into account multi dimensional analysis. Subscribe below for more such contrarian calls from me.
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A lot of excitement today amongst Twitter traders was caused by release of news where it was said Big short fame trader Mike Burry has taken out a 1.6 billion dollar short again the QQQ and SPY.
Many folks were too excited by this news and assumed S&P500 end is near.
Well, I have a little different take on this than the obvious.
The most important thing in my opinion is that no one really knows the strikes of these puts. A lot of small retail takes options trades at far out of the money strikes. I think this is because these puts are cheap and folks assume cheap is better.
However for a lot of these large traders like Burry, they do not take a lot of duration risk and their strikes often are in the money or at the money. They also do not always go for home runs. So assuming Burry took these puts out before latest 200 point sell off in the S&P500, and assuming his strikes were closer to 460, he may already be up handsomely on these options. This is similar to his puts on TSLA and AAPL in 2022 when a lot was made of them being bad trades but in reality he was up quite a bit on those trades before price action reversed and started going up.
Just wanted to share my 2 cents on this whole topic.
Image courtesy: Getty/Bankrate
My levels for tomorrow:
For the session context tomorrow, the driving forces right now are deteriorating global economic metrics. The focus should also be on the FOMC tomorrow.
This along with higher yields and a stronger dollar could weigh on risk assets.
However technically speaking, I personally think the bears should not cede an inch in the cash session tomorrow to keep pressure on for the bulls.
Having said that, my key levels tomorrow will be 4450.
Scenario 1: As long as we remain offered below 4450, we could retest 4408.
Scenario 2: If the bears begin losing 4450 early on the session or can not close below it, we could retest 4480.
At time of this post, we last traded 4450.
TSLA
On the individual stock side, if the general market remains strong, they also tend to do well. The reverse is true when the general market remains like this. This market softness is now proving what I have been saying for a long time now- there is not much sponsorship in terms of a FED put here at these levels. This is not the same as a 2020 or a 2021 market where the FED had a backstop in terms of trillions of dollars of liquidity. This is what makes this market in 2023 so finicky.
TSLA is one such name which has consistently found selling pressure from my 270 level.
It is near 230 now.
I think as long as 240 holds, it should remain soft and could retest my 210 level.
Longer term, I think if we now do not close back above 4500, we should have first lower low weekly level in a long long time, which could establish a downtrending market now.
I think if the bulls are unable to take back 4500 now, we could retest 4356 longer term. This puts 4170 area within a cinch. And if 4170 goes, things could get interesting in a jiffy!
But more on that later , in the weekly plan. Stay tuned.
~ Toc
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