Daily Plan 8.25.23
Folks -
This is why these markets are super finicky and hard to be trusted, devoid of FED’s steady hand supplying it with a constant IV of stimulus.
The celebrations from night’s session due to NVDA earnings gave way to a strong sell off which lasted pretty much all day today.
Barely any stock was spared, NVDA gave up all of its post ER gains to close right back at where it all started. AAPL shed almost 3%, TSLA was not too far behind to find rejection at my levels shared earlier.
The drama really started at the open when we opened actually right at the LIS from last night. I had warned against this level that this level has been a key gauge of risk on, as well as risk off from many weeks now.
Today was no exception. We could not do any trading what so ever above this level;. on QQQ there were barely any retracements, just one heavy, steady tumble to the downside, one dollar at a time!
At one point I thought there could be some support near 15000. We got a small bounce, which died down a few minutes later, this support then became resistance for rest of the day, to close down another 250 dollars below it!
I felt there was some one large offloading large size and this is what this session reeked of, barely one day ahead of Powell and ECB comments.
Now this session, again, cements the upper hand that the bears have shown in recent weeks. My 4470 level again presented enormous resistance for the bulls to overcome. This was almost a 3% day when measure from high to the low of the session!
Bigger picture- these are tell tale signs of a longer term bear market IMO, which has prevented me from unabashedly joining the bullish chorus on longer time frames. Shorter term, it is just finicky 2 way market which I think should soon find resolution in a one way trend. A lot of folks are missing one key point in all of this when analysis the price action- the market itself is missing the stimulus from the FED which used to be billions of dollars every day of purchases by not only the FED, but their friends at BOC, BOE, ECB and BOJ!
TODAY? It is ZERO. 0. How will AI help this?
Back to day to day action.
What am I watching tomorrow?
I think one level is going to be front and center. Then on top of that ECB and Powell comments are going to be important factors as well which should pour in an hour or so into the open.
I think it will be an important session tomorrow and this is the reason this plan is opened for all today.
Few thoughts for the session tomorrow:
There could be more volatility
Lower weekly levels around 4320-4330 could be in scope
For volatility to die down, I like to see intraday closes above 4420.
Longer term I do think the bears need to take out 4320-4330 to unleash what I call some serious selling pressure towards 4170 which then is barely 10-12% away from some of my longer term levels on downside which have eluded me.
My main level tomorrow will be 4320-4330.
On the related market side, I do think TLT 92-93 remains key.
Scenario 1: Based on my prop OrderFlow volatility templates, if we open and remain offered below 4380, we could test 4350. A break of 4350 could take us down to 4330.
Scenario 2: However, minus such an intraday close below 4350, the bulls could stage a rally back to 4420. On the intraday time frames, they could retest 4420 if we can manage an intraday close above 4400.
At time of this blog we last traded around 4380.
To summarize: I think some of the weekly time frame levels on 4320 side could be in play tomorrow, however, for further selling down below into 4170, I like to see a could of closes here below this level. I think if we do get 4320-4330 trade, we could see a bounce there back into 4370-4380. For volatility to die down here, I like to see some intraday closes back above 4420 now.
I know this action reeks of a Kangaroo jumping back and forth, up and down, however, if you dial back to the weekly plan from Sunday, despite the action today, we remain within 4320-4450 broader range context. I do not think we get directional clarity unless we begin to see a couple of closes outside of this range on the daily time frames.
Outside of this, I am keeping an eye out on TSLA.
It was rejected again at my resistance levels but I am not liking NOT being able to take out 220. It is about 227 right now.
I personally think if we see 220-225 hold on TSLA with the general market not puking below 4320 level, we could see TSLA rally back to 245-250.
Few thoughts on TLT in particular and Bonds in general
If we get recession and unemployment goes up, this helps the FED. If inflation remains high, even at 3-4%, I think the FED is trapped very badly.
A lot of these banks, in fact most of the financial institutions in the US hold a ton of these government issued debt instruments. And they own it when the rates used to be less than 1%. What this means is there could be banks who own billions of assets like TLT when TLT used to trade 160. Today it is trading at 90.
Now it is not a loss until they are forced to sell it as they can just own it thru maturity, but that could be 10, 20, 30 years! On top of that a lot of these banks haven issued new mortgages at 7% interest rates! While the housing market has stayed stable, I do not think it will a year or 2 out. So if those prices also fall, then you have double, triple whammy for these lenders.
This is just not a pretty picture and I think the FED is tied in how much can it really do in terms of increasing the rates from where they already are. If they have to do QT, then they need to sell some of these bonds on their own books which exacerbates the problem. This is a very catch 22 situation for the FED and most folks have not yet gotten time to even begin to start thinking about gravity of this situation. This is why I said a few weeks ago that a TLT that trades below 90 level could be a a massively volatility creating event. I hope we do not get there any time soon, if I am scared of volatility!
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~ Toc
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