Weekly Plan 2/13 '22
War Drums
Folks-
Last week seems yet another reminder that the market has shifted from a regime where “the markets only go up” to “Markets can go up. And down.”
This is a good thing. This weeds out certain players and helps strengthen others. But this kind of environment does require aptitude to be able to handle the swings on both sides. There is more work to be done. The days of 2020/2021 easy money are gone.
What’s even better is we have not yet shifted to the regime where “Markets only go down”. I don’t think we have. Yet.
From my own perspective, I have been on the right side of this action for most part. At start of the year, I became very bearish on overall market at 4800 which then proceeded to sell off to 4200. At 4200 I was bullish again before a 400 point upside move to 4600.
And last couple of weeks I have been bearish off ~ 4600, before another move back into 43xx handles lower on Friday.
2022 is turning out to be a year very much like 2018. I do not think the chop is over. Having said that, Investor Tic is not worried. As an investor, I am invested for next decade, not next 10 days or even 10 months. This is the money I do not need for rent tomorrow. Or next year for that matter!
Trader Tic actually welcomes this chop and volatility as it creates large intraday moves which if I am on the right side, I can grow my active trading account!
To give context to recent moves, last year, S&P500 Emini was moving 20-25 points on average a day. It is almost like watching paint dry. Who has the edge in this kind of slow volatility? Only the market makers !
This year, on average the market has been moving 50-60 plus points. This is great for any one trading actively with tight, defined risk! However, this also cannot last as I expect this volatility to die off in next few months, around Summer time.
For this weekly plan, I have 3 topics to cover:
My outlook and some levels for next week in S&P500.
A few stocks that I like at these levels and my context/levels for those . Some of them are tech and a couple are REITS.
A brief wrap up of previous week and how my plan fared.
Outlook and Levels for next week:
This section of the newsletter is more geared towards Trader Tic. The times frames in effect are from intraday to weekly swings. Risk is a few standard deviations of S&P500 ATR which is currently about 60 points (10-20% of ATR).
Let’s look at Emini technical chart A below.
At first blush, this is a bearish chart with bi-nodal distribution and heavy volume.
However there are 2 things that complicate further bearish action this week. I think these factors complicate not only bearish action but also any directional action this week. Period. So more chop.
Very close to strong orderflow support at 4360
Very close to major Monthly Option Expiry (MOPEX) on Friday