Contagion
Daily Plan 3.11.25
Traders-
Tonight around dinner tables and on online forums, a variety of explanations will be provided for the sell off today and prognosis for what’s next- I want to be categorically clear about one thing: no one, and I mean no one whether it is Powell, Buffett or I know what this market is going to do next. No one can predict what the market will do.
Now on my part, I did last night mention that as long as we remain below 5800, a retest of 5650 is a fair game. See below.
Now this has been a great trading environment if any one is trading intraday time frames. The issue for any one trading intraday happens when you are only trading on one side, or you are only trading one lot or you like to trade without a stop.
This remains a great market for anyone trading short and long, with a stop loss.
Now when you try to do a prognosis of this market longer term, a few themes are strongly at play-
The Trump overhang- Trump has been saying few things which generate a lot of uncertainty. Not because we know what they might or might not do, but because no one knows what the game plan is? Is it to stop imports altogether for everything to be produced here in the US side and consumption is also local? Is the game plan to move all factories onshore and bring back jobs to the industrial belt? Are we done now with interconnected global economies, supply chains and logistics? There is very little clarity on this and I think this is bigger uncertainty than just the tariff threats.
The markets also remain sharply oversold. You could see a sharp bounce just due to the technicals. Though if you want to see a return to a sustained uptrend, please refer to my post yesterday where we need to fill some gaps at 5850, make some higher highs, higher lows in daily/weekly time frames.
You also then have a trillion dollar question of money market funds which can potentially offer support to stocks beaten down in last month and a half. This may not sound much like it when you talk to the loudest voices online but believe me there are folks with very large cash positions and this cash has to go somewhere at some point.
On the retail side specifically, crypto has been an absolute carnage. I have never seen anything like this even back in 2022 when Bitcoin fell to a low of 16k. So from what I gather, a lot of crypto community was all in, not just in quality names like bitcoin but all sort of memecoins and alt coins which have taken a ginormous beating of 80-90%!
If this were not enough, you potentially are looking at debt ceiling drama here in the US next week, you have the Japanese yields make 4 decade highs and then you more geopolitics, with a massive Cyber Attack on X which per Elom Musk originated in Ukraine.
Personally if you ask me, the best strategy personally for me is to deploy cash a bit here and a bit there. Since no one has the crystal ball where the ultimate lows will be, a dollar cost average strategy into strong assets makes the most sense to me. If you go all in at one level, then you have nothing left to add if we fall another 20%. If you don’t buy at all, then you may not get to buy anything at any price at all. So this is a middle ground I am comfortable with, knowing well that there could be volatility ahead.
To be clear, the downtrend is quite strong right now. As I said yesterday, if one wants to wait for this market to firm up, that is not a bad idea but know that you may miss out on the bottom 5-10% of the move. The upside is that you may also not have to go through another 10-15% drawdowns. We will see specific signs on the tape once this market begins to firm up but I don’t think that’s today or tomorrow.
Levels for tomorrow
So this market is down more than 5% for the month of March. This is highly unusual but it does not mean this cannot drop another 2-3%. Now normally, unless you are dealing with severe stress situations like the 2000 DOT COM bust, or a 2008 GFC mini depression, or a 2020 Corona onset, a 5-8% down market sees quick 5-8% rebounds as well. Now I have no idea if this is something similar in scope to 2000 or a 2008, the fundamentals definitely dont seem to suggest so.
For those of you who are super new here, unfortunately it is just bad timing. We had 2+ years of unabashed bull market with tremendous plays numbering in hundreds of stocks and options. Ironically, if we dont get these sell offs, we will not get any good stocks at decent levels. Now when this period of sell off ends is anyone’s guess, but once the dust settles, this should set the stage for dozens of great runners. So if we are going to have great runners, at times we need good sellers also. This is just the game.
At this point, I need to see some signs of firmness return to these markets.
For the session tomorrow, I will lean on this 5592-5600 zone as potentially important.
Scenario 1: If we are going to open and remain below 5592, I think we are going to see some more pain, perhaps targeting 5554-5556 area.
Scenario 2: An open above 5600 which then sees us hold the open thru the session could be a plus sign which could see us retrace into 5677-5679. At time of this post we last traded around 5592.
~ tic
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