Daily Plan 6/15/23
Skip or a Pause? Doesn't matter.
Hey folks -
This was an excellent day for OrderFlow levels, with both ES and NQ capped by my two levels, ES losing about 50 points from the OrderFlow level and NQ shedding more than 200 at one point before the FOMC conference even began. These losses were reversed in the last half an hour of trading after this market sighed in relief when Powell left the room indecisive and weak, following a very strongly worded FOMC statement. His performance was dovish, but the statement was quite hawkish. I would not be surprised if this is all by design.
Talking of the FOMC, I thought there were a lot of inconsistencies for me today in Powell’s press FOMC conference. Here is a sampling below.
He shatters the prevailing wisdom that there will be rate cuts at the end of this year by raising the FOMC projections as far as the terminal rate goes and raising it to 5.6. Very few expected this. Even fewer believe this is practical. The FED pushed down the rate cuts to 2024, with the average rate hovering around 4.6% next year. I thought this was strange, especially given the fact that they expect the core PCE to come in at 4% by the end of 2023. This is huge but was ignored by the markets. I think this may be the first baby steps in the FED accepting higher inflation as the norm rather than keep dreaming about a return to 2% any time soon.
Then he goes on to say how the core PCE has not budged in the last six months. This was my observation weeks ago. So what does Powell do when the core PCE has not budged in the last six months? He does not raise the rates and instead chooses to wait. This was explained away by saying he will be data-dependent and see the long-term effect of past POLICY actions. Well, the effects are clear - core CPI has stopped going down for over six months now! I don’t need to wait another three months to see that! This is not rocket since - the prices of everyday important items are tied to prices of asset prices. When asset prices go up, the demand for these items goes up. Those who own the assets charge more for those assets. When asset prices go down, inflated prices of products associated with these assets also come down.
Coincidentally, core CPI/PCE stopped going down when the general market started going up from the October lows. You do not need to be the FED Chair to see this correlation.
The key takeaways for me from this FOMC today are:
This does introduce a certain level of uncertainty that was not there before. The expectation today was no hike but a hawkish pause. We did not get the pause, but we got a hawkish skip.
Now I think this meeting decision today (of waiting instead of acting) will have ramifications months down the road. I think the actions today set the stage for a spike in both Core and headline CPI numbers once the June 2022 data drops off from next month’s CPI data. I can not draw any other conclusion from this - the housing market, which was slumping has been revived in many zip codes- this will put pressure on core PCE. This also increases the wage inflation portion of the CPI.
My levels for tomorrow
There is not a large change to my levels from last night.
4410 is my key level.
Scenario 1: As long as we remain below the key ES level, I expect a retest of the 4370-4380 area.
Scenario 2: An IB close above the ES level may target the next resistance at 4430.
At the time of this post, we last closed at 4420.
TLT
From last night's plan, TLT did ok today but the main star of the day was the Chinese stocks like VIPS and BABA. I had shared BABA for around 80 bucks and VIPS near 12. HOOD almost crossed ten today and was shared around 8.5.
I am using AI and Dark Pools OrderFlow to come up with names like VIP and BABA almost every day. Subscribe below to receive a copy whenever I come across new names like TGT (125), INTEL (25), and BUD, which I shared near the lows. Daily ES (S&P00) and NQ levels also are included at 0 extra cost. ES services alone can be 50 or more a month. This one has all 4 at one cost - for now.
UNH
One of my favorite stocks UNH collapsed today and dropped almost 8% to nearly 450 due to higher costs. These I think are side effects of reopening where folks are getting surgeries earlier that they were not able to get during the lockdown. If it drops to 400-420, I will probably buy more.
WMT
I had shared recession stock WALMART at sub 140 and it made a new high today, very close to 160 now. It’s enjoying both being recession-proof and general market tailwinds.
~ Toc
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