Newsletter - 01/21/2024
Starting this week, I will be scalping each morning for a couple of hours before my daily live sessions at noon EST. Join me in the #Futures Scalping run by @Bacon and @Jugg.
Finally!!!
The market has decided which way it wants to probe - topside!
I think we finally get the blow-off top OR the test and fail.
When looking for evidence of major trend changes, I go to the weekly charts as they provide stronger confirmation.
I am not concerned about missing the first 3-4% of a move if I believe the move will be large, which I do expect this down move to be.
But first we get the blow off top and get to see how unrealistic they want to take stocks.
Week in Review
From Schwab:
"Equities end with narrow advance as investors adjust rate cut expectations.
Stocks ended mostly higher over the holiday-shortened week, although the advance was narrow—an equally weighted version of the S&P 500 Index recorded a modest loss—and heavily focused on growth stocks. Information technology stocks outperformed, helped by a rally in semiconductor shares. Artificial intelligence (AI) chip giant NVIDIA was particularly strong, as was rival Advanced Micro Devices (AMD). Markets were closed Monday in observance of the Martin Luther King, Jr., holiday."
Macro
The market took cues this week from the shift in perception about interest rate cuts. While last week the market was all but certain there would be initial cuts in March, or even earlier, expectations were dampened this week with multiple Fed speakers, as well as other Central Bankers, stating that cuts would be delayed, perhaps as late as third quarter of 2024.
You know what my position is: any rate cuts now are only going to worsen the economy when the Fed pivots back to raising rates.
Market participants are grasping for any last bit of positive returns and any data point that appears to support the market going higher will get attention. However, with worsening economic conditions, the effect of any "good news" is becoming shorter and shorter.
As an example of how unbalanced this market it, take a look at the next graphic. The following shows what professionals think will be the primary driver of the markets and intertest rates this year. On both issues, it's the Fed. The Fed's job is NOT to provide cues for the market. The Fed's JOB is to attain their (stoopid) inflation target of 2% and "full" employment, whatever that means.
Effectively, you have a small group of policy makers who are driving the "tone" of the market. Not good.
In fact, as the next graphic shows, market expectations for a rate cut at the March 2024 Fed Meeting dropped to 48% from 77% a week ago. The market is realizing that the Fed may not come in time to rescue the bid support in the markets.
And here is what the market has done with all of that stimulus, and where we are right now.
SPX and NDX Charts and Outlook
The SPX has broken out to new ATH. On a blow off top like this, I am expecting a 3-9% move higher. I believe this will be the final move higher before we start moving lower, significantly.
It's fairly easy to see that the SPX has finally taken out the January 2022 highs.
NDX:
The NDX also broke out this week to the topside, led again by the Magnificent 7.
Fundamentals do not matter at this stage. This is a last chance grab for alpha before the market turns.
The NDX also broke out this week to the topside, led again by the Magnificent 7.
Fundamentals do not matter at this stage. This is a last chance grab for alpha before the market turns.
This is a Sucker Rally
With valuations and fundamentals having been tossed out the window months ago, it is easy to see markets advancing and think that all is good in the investment world. It's not. In fact, when you take a further look beneath the surface of the headline numbers, it's readily apparant that the broader market is not participating in this final death thrust higher.
While the S&P 500 closed at an all time high, the IWM, small caps, remain firmly in a Bear market.
With small caps down 20% from their all time highs, in order for a broad market rally, small caps have a lot of ground to make up just to test the highs.
I do not see that happening in this market cycle.
These are the type of headlines I am seeing now - this is exactly what I have seen before when the market gets out of control, like it is now.
Finally, of the 11 sectors that make up the S&P 500, only one, Technology, is breaking to new highs. You've been warned.
DOOM List Update
DOOM 1: CRE IMPLODES:
This past week the largest banks reported earnings and provided evidence that they are still engaging in a "pretend and delay" strategy. Pretend that they don't have toxic real estate and loans on their books with the hope that if they can delay enough, interest rates will drop and "save" them. That's not going to happen.
The following shows that while large banks cash assets are rising, smaller banks are seening cash flee. This is hugely important because cash assets / deposits are the foundation from which banks can lend on. Seeing smaller banks cash drop only reinforces that smaller banks are getting weaker at the exact time they should not be.
The next chart shows that banks have been tapping the BTFP and NOT the Discount Window due to the arbitrage that exists. There is only one problem: the BTFP is slated to wind down in March and Fed Vice Chair Michael Barr stated a week ago that there was no change to that plan. If and when the BTFP closes, where will banks that need emergency funding get relief?
We will get a good measure this week and next as regional banks report their earnings. As I have been telling Members, I only need one bad report.
And piece of evidence #4,532 that the coming months are NOT going to be very good for the economy or banks or CRE:
DOOM 5: NATO AND RUSSIA ENGAGE DIRECTLY:
A senior NATO official said this week that NATO will be at war with Russia within the next two decades. It's not going to take 20 years:
Doom Trades
$KRE
I added to my $KRE DOOM position this week as I said I would last weekend. The Weekly is in sell and the Daily WAS in sale until Thursday.
However, barring a new bank bailout program by the Fed, I believe that we have seen the highs of Regional Banks.
$BAC:
Last week I said that $BAC was a valid trade and I was prepared to add to the DOOM $BAC trade. I also said that I would be watching for a retrace on the Weekly for entry.
With Friday's LCD, I now have to wait into next week to see if the LCD Daily reversal gets stronger.
$TQQQ:
With the NDX making new ATH, I am using the weekly for a reversal to occur. When that happens, I will be adding to my DOOM $TQQQ position.
$TLT:
My $TLT put trade is doing excellent. I have already scaled 75% of my position for an average return of 72%.
The Week Ahead
Finally the market has decided a direction to test. This coming week we will get to see if tech has the legs to drag the market higher. I don't think it will last long regardless.
I am very encouraged that finally the market is starting to show some segmentation with some sectors struggling while Tech goes higher. This tells me that the effect of the carry trade - short VIX - long equities is having a narrower and narrower effect.
Some areas or stocks that I watching this week:
I am keeping an eye on oil, especially with Seasonality about to become very good.
$GOOGL Seasonality looks good also, although we only have two weeks left. Also, price is very close to taking out ATH.
$MARA is another miner I am thinking of adding when it's the right time. My reasoning is that bullish sector moves are LED by their largest components. $MARA is that company in the BTC miner space.
I am searching for the best way to get short the Chinese market. Banning short selling only makes the drop worse and faster.
Finally, if you want to see what will happen to stocks if the Fed and Treasury announce another stimulus. ALL short thesis will be negated if this happens.
Bitcoin
As I posted on X last week, BTC price is substantially weaker despite the new BTC ETFs trading. However, I expected this as new institutional players pushed price down last week. I still expect price to fall to close the 11/27 gap at 39640.
Money flows into the new BTC ETFs remain higher than what was projected.
Ex GBTC, almost 4 billion flowed into BTC ETFs last week
On the Weekly chart, it is easy to see that the area price is in now was a previous area of consolidation.
45000 to 40000 is now the range. Which way does it go?
Previous times a major new BTC related vehicle was launched, BTC price went down.
NEW FREE TRADE IDEA
I did not do any free trade ideas this week.
UPCOMING WEEK:
VIPS:
Meeting this Sunday at 5pm NYC.
FREE MEMBERS:
Free Session THURS @Noon
Topic: Creating a Trade Plan
CLOSING COMMENTS:
I said this last week in closing: "This next week should prove very consequential regarding market direction" and that's exactly what happened.
Now, we get to see how much more the manipulators have in their tanks. Then the fun really begins.
I scalp different setups than @Bacon and @Juggernaut so I am looking forward to a great atmosphere of an exchange of knowledge.
This is going to be a great week!
My Ultimate Goal
I have shared with a few members what my ultimate goal is for this whole endeavor. I think it would be good for everyone to know.
Beyond simply teaching people how to trade, these are where I want to be in one year:
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100 active traders. Not for collusion but volume often attracts other volume.
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2 to 3 program teachers.
And the final goal?
To create a hedge fund with the top 20-30 traders. I can raise money. I want to show Wall Street how much they suck. I want to show people how it can be done. Change the world.
Paid Memberships:
ALL OF THE LIFETIME VIP MEMBERSHIPS ARE GONE! But I am still running a special on VIP memberships and VIP Trial Memberships have been discounted to $99. VIP Trial memberships give you the chance to try out all the VIP benefits such as real time VIP only trade ideas, VIP only chat where we discuss trade ideas, and a one-on-one meeting with me.
See what others are saying:
MERCH STORE IS OPEN AND LIVE!
Don't forget the Discord live chat is STILL FREE but it will be closing to new members soon. In fact, we have already started removing non-active members.
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In the meantime, come and join us - its the best community out there: Discord.
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Also, be sure to check out the new page for Daytrading on the website, run by the fine gents @BaconTurkeyClub and @Juggernaut. If you ever wanted to learn or just watch two pros daytrade live, they are at it every day here: DiscordFuturesChannel.
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Finally, be sure to check out VampireTrades and his amazing penny stock trades.
Thankyou Family!
theBoss
Nothing above is investment advice nor should it be construed as investment advice. It is offerred for entertainment purposes only. Always consult your advisors before investing any money. Do not "follow" or "mirror" any trade ideas provided. Mr.NotAdvice is not a licensed or registered investment advisor. Do your own research.