Daily Plan 4.5.24
Bear Market Begins
Hello-
I had a bullish bias at the open near 5260 for a target of 5310.
This was easily achieved in the AM, with the markets trading up to 5310 and then stalling. Note that 5310 is also a 20 handles shy of 5330 which has been a weekly resistance all this week shared by me last Saturday.
Once the auction stalled at this level, we saw a severe sell off with the market losing more than 120 dollars within a period of about an hour and a half to close the session near 5190.
Lot of leading stocks like NVDA, AMD came under enormous pressure with AMD shedding more than 8%.
With the sell off today, we are now about a percent or so from the SPX 5110 LEVEL.
It is at 5147 at time of this post.
This level corresponds to about 5160 on the Emini June index.
For tomorrow, my key level will remain 5160-5170.
Scenario 1: I want to be bullish if 5160s trade, for a move back into 5200s. At time of this post we last traded 5190.
Scenario 2: For bulls the 5220-5230 level will be important resistance tomorrow and for the bears the 5160 level will be a key level for a trend move outside of this bracket.
Outside of these day to day levels, the action comes down to the likes of AMD and NVDA.
NVDA in particular is now trading 860. I think this 850 zone is important one on NVDA, as well as the 150s are key on AMD.
Note that these are orderflow driven levels. While Orderflow is as real time as it gets for analysis, there are some limitations. What are these?
For instance if I am bullish at 5160 for a move back to 5200, it is dependent on some assumptions. Those assumptions being come Sunday night, we do not have a new war in the Middle East which can send Oil higher above 90 dollars to the barrel. Please refer to my earlier notes about Oil trading above 92 and its potential impact on risk assets such as Nasdaq. While you can observe and react to orderflow, you can not predict Black Swan events by their very nature. This is important because the importance of 5160 level is established based on historical orderflow but future orderflow in case Iran and Israel go at it on Sunday night, cannot be predicted yet. It can only be observed if and when it is here. I will cover the significance of higher Oil prices and higher Oil stock prices as far as correlations go in my weekly post. Stay tuned.
Slightly longer term, I will reiterate that the strong action in Oil and Oil stocks is not the best combo for risk on assets. I have been saying this for over 2 weeks now and thus far the action in risk seems to confirm this. We have seen this before and every time we seen this before, it does not bode well for risk. Then you also have the “technical” bear market in stocks like AMD, INTC etc. Again leading stocks, they enter bull market before others, and they enter bear markets before others. For context, AAPL is 5% shy of a “technical” bear market. We have seen this template before in late 2021 and early 2022 and what followed should be common knowledge by now.
This is it for now, will be back next week.
Have a great week. Do not forget this is last chance to avail of the largest discount in history of this publication. Use the link below.
~ TIC
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