Weekly Plan 10/9 '22
Folks-
When we say a market has been weak or strong - there are many ways to measure it, but none of them in my opinion should be based on a feeling or some one else’s opinion.
Measuring the weakness or strength on a market should be based on measuring the momentum in market and should be objective, not based on the opinion of others.
Here is some of the ways I read the market momentum: Momentum 101
Now, last week’s auction is a prime example where for many the market “felt strong” at 3800 and it “felt weak” at 3600.
At the end of the day, neither was the case as we rallied 200 points from when the market seemed weak and we dipped 150 points from where the market “felt strong” and we ended the week pretty much unchanged. In fact the SPY index was up about 1% on the week.
For me to determine that a market is weak or strong, a few things need to happen:
A break of a strong supply and demand zone.
Demonstrated strength or weakness in the OrderFlow.
Contextual changes in the market, for instance the FED is hawkish and the market makes new highs.
Minus any of these, I do not rely on opinions - whether my own or some one else’s to make my decisions.
When you zoom out over a year, the market has been weak. We have shed over a 1200 handles in the emini S&P500 since start of the year, this is where I became bearish on entire market.
When you look at the key momentum names like TSLA and AAPL - they are both down big. TSLA in fact has been cut down almost in half. Even most recently, TSLA has lost about 20% of it’s value within a week, that is a whole bear market that was added to the stock within last one week.
TSLA is a perfect example of how the OrderFlow forecasts play out over several weeks and months.
Regular readers to this publication know that my target in TSLA has been 180-200 for many-many months now.
We came close to this in June when the stock was still pre split. Then it took off and being bearish on this stock became painful and unpleasant and even the most hardcore bears started thinking “new highs” in TSLA at 330 area. I lost interest from some of the most hardcore TSLA bears when we rallied past that 300 again. However, I had expected that the break out will fumble and fumble it did.
Well, here we are, losing more than a third of TSLA value within a matter of weeks, just an inch from that 180 handle. Who would have thought?
I do want to take an opportunity to share a thought about this Threads feature being offered by Substack again. It is a real time chat like function, I intend to use this quite frequently for the paid subscribers where I can share my thoughts during the cash session hours. However, it will not be every day. Some days I have personal conflicts where I can not step away from my desk. Some days, the orderflow is not very clear to me and if it is not clear for myself I do not want to share my lack of clarity with others :)
The feature is also not available to everyone yet. It is only for iPhone users. The Android support will come in November according to the Substack people.
Until then I may also share the update in Twitter to ensure the Android users can also read it. However, by December or so , my plan is to share these exclusively with the paid subscribers via the Substack app. Install the app below.
My own methodology, aka OrderFlow does not just look at the charts or the tape, the fundamentals/macro, the insider transactions, or the news . It encompasses all of those. Even if you could argue that TSLA technicals were strong, you could see that the while insiders, including the CEO has been outright urging folks to buy the stock, they have been selling big time. They have sold this stock in billions while asking the small investors and traders to buy it. If the insiders can not have faith in their stock, who else can?
BTW this is a free preview of my trade plan where I share my levels and my own personal journal as I prepare for the week ahead.
This is not about being right or wrong, this is just a different take on the market where all my calls are made after watching the level 2 on the S&P500 Emini and related markets. This is all very different from your typical chart and indicator based analysis methods. If you have not, subscribe below to get up to 5 such posts a week plus access to my exclusive chat in form of Substack threads.
This market is not for every one.
Even active traders I know have been having a hard time. However, the worst thing I think any one who is interested in markets can do is become disinterested when things get tough. I personally think the markets are near a major pivot and there are so many names out there that have probably already made a decent low.
For instance, Palantir shared by me here at around 6 dollars was already up about 50% to 9 bucks and change from that low achieved back in the Summer.
When can this market bottom?
Bears markets, unlike acute sell offs like the one we had in 2020 March, do not bottom instantly.
Average bear market can last anywhere from 12-18 months. This one , we have been in this for about one year now and the bottoming process can be in waves.
I personally have a very unique way of looking at this and I have shared this previously with folks.