Weekly Plan 6/4/23
Very strong bull market
Traders-
Let us start with some thoughts on the events of this last week.
Starting with the nonfarm payrolls from this Friday- At the surface, this report looks very strong, with almost 400K jobs added. However, the Bureau of Labor does not report how many individuals gained or lost jobs; It only shows the total number of jobs lost and gained. This jobs report may very well be high due to individuals doing multiple jobs and the market reads this as a soft report rather than strong one.
This is why the market did not sell off; in fact, as I start writing this post, it has sharply rallied from that 4200 level for Friday. It is trading near the 4285 critical orderflow level now.
The market is strong. Let me get one thing out of the way - for the market to go up, it does not need more buyers than sellers. It simply needs more aggressive buyers than sellers. For the market to go down similarly, it does not need more sellers than buyers. It simply needs more aggressive sellers.
The buyers are very aggressive right now. For whatever reason. This is not surprising for me as I have anticipated this based on a slush of liquidity in the system. This is in my view, because there is a lot of liquidity in the system and it has to go somewhere. A lot of money is wanting to go somewhere - this is what we see with home prices spiking again. One of my folks recently sold a home that has gained a 100% or more in the last 3 years, they sold it almost at the ask, at 7% interest rates!
Folks on the upper end of the income spectrum are thriving and continue to spend and do well. The lower income households continue to struggle, and we see this in guidance from the likes of Costco, Dollar General, Macy, etc. Their forward guidance is much more conservative than some of the higher-end shops which cater to 200-300K+ AGI individuals. I have been saying the same thing from over 6 months and now more and more corp c-suite is saying the same thing.
I am not a big user of technicals (like indicators) in my own trading. I only use Orderflow and flows in related markets. I have been bullish in several markets and bearish in a few - like the S&P500. Of the Markets in which I have been bullish, several of them have done well. The one I have been bearish on has been going against my viewpoint.
Even with the close today, it will most likely end up closing 2% or so above my key 4200 level. In the S&P500 market, I like to be passive unless it is something like an ES ( emini ) on the intraday time frames. So to be clear, I am not stating that there are more sellers than buyers, I am, in fact, acknowledging that the buyers right now are more aggressive right now than the sellers.
Why?
I do not know. I think the market price action alone is enough to entice or repel buying or selling activity. So as the price goes up, the sentiment improves. More and more people who were on the sidelines will jump in as they see the markets go higher and their friends get more bullish. Similarly, when the price goes down, it sours the sentiment, and folks get more and more bearish with the decline in price. I believe the price is always right in the moment, and there is no point arguing with it.
From my perspective, I have marked down levels that I like to get in for my most passive of accounts. I do change these levels up or down, but it is extremely infrequent, like 2 times a year.
When I change my mind, it is not due to the technicals, price action, or sentiment. This is why I have been hesitant to change my levels for over 2 months. Price action and sentiment are not what I am looking for, as that can change on a dime. I could buy an x number in SCHD today, and the sentiment can sour in a week with the market down 10%. So for me; this can not be a strategy to change my levels based on price action alone. Price action for me is only and only for extremely short-term time frames, like intraday.
I have broadly 3-time frames - Investor (2-3+ years), swing (weeks to 1-2 months out), and trading (same day, same hour). Whatever I said about S&P500 is in the context of the Investment time frame.
If I am investing in something, do I really need to check its price every day? If I check my price every day, it means I am not comfortable with the risk I have taken. I may buy an instrument like VTI, or VYM, with extremely low expense, and I forget about it that I ever bought it. To me, that is investor time frames.
So what will I look for when and if I am ready to change my investment thesis?
A marked change and departure from my main thesis. This will not be a 200-300 point move against me.
A few examples of those could be:
Something like a major geopolitics event or a new pandemic causes the FED to abandon QT and begin QE again, printing a billion or 2 every hour.
AI emerges as something that causes millions to lose their jobs and leads the fiscal response in the shape of a universal basic income for the millions that are impacted. I think the initial AI impact on the economy may not be a positive one. Not everyone to start with will benefit from AI. Some will do better than most. This I think will lead to more and more consolidation between the haves and the have-nots. These AI-related revenues may also take a few more years to show up on your balance sheet. So this is not really democratizing like the internet was. The Internet gave power to billions that did not exist before. In a sense, the internet helped the weakest. The AI on the contrary may help the strongest and take power and freedoms away from the weaker. I think in the first few years, it helps the top 5-6 and is detrimental to the vast majority. We will see how it evolves in 2030 and beyond. But without question, it will change our lives in terms of how we work, how we express ourselves in society, and how we receive services in various forms today.
These are a but few examples of where I will move my long-term up from current support levels significantly up from where they are right now. Now if I just look at price action, SPY was making 52 week lows last year but it did not stop it rally 70 points.
SPY is now making new 52 week highs. Can I say with any certainty that it will keep going up based on this one fact?
I wanted to share this as I do not want to come across as I have been a bear on everything in every time frame. Nothing could be farther from the truth. I have been an S&P500 bear, and I have seen the market go against my 4200 level by 2-3%.
I have been a bull in several other markets in several other time frames. Many of these have been going up just like other things. Below I have shared a list of names that I felt looked strong in the last couple of weeks and how they did this week in terms of their price returns. The lowest price return was 4%, and the highest was more than 40%. Yes, S&P500 has not gone down as I expected, but then there are several names which I expected to go up and have gone up quite a bit.
One of my strengths (and weaknesses also at the same time) is that I spend a lot of time watching S&P500 price action. In that sense, I understand its price action may be too well. I can see when it is acting as it should and at the same time when it is acting as it should not. In this sense, I am not looking at it from a lens that the majority is looking at it from, which, most of the time, is up or down. This is why I have been hesitant to call an end to the bear market that first started when I became a bear at 4803 on January 3, 2022.
Frankly, this should be straightforward for most, but unfortunately, it is not. Knowing your time frame is extremely extremely important. If the S&P500 is expected to move 1200-1500 points in one year, then I need to understand and accept that risk if I think my time frame is one year.
If my time frame is one month and the market usually moves 100 points in current volatility in a month, then what is the risk I, as trader Tic should take? Is it 1000 points? Is it 100 points or 2 points? These are very important questions that I need to answer, and the answer will come from my time frame.
What I mean by this is if I am short S&P500 at 3900 because my system tells me that S&P500 could be 3700 next week and the market is now trading at 4300 after 3 months and I am still short at 3900, which was supposed to be a 1-week trade… this is a system risk management question. This means I never accepted the risk.
Based on what I have seen personally, a lot of folks use 10-15% of the average range (ATR) or the IV. On any time frame other than investment, I feel 15% or so is the max I need to know that I have been wrong, So for example if the average daily range is 40 right now, that 15% is about 5-6 points. Now if we open at 4250, which is a key LIS, whether I am long or short, based on a 40 ATR, what is the max risk in the same-day timeframe I wanna consider? Is it 6 points or is it a 100?
Now, if you recall, I had a bullish level shared for TSLA at 196-197 last week. This was the low of the week for TSLA before it rallied about 20 points from this level. All the preparation, research, and analysis have already gone to the level. If the level is going to work, it is probably going to work right away, and if I see the stock slip 5,6, and 10 dollars below this level, based on how I came up with the level, I have been very wrong. Do you see what I am saying?
Yes, there are traders who can average up or down. But that is not me. It does not work well for me to average up if the level to start with has been wrong.
What were some other examples? Like BABA at 83. VIPS at 13 dollars. S&P500 at 4175. GME at 20. TTD at 60. ENPH at 153. These are all very recent examples. I know based on my experience that my levels, once they go wrong, they are going to be wrong. And if they hold, they are going to hold. Look, there is an outlier of people who will not get it. That is not my audience. But I think 60-80% understand what I am saying. The crux is in short-term time frames, I am ruthless about cutting it if wrong.
On weekly, if we see an 80-100 point average range, that 15% threshold could be 10-15.
In very active markets, this may mean getting stopped out many times, but the advantage of volatile markets in my opinion, is you get several setups during the day. Note that in active markets, the ATR also goes up, which means that the 15% threshold also goes up. It is never static; it is constantly changing.
Look, it took me hours of research to write this letter, and it took you 20 minutes to read it. If there is one thing you can take away from this, it is how I feel about trading. I feel trading is something you throw a dollar or two at and see if you can get 3 or 4 or more back. And I hope to be able to do it 3-4 times a day. There is really nothing more to it, in my view.
I hope I was able to share my personal views on time frames in this section for educational purposes and how I see them as the same day, week to a couple of months and long term. A major announcement regarding the Substack blog is on its way. Stay tuned. This should not impact anyone already a member but only new ones.
My levels for this week
Let us see how my levels did this week.
4250 saw a sell-off towards the 4150 area which was then bought up. 4250 then gave up on Friday and we traded down into it for a few minutes in the cash session and then took off to 4300s.
Let us look at the weekly performance of names which I felt looked bullish last week. This does not include anything that was shared during the weekdays.
VIPS 0.00%↑ : up 6% on the week
BABA 0.00%↑ : UP 8% on the week
SNAP: Up 7% on the week
TSLA 0.00%↑ : UP 17% ON THE WEEK!
DIS: up about 3%
GME: up about 6%
SAP: up about 3%
SNAP: up about 7% on the week
PLTR 0.00%↑ : up 13% on the week but at one point it was up almost 6 dollars from that $10 post-ER support.
LoveSac LOVE: this stock was up about 16% on this week
PACW and WAL up about 7% this week. More on this later.
As I said I did not include weekday names like CVNA which was up about 25% in one day and is up 40% on the week. The average weekly move of these 12 names above last week was about 9% . I have been off in my timing for S&P500. The SPY ETF rose 3% last week.
I am sharing this list of names that I felt were bullish BEFORE they made the move, to demonstrate that while I have been bearish on the general S&P500 market, I have been bullish on several other names.
As I said before and I will say it again- I am a long-term bear on S&P500. I first became bearish on January 3, 2022. See below. I was bullish at 3500 but in recent months the market has gone against me. It has not gone down as expected. But at the same time, I want to put my point across that I have been a bull on dozens of names like in the list above. So I am not your typical ‘always on perma bear’. I am a strategic bear, driven by data.
This Stack is the best long-form opportunity to share my thought process, and I must make my thought process clear to fight misinformation that I am a perma bear on everything. I am not! I will continue to share such themes with folks in my capacity as a personal journal, but as you can see 10-12 names in a week or less, I have to raise the barrier to entry. I feel it is very low right now.
To subscribe, I am making available the largest sale this week for June below. This discount does not expire after 12 months and will be offered only once in June.
The next session contains my levels for NQ, Emini S&P500, and some other levels like in TSLA, AAPL, NVDA, and a very special name (totally unexpected)!