Daily Plan 6/16/23
Folks -
From last night my key level was 4410. We opened at 4410 and did not look under it for a single minute in the session, taking off more than 2% to end the day very close to 4500. Right off the bat, the market-based indicators like Tic TOP, TRIN, AD, etc., all were extremely strong, and the rally broadened to some of the other non-AI names within the QQQ index, feeling it higher despite average moves in the SOX stocks.
Other names shared by me in the last couple of days also had an excellent day, and most of them were over-performers -
BABA
BUD
WMT
TGT
LYFT
SNAP
TLT
Several others
I was not surprised by today's auction as a very weak and indecisive Powell left the door open to this. This may very well have been intentional on his part.
Unlike the FED, the ECB today raised rates to almost a 25-year high! At 4%, these rates are the highest in the 21st century for Euro Zone. How does the market respond?
By a 100-point rally.
This I think, goes back to my initial point - inflation itself is not an issue for the stocks. Higher inflation with a lower neutral rate may be quite good for markets. For instance, look at the UK. This year, a 10% inflation has not been an issue for its stock market. It has been making new all-time highs!
The problem arises when inflation is high, and the rates are also high to fight it. At the end of the day, this market may be thinking that the FED has thrown the towel in and may have accepted a new inflation normal at 3-4 percent rather than at 2%. Time will tell if that is the correct assumption, but for now, the buying pressure is strong compared to the sell-side pressure. The main issue with assuming that the FED has given up its fight against inflation so easily is that the AMERICAN inflation nature is very different than that of the UK IMO. American corporates are very powerful, and if they get a taste of that they can get away with charging more for less, I think the CPI in the US could get on steroids real quick. I hope FED is not giving up on its 2% inflation goals, I think this will be a tremendous mistake!
Intellectually, a lot of things sometimes do not make any sense. This is true for dozens of events going on in the US and the World right now. Half of the folks you talk to will agree with anything, and the other half will disagree.
This does not make them wrong (or right) from everyone’s perspective. Especially in markets- The market outcome is very binary. If I am right on the direction, I make money. If I am wrong on the direction, I lose money. There is no third outcome.
Do I agree with half the things going on in the world right now? Not really. Can I do anything about it?
With time, everything returns to its value area, a sense of balance and equilibrium.
As far as the action goes INTRADAY today, this was a classic uptrend day above the 4410 area with little to no pullbacks. I shared educational tools a couple of days ago that I use, like Tic TOP, TICK, TRIN etc to demonstrate how I will view the intraday action today.
For longer-term time frames, personally, I will continue to use my methodology, which I have used for years; I will buy longer-term investment time frame names even at these levels if it makes sense to me—for instance, any of my fav value names. I will probably DCA into them, regardless of the price level. With some other names, despite their price, I will not touch them with a ten-foot-long pole until I feel they are at value-levels I am comfortable with. I have a list of dozens of these names which I am looking forward to publishing and share when these levels are met. Stay tuned.
Now another example of this is Target. I called for TGT to be oversold at 125 using my methodology. It is near 140 now. Today I am hearing all these calls about how TGT is ripping higher. Ok, but the stock is already more than 10% up from its lows. This is not to say that it can not go higher, but I am illustrating how the social media is fascinated with the markup phase and ignore the accumulation phase!
BUD same story - moves from 50 to almost 60 and it is ripping now! No one talks about how we shared it at near 50!
BABA. LYFT. Palantir. PYPL. No one really talks about this stuff.
On the emini side, I was the bull at 3500 back in October! I had expected a test of 4100-4200 although I did not see it rise to 4400+!
Anyways…
Another thing that I feel is important for this journal is to acknowledge that this market has been strong. I do not disagree that the buyers are more aggressive than the sellers, which I said a few weeks ago as well. I do want to be clear that this is not something that I do not see. I see strong upside momentum. Now it is another discussion if I agree with this or not. Price memory is too short. I was the one who was calling for TSLA and AMD to be cheap at 100 and 50 in the accumulation phases. I do journal and share any such names that I happen to see in similar conditions, like CVNA and WAL, most recently. Actually many more.
On an admin side note BTW, I appreciate each one of you who has asked me about my furlough from social media. Thank you :) I am taking some time off from Social. Mostly due to the fact that I am spending an inordinate amount of time on research for this letter, and I want what I share to be exclusive to the folks here. I want this to be the only channel where I can share and publish OrderFlow content. The main reason being that having some sort of paywall weeds out non-serious and frivolous folks and only the folks genuinely interested in the message of the tape get in. Second, I really believe that competition should be encouraged, and I am not on board with Twitter's censorship of Substack. I mean, when I post a link to my posts, the thumbnail is removed, and the post is not promoted. This is all rather silly and gimmicky! Substack social is not very good, to be honest, and I am on the lookout for a new social presence. Stay tuned!
My levels for tomorrow
I think for tomorrow 4430 may be an important level. We are now trading near 4485.
From a related markets perspective, we saw a decent bounce today in the Crude oil and Gold both off some of the key levels like 67.
The dollar absolutely collapsed. I will keep an eye out on Dollar this next week as I think if this gives up the 100 handles it may light a fuse under Gold and other commodities like Oil. Oil was really happy about the events of the day today! No change to my oil outlook. A Dollar collapse below 100 could produce very very interesting results and could be a relief for macro bears who have been taking the heat.
Scenario 1: 4430 FOMC SOC could be supported if tested for a move back to 4460.
Scenario 2: If 4430 gives up, we may see 4380 area retested (FOMC low).
Have a great week folks. Monday is a federal holiday so no markets until Tuesday.
Goodbye!
~ Tic Toc
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