Tic Toc Weekly Thoughts 1/16
Rally gets new legs..
Folks:
In trading and in markets, we are all telling ourselves stories all the time. If enough people believe a story, trends develop, the prophecies become self fulfilling.
I wanted to outline few thoughts about general conditions before diving deeper into the technicals. Scroll down to Section C if you want to get to the technical part first bypassing my current macro thinking. Section D has my levels for this week, followed by Section E for some equity tickers. Last but not the least, I summarized how we did from last week’s plan in Section B. Enjoy reading!
Friday saw a good bounce in the tech sector with the usual suspects leading the charge. We called this hours before the rally began in NQ in my Telegram see below.
By close of Friday, majority of FinTwit participants who were very bearish at 4610 in AM had become very bullish at 4660 in the PM.
I myself spend a lot of time thinking about my stories- whether right or wrong- do they still make sense given new events and developments.
Here is my current story I keep telling myself, now you tell me if this is still works or not?
FED has started communicating the easy money has been made, they are tapering and will soon begin raising rates.
Some rate increases may be needed- given price inflation in several every day items people need. Too much tightening will stifle the growth and lead to higher unemployment especially amongst the most vulnerable groups. FED will like nothing more than inflation fall back to below 3-4% (atleast in energy, food, basic household consumables). Will they get their wish?
Americans have record savings right now- some 3 trillion dollars. They are waiting to spend it, if only they could get their hands on what they want to spend it on!
With widespread testing, quarantines, draconian lockdowns, this saving continues to go up while supplies shrink even more.
So I think inflation is FAR from over. And this makes FED agenda and wish list harder to achieve. Especially next quarter or two.
You can also argue if FED tightening is even the most important factor right now. With widespread Omicron testing, I think the real risk may also be economic growth and with earnings season in full swing, this can really sink the indices if they fall short of the mark. Self inflicted wounds.
Given this and other technical factors I will outline below, the short term volatility in equities stoked by fear of FED tightening is far from over IMO.
I remain of mindset the rallies may be sold, that next steps may be decided at 4480 and it would not worry me in least if we traded down to 4336 to take some of the fluff out.
I define some technical developments in related markets that need to happen before I feel comfortable that the low is in.
B Before any thing else however, let us review how we did based on our levels and plans from last week for transparency. Here is the link from last week’s trade plan: Trade Plan Weekly 1/9
My primary thesis with S&P500 EMini was that all rallies into 4730/4750 zone may get sold. The close on the 6th, Friday at time of this post was 4660 (see below) and the high of this past week was 4740 before a 140 point drop on the 14th of this week. So that worked out quite well for swing time frames .
All Rallies were sold In other trades I was bullish on VALE which did ok , nothing too stellar but outperformed the overall market. I was bullish on MGM which again did ok, very small outperform compare to the overall market.
I was however again very bearish on TSLA and gave the exact high of the move at 1110 before the stock fell about 90 handles. Bullish on F which also manage to eke out a gain when rest of market sold big.
To top off a good week, I outlined 4610 as a level where there may be a violent rally on Thursday. See link below: LAST TRADING PLAN.
