Weekly Plan 10.30.23
“I have no desire to suffer twice, in reality and then in retrospect.”
― Sophocles
However, hindsight indeed is a wonderful thing.
I was perhaps one of the very few traders to have not joined the bandwagon of S&P500 all time high bulls at 4600 earlier in the year. I laid out reasons for my hesitation as below:
It was widely believed that the inflation will come down to 3% this year and the FED funds rate will be closer to 3% by December this year. I refuted both of these claims and my contention was that the inflation is far from bottoming and therefore, this FED will keep rates higher for longer. The FED tends to be a student of the history and when you look at history of last 100 years, the inflation genie, once it is out of the bottle, comes and goes in waves and it can take some time to quell it.
My prediction called for a resurgence in oil prices at 66 dollars, which I speculated will support higher inflation rates. This on top of dwindling consumer savings, increasing credit card debt AND an ever tightening FED balance sheet were all cited as my reasons to not join the merry bandwagon of S&P500 to 6000 back in the year.
Yet here we are now, about 500 points shaved off from those highs. Based on the close today, we are now barely 500 points from some of the lower targets called by me where I will begin to be a longer term bull.
The intraday moves themselves have been choppy now. There are 0DTE option selling ETFs out there which promise hefty yields now. These are one of the reasons the moves are so choppy now. But I think this is just a fad that will fade too, and once a couple of these shops get bagged (due to a volatility event), we should see clean moves, both up and down. Orderflow is a direction agnostic methodology so it is ok with both up and down moves, as long as there is a move. Like, share and subscribe for more content.
My levels for next week
I want to reiterate that the daily plans and the chats are geared more towards the daily time frames. These weekly plans are 1-2 weeks out, may be slightly longer, unless where mentioned.
Any thing longer than that, I always call out the context with the longer time frame label on this publication. Now, I have been an S&P500 bear from 4800s, back in the early 2022. My longer term support targets on the SPX index are 3400-3600 area. Even earlier in the year, a lot of folks assumed the FED will step in to save the equity bulls. In my personal view, the FED does not care about the stocks. They do care about the bond market, however, unless we reach a breaking point where the US treasury markets freeze and stop functioning, the FED really is in no mood to save the Emini bulls. This is why I will not be surprised if we see 3400 again, and may be an impulse can overshoot that by a couple hundred points too. If. you think about my long term prediction, nothing really has suggested that they will not work out. Even this year, we were not able to take out the previous contract highs, despite given a tremendous opportunity for the bulls.
However, on the shorter time frames, the moves can be quite choppy. This is where perhaps the most value from this publication comes in - in form of intraday and weekly support and resistance zones.
Now from last week’s plan, the weekly levels were at 4300 and 4200.
As expected, 4300 proved resistance and 4200 proved support, until that level was broken mid week, and that support then became resistance.
I visualize market as a constant auction and one of the key concepts to understand is that support does become resistance AND resistance can often become support. In this context, this 4200 level is quite important this week. We last traded 4130 on Friday for the December Emini contract.
To glean some clues for next week’s auction, let us look at Chart A above from the previous weekly auction. This is a bi-nodal auction, with 2 distinct nodes, which often suggest trending markets.