Weekly Plan 6/12 '22
Softness lies ahead
Traders-
As I begin writing this weekly newsletter, I can not help but be in a little awe of the orderflow levels— beginning of the year, I became a S&P500 bear at 4800 on January 3rd when we promptly sold down around 4200. 4800 level then was not visited again.
At that point after the sell off, I shared a range of 4200-4600 which we held for a number of weeks, and provided swings on both ends of the range, before that late May dump which took us down into 3800.
It is here 3800 that I shared a new potential range between 3800-4200.
At first many did not believe that 3800 could be the bottom with all the doom and gloom that was going on. However, despite all the skeptics we did manage to rally, and we rallied all the way to 4200 , in-fact high of the move was 4202.
Now back at 4200 I did not expect this to hold either beyond a half hearted attempt to perform a failed breakout. There was a lot of disbelief- folks in majority had turned very bullish for some reason at this critical range high. In fact my weekly plan called for an early test of 4040 this week. However what surprised me was the fact that we did not even stop for a bit at 3950-3970 which I had expected before the FOMC in my weekly plan.
Here is the link to the plan if you want to check it out.
Yet, here we are, barely a 90 points away from that 3800 range low again. This has cemented the status of orderflow and tape reading as one of the better analytical methods out there compared to traditional TA.
I wanted to highlight this to again underscore my point about how key the levels are as most of the daily and weekly auctions react to these. However at the same time, timing can be a lot more tricky. It took a while to come down below again from 4200- in fact it took 2 weeks. I was actually expecting we would test these lows sooner, however the wait was no fun for any one that I know of personally.
All of these levels and my ranges in S&P500 were shared with folks here in the Substack.
While I am quite pleased that the range top of 4200 has held, as had the range low of 3800 two weeks ago, I am now concerned that a lot of folks are taking this lightly. I still see a lot of bullish sentiment amongst the Twitter gurus and a lot of large accounts still seem to believe that we are going to make new highs in the equities soon.
I will detail in this newsletter with charts and examples why I am not bullish on the general market and will share my levels for next week in both S&P500, Nasdaq 100 as well as key related markets like AMZN, TSLA and AAPL. I am also going to share my opinion on TSLA 3:1 stock split and where I see this thing trade next. If you would like to stay on top of these levels when ever they are published in real time, make sure you subscribe to my newsletter below.
Now before I dig deeper into the levels for this week, I do want to be very clear that I am not in the permanent “doom and gloom” camp. It is never my intent to scare any one away from any thing. However, I always back up what I say with solid observation of the orderflow. If I see weak orderflow, then it does not matter if 99% of the Twitter is bullish. That is my methodology and this is why a lot of my calls will seem contrarian when I may be out of sync with the majority - whether right or wrong is besides the point. So it is in this context that I am not quite bullish right now even at these lows as the underlying orderflow remains weak.
Now while these markets suck if you are a bull, or they may suck if you like to trade low volatility, or lesser chop, know that these kind of markets may appear 2 or 3 times in your career. I would learn as much as I can from this- even if I am not being very active. This is not your average market, and by that extension this presents an outsized opportunity to learn from it which I do not think you can from an average year. I will keep plugging away - eventually these headwinds will subside and we will bottom - however I do not think that is this very moment.
My thoughts and levels for next week
So right off the bat, next week is the FOMC week. It is on Wednesday and a lot of preparation and levels can evaporate in a minute. I want to put this caveat out there as volatility will be elevated and liquidity may evaporate causing large scale moves within minutes.
Chart A below. 10000 ft Technical lay-of the land.
So you can see a lot of damage to the S&P500 market was actually caused by the sell off in last two days on Thursday and Friday. You can see nice rejections at my 4151 as well as the struggle to go up past 4110- both levels shared here in the substack as part of the daily plans.
Technically since the value has not moved lower itself this week, we may be prone to retracements or rallies off these lows at 3900. However any rallies in my opinion will be shallow. More on that later. Scroll below.
Now you will hear a lot about extremely high option volumes, quad witching, FED QT tales and much more. While this is all interesting information, I do not use it or rather I would not know how to incorporate these in my own trading - if I look at my trading, I need to know one thing and that is orderflow.