Daily Plan 6/14/23

Traders-

Before the open, I shared a couple of key levels for the cash session today.

One of the levels was support for most of the session (was in fact very near the low of the day), and last I counted we saw about 3 attempts to take it out, and rejected every time. We ended the day near 4415.

If you have not already, read the below post on some thoughts I have on intraday execution and how I use market internals to determine potential support and resistance throughout the day. Important post. If you look at this we opened strong on TICK today and barely did any business below that key level.

I would recommend reading and re-reading the Tic TOP indicator post too as this can be a good indicator of intraday momentum.

The price action of the day was punctuated by what I thought was a misread of the CPI data today. Even though my level was support, there was a lot of expectation today of a massive rally which never came. We rallied about half a percent from the level. The reason for optimism was the year-over-year collapse in the inflation metric. I had expected the CPI (YOY) to come in weak and shared my view last night.

Personally, I thought if you ignore the YOY drop, I thought this was a strong CPI report. Yes, the headline number came in lower than expected, but the monthly trend was still a gain.

On the Core CPI side is where I see the most strength. A 0.4% gain month over month, out of which housing is a large component. Housing costs rose 0.6% month over month! Almost a percent! This puts the core at 5.1 % for the year, and it is barely changed from a month ago. I think inflation is re-accelerating.

This is why I think at the open, while SPY remained firm, QQQ or NQ just dropped 200 handles within minutes. It rallied later in the day, but the initial headline was negative for the growth-heavy index. In fact, we saw good performance in Vlaue names today. I have been a Value bull compared to the growth stocks, and I want to add more Value on a pullback as I feel the spread in growth and value gains over last year has been one of the largest ever and I think this trend at some point will reverse.

At one point in the day, Value was outperforming growth by almost a factor of 2. The fact this came in during the first hour of the day tells me that value may have been seeing some rotation out of growth.

Back to the initial market positioning today - I thought we had a lot of bullish sentiment at the open today to target 4450-4500 and even beyond just off the backs of that weaker-than-expected headline CPI data.

My own context was that we are opening very close to that key weekly level (4360 June contract level). From now on, this level is 4410 with +50 added to 4360 to account for rollover. Overnight, before the cash session, I saw a very heavy volume, almost at 500 thousand lots. Some of this is due to rollover but not all. Normally, at night we do about 200-250K lots, and anything above that, for me is an unusual volume.

Then we opened at 4400 and did another half a million lots within the first 40 minutes or so. This, again, was extremely heavy as we do not do that kind of volume at the open on most days. It is here at this point I had thought this will probably not be a very strong day. If I am a bull at the open, assume I have bought some of these million lots, what am I thinking?

A) I am thinking I am buying here close to this 4360 (4410) level on extremely heavy volume.

B) I am also looking at a 200-point decline in NQ and thinking to myself, what is going on?

At any rate, I thought this would likely not be a large-range day, and I was right.

If I am looking at what 99% of everyone is looking at, like if I am making a decision based on headline CPI which was expected to come soft, and it came soft, then what edge do I have? If I am also looking at the same info that you are looking at, and everyone else is looking at it, then I think we are all looking at the same thing, which may not work. The boat can capsize if it gets too heavy. So I am searching for a methodology based on context and real-time, market-generated data that only a few could be looking at.

This is how I look at the open. Obviously, I have no idea how anyone else looks at it, but I think we can all agree if everyone is looking at the same thing, then no one is looking.

Besides my level shared in the AM, the below names shared by me this week had a good day today -

1. CVNA at one point rose about 15%.

2. HOOD had about a 3% day

3. GME rose about 15% today, it is now up more than 60% from the key level

4. INTC now close to 35, up about 40% from the key support

5. TSLA closes at 260, up about 65 dollars from 196 support.