Risks remain elevated.
Daily Plan 3.7.25
Hey-
So another session where our levels whether that is a 5720 or a 5818, continue to add value in this type of market action. These are very large moves which are not for the faint of the heart.
If you are trying to make sense of these markets with technical analysis or fundamentals, know that larger forces are at play here- this market intentionally or unintentionally is being played via mechanics of sudden and unpredictable news flow from the very highest levels. Despite positive news flow, the market has managed to find selling flows.
In such uncertain times, you have to be quiet picky with your levels else you get whip sawed like we saw first hand today. And for that matter any of the last 20 trading sessions or so.
So at this point, what you have is a gap at 5850 which is a prominent gap. Most gaps tend to fill within 3-4 session, and when I say most, I mean most, like 60-70% not a 100%.
On the other hand side, the market is willing to accept sellers here at under 5800.
So if you put two and two together, I do not think the volatility is ending at this moment, atleast not tonight and not tomorrow.
Now while I wanna say, I see this gap at 5850 fill in 3-4 sessions, I do not precisely know when it will fill. This market is now trading 5774 at time of this post. This gap fill could be tomorrow, it may not be until later next week.
If you ask me, I will let this market slip a little here, perhaps into 5700, may be even a sub 5700.
And then once that stops some traders out, I think I would prefer a relief rally to fill the gap at 5850.
I will share the playbook for the subscribers over the weekend, but for tomorrow let us see if this 5770-5780 zone remains in play.
Outside of this, if you look at mega caps, folks are dumping them left and right, but I do think these mega caps remain in value. If I wanna avoid a single stock risk, like that of TSLA, I would perhaps focus on an ETF like SCHG which I think is a preeminent ETF with very low fees. May be it dips into 23-24, and if it does, it represents deep value. Even at 26, I think for me personally for some dip buying long term as a well thought out DCA strategy, I could peck at it, knowing that it can shed another point or two.
Folks, when we post these newsletters, the intent is never politics. It is just a way to think out loud what factors may be driving the flows. I think we can all agree that a key reason for Trump win was to lower the prices at the grocery store and curb immigration. I think in hindsight, if any one knew the impact on retirement accounts and an isolationist approach to trade and economy, may be some of these voters would have voted for alternatives or not voted altogether. This represents a big unknown in the markets right now. And you can see this with Dollar crashing, international ETFs like SCHY remaining strong. A lot of US mega cap was supported by Dollar flows last 2 years. With Dollar selling off, these carry trades are unwinding as well.
Ultimately the dust will settle. That is not today. Or tomorrow.
For tomorrow, keep an eye out on this 5790-5800 zone.
Scenario 1: I think unless we close above 5800, the risks to downside remain. I think at some point we could retest the lows from today and a break of 5720, can expose 5640s.
Scenario 2: If we are trading 5640-5670ss in next session or two, I am a buyer with an intention of a retest of 5720. And then a Daily close above 5720 could set its sights on 5850 gap fill.
To summarize: I think we will fill the gap at 5850s in next few sessions, but I think we may see some more downside action here first. Until and unless we begin to see some closes above 5800, until we see gap fill at 5850, the bears remain in charge here.
I have been opening up my levels in light of volatility, and for most part they have added value by keeping me on right side of the tape. I do not mind sharing them. If you fund value, make sure you share with traders like your self.
~ tic
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