Daily Plan 12.1.23
Main expectation was to see sell down into 4530s as long as we remained below 4565.
Towards first half of the session, I felt the sellers were losing control and expected to float up to 4573.
This we did albeit we saw quite a bit of downside momentum before stabilization. Traded down about 12 handles before making a push higher and closing above 4573.
Number of other good calls like CCJ, SNAP and LULU- both saw good action.
Key level for tomorrow remains 4570.
Scenario 1: As expected saw some cracks in TLT with a stronger dollar. If this gets legs, I think this will not be great for the SPY. With this in mind, 4573 could be resistance for a move down into recent lows near 4530s.
Scenario 2: For bulls to shine tomorrow, I think they need to see weaker dollar and remain above 4573. With this combo, they could expect to see another stab at 4600.
I am seeing quite a bit of heavy volume here now, and I think what this means if we take out 4600 on the upside, we are going much higher. However, on the flip side, as long as remain below 4600, I think we have seen the highs, especially when I consider the action in AAPL below 192 and stalwarts like NVDA remaining below 500.
Part of dollar strength could be explained by the surge in this new respiratory syndrome which I personally do not think is going to develop into full fledged crisis like 2020. This same logic however does not square well with yields rising.
If anything I think this is signaling higher for longer if you look at the PCE numbers from today. I see the FED cut rates in Q1 if we begin seeing a meaningful loss in employment situation. In an election year, the FED does not want to be blamed for rising unemployment. Unemployment numbers have cooled but are far from being categorized as a collapse.
From a directional point of view, this market is broken in intraday time frames.
Seriously when was the last time I saw a 70-80 point day in the S&P500?
Memory fails me.
This is a direct result of these 0DTE options across a variety of instruments from SPY to EMini to the QQQ. I do not see an end to this any time soon, and I think my strategies need to evolve for this, if I am in intraday time frames. For instance, folks still have this hangover from 2021-2022 with routinely options being bought 40-50 points out, however the session itself is not even moving 20 points, this is just a side effect of options being sold by the MM at every tick, every single minute of every single day. This has weeded out a lot of folks as the moves are simply not there to justify a far OTM option. Options is now what futures markets used to be for years. Lots of smaller, higher lot size moves, far closer to ATM or ITM strikes. This is primarily for the SPY, ES markets. Stocks still have good moves as long as we do not see daily expiries for names like TSLA and NVDA! Now if you look at last 10 days for instance, where are the far OTM moves in any strike at any price?
Eventually if we see VIX go back to 20 and above regime again, I think this situation shall improve. When is any one’s guess.
However if and when we get there, the moves will be cleaner with lot more room to run.
~ Toc
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