Weekly Plan 8.20.23
It is Over!
Hey folks -
From an event perspective, it is going to be a very light week; however Jackson Hole symposium as well as Powell comments next week could be market moving.
In particular, I think after the Jackson Hole symposium concludes, we could see the real move begin the week after next.
This is a slightly abridged plan as we enter the dog days of Summer. I am going to share few thoughts and some of my ideas which I think could benefit after conclusion of the Jackson Hole.
Let me first start with my view on Crypto. I like to be transparent about every idea and thought process I have shared as part of my personal journal and this is no different.
Crypto had a rough week.
Bitcoin tumbled down to 25000 and change. Many other crypto currencies were ravaged, and crypto miners like MARA were not spared.
I want to reiterate my view on the whole crypto space. First off, I am not a big fan of Bitcoin. I think the whole notion that Bitcoin is equivalent to the crypto industry is a misplaced notion. It is akin to saying that MySpace of yesteryears was the defacto social media. It was not!
After the demise of MySpace, the real leaders in that industry emerged. So whether Bitcoin lives or perishes, I believe Crypto is here to stay. And flourish.
However, my call on Crypto is not a short term call. This is a decade + viewpoint on Crypto. If I invest 1% of my account on Crypto, I fully accept this may go to 0. However, if Crypto thrives, I am expecting my 1% to be some day up a 100X.
Several winners and losers will be born in the crypto industry. It is just not about mining or coins. I think the real action is going to be in payments, in P2P networks, in infrastructure, computing and ofcourse, mining.
As far as the bitcoin goes, I think its main issue is that it is very concentrated in hands of the few. This could be a good thing in some aspects, however when you have a large whale very publicly flaunt their positions, they have targets on their backs.
This is why I was a bear on MSTR at 450 and this week it came very close to 300. Shedding about a 3rd of its value in a week!
I think once these actors get taken out, we could have a clear runway for takeoff. Like to go all in on one cryptocurrency, like Bitcoin, is such a one dimensional thought process, I can not even begin to understand the amateurishness of it. I understand when some one wants to go all in on one stock - because that company may have some strong USP, an impenetrable MOAT, a visionary leader, like Steve Jobs, but I can not comprehend going all in on one commodity. I can not. And I think due to this reason, if such actors are punished severely then so be it.
Personally, I think some of the good levels in Bitcoin are around 12000.
Since I believe as of 2023, Bitcoin is a perfect money laundering tool, it may have appeal for certain large scale operators who engage in such unlawful conduct. Due to this very reason, I think there is a floor under Bitcoin around 12000 dollars, it may even double or triple if that level is tested again IMO.
This belief will remain true until I see a competing product to Bitcoin. I do not see one right now, therefore I think BTC has a support going into some of these levels near 12000, if we ever get there.
My personal exposure to Crypto is via an ETF. It was shared by me first around 9 bucks before it went to almost 25. Since then it has faded down to 17 dollars. Again, as I said, my view point is about 10 years. I am not necessarily worried about weekly or monthly action. However, since its major holdings right now are the miners, their fate as of 2023 is tied to Bitcoin. This may change few years down the road. However in the present moment, they are quite sensitive to the moves in Bitcoin though not to the same degree as a BITO or a MSTR which in my view are far more likely to go to 0 than a more balanced ETF like FDIG. This is not to say they can not all go to 0. They can. After more than 2 decades watching these markets, IF there is one thing I am very certain about- anything can go to 0. Some things, like Oil, can even trade below 0 under the right conditions ;)
Speaking of the oil
Oil had an awesome week. First off I was bearish on weekly time frames in oil last week and had expected a test of 77-79.
This was indeed the case but then we rallied sharply from the lows to close the week above 81 again. I personally think this was good action in Oil and this keeps the narrative for higher energy costs for a longer time alive in my view. Especially on Friday, I shared here in the chat room that I expected Oil support to come in near 80 and we saw about a 125 pip rally in Oil from that level.
Levels/Bias for next week
Primary levels and bias for the upcoming week have been influenced by the action in Oil as well as the action in the Bonds.
From a news front, on Sunday night the Chinese data about loan rates is important one. I think lower financing rates out of China could be supportive of the stocks in the US going into next week. Please read the whole section first.
The US bonds themselves have been on a downtrend in recent weeks, and the equities action for most part has followed the trajectory of the bonds.
TLT is a good proxy for the US bonds and we saw good volume come into TLT last week with an OK session on Friday where it did not make new lows.
I would personally think if the bleeding in the bonds can be stopped - even if temporarily, this could help lift the overall risk averse tone.
Look, forget about what the FED does, what the GDP or FOMC do, if these rates stay here at such elevated levels, a system built on debt like the US, could come crashing down. I think this is what will happen eventually which will bring my lower levels into play again. But for now, let us dial back to the immediate time frame of next week.
SO yes, I think if this 92 level holds on TLT, and this 80 level holds on Oil, this combination in my view is a risk-on combo.
I do want to stress upon the important of IF statements. These IF statements are quite important. This is how I am measuring the momentum day to day. I refer back to my weekly IF statements as I have prepared the weekly roadmap using these related markets.
On the upside, I see resistance come in at 100 for TLT and at 84 for Oil (WTI).
With this said, for next week 4532/4318 will be the key level for me for next week or few. Updates may be shared with daily plans. Weekly close on Friday was near 4380.
Scenario 1: With related markets like Bonds (TLT) and Oil supported, and Emini S&P500 could find support near 4318 if tested. If supported, we could retest 4450-4470 area. If 4470 is overcome in next week or so, we could still retest 4532 IMO.
Scenario 2: The bears on S&P500 side need to over come this 4318 support and break down in TLT below 90-92 for bearish gravy train going into 4170/4210.
Longer term, I think this TLT 90 level is very important. Ideally, I do not think this level will give way. I think if TLT were to give up 90, this could lead to very unpleasant side effects for risk on markets every where, not just the US.
If I was a betting man, I think this FED is badly trapped right now. I think they have this charade going on about how they are doing QT and all and inflation has been coming down. This has worked for them so far, however, if Oil prices do not come down under 70 (now 80), I think we could be looking at an endemic 4% inflation in the US.
Since every one else follows the US, this could mean 5-6% inflation in Canada, UK etc for several years.
This is an extremely serious issue as Western consumers are loaded to the teeth with debt. In such a case, if FED were serious about inflation, they will have to start selling bonds. They keep saying they have started QT. This is actually not true.
They have simply stopped buying bonds. The real QT begins the day they aggressively start selling these bonds and treasuries on their books. Once this process begins, I think we will see a nice sell off in the stocks which will vindicate my view that I have now held since start of 2022 when I became a bear at 4800. In case of small caps, I was a bear in 2021.
From a timing perspective, this is not a short term call. It has taken decades to build this up and it may take a few years to wind it all down.
If I am thinking ahead, I think if we come close to 90 but do not break it, this presents enough drama for the SPY to begin trading some of my lower support levels near 360. I will be sharing these levels with subscribers if and when we get there. Make sure you have subscribed to me so you do not miss the email and turn on the notifications for me on the chat so you do not miss those for intraday time frames either.
I think same way every one was a bull at 4600, we will probably see everyone become too bearish when we do retest some of these lower levels. I will fade that.
I think in an election year, it will be tough for these markets to collapse. And I think it will be even tougher for them to collapse under a divided Congress. This is why I want to be opportunistic and add a large size to my longer term IRA if and when these levels do trade.
So far if you are with me, and have not fallen sleep, please like, share and subscribe. More shares automatically mean more levels from me as no one likes to work in a vacuum and this tells me folks are still up and have not fallen sleep yet.
These levels and context are mostly for a week or two out. These are not necessarily intraday levels though they can work well on many days. For intraday levels, daily plan and chat room is the best place.
Some other ideas in personal journal
TGT
I had shared Target 125 as support and for most part it has done well off that support to now close at 130.
I think if we hold this support, TGT remains attractive for me and I think it could retest 150 area.
BUD
Budweiser was another victim of its own marketing choices. I was a bear on it around 62 before it collapsed.
I shared 50 as support and it is now trading near 55. I think if 50 holds, we could see 62-65 retested on BUD.
In my own scanners, I am not seeing a whole lot of interesting stuff.
Part of the reason is that the general market has been downtrending. If the general market remains soft, it shrinks the universe of ideas available to the upside.
On the downside, I have had several good ideas but I think the best one was TSLA.
I had a bearish target of 210 which we came within 2 points of this Friday.
For bullish ideas, one of the below has to happen in my own personal system -
The general market is on uptrend
The general market is oversold quite a bit on longer time frames
I do not think either one of is true right now so I am not finding a lot of great ideas. This is a feature, not a bug, of the markets where they shut off to new ideas for a while and there may be 2-3 months when there are some really great ideas in a year.
TSLA
In TSLA I have been negative last couple of weeks and my most recent target was met on the downside.
I think TSLA should remain pressure on retracements. I think if it were to retrace to 230-240 level, it could see sellers reemerge.
Longer term, I would like to see it retest its lows from 2022.
One of the factors that has helped TSLA is the whole AI hype with its FSD. If you look at TSLA as a software company, it has some tailwinds which otherwise are not there if you think of TSLA just as a car company.
In my own research, a strictly consumer discretionary or a cyclical company like a car maker could have some substantial problems going into a recession.
I personally think we are going to be in a recession soon if we are not in one already.
The way they measure these recessions has been changed to fit a particular narrative but that does not escape the reality. If you look at TSLA used car prices, they are down 30-40% on the YOY basis. It is easy to say TSLA has pricing flexibility which is true as they do not have any intermediary dealers.
However, when you look at these used car prices being down almost half on the year, this questions their margins and pricing power in current Econ climate. Overall they have a good story and could grow in future but for now they will be one of my weaker mega caps in the S&P500 index. I will perk up if they are closer to 100 than 200 or 300, once the FED begins cutting rates aggressively.
Momentum
As I said earlier, good names are far and few in these conditions, however in what is out there, I like this materials supplier for housing products. I think this has a 40% upside if this key level holds.