Newsletter - 03/24/2024
UPCOMING WEEK:
VIP MEMBERS (all times MST):
FREE MEMBERS (all times MST):
At this point, I do not care which direction the market goes. Up. Down. Just not sideways. I am hopeful the market's move upward will be sustained, if for any other reason to get it over with.
We are in dangerous times. But I am congnizant of the fact that sometimes I can be, well, a bit of downer. I will comment more on this later.
Week in Review
From TRowePrice:
"Stocks moved higher for the week, pushing the S&P 500 Index and the Nasdaq Composite to new records, as investors welcomed news that Federal Reserve policymakers were still anticipating three interest rate cuts later in the year. Communication services led the gains along with technology shares. A late rise helped artificial intelligence chipmaker NVIDIA reach a record high on Friday and lift the company’s market capitalization near USD 2.4 trillion. Reports that Apple might partner with Google parent Alphabet in offering generative artificial intelligence tools also boosted sentiment. Health care and real estate shares lagged. Trading this next week is scheduled to end on Thursday in observance of the Good Friday holiday.
The week’s main driver of sentiment appeared to be the Fed’s policy meeting concluding on Wednesday. As was widely anticipated, policymakers left the federal funds rate unchanged, but our traders noted that investors seemed to take heart from the quarterly release of the Fed’s Summary of Economic Projections, which summarizes the outlook of individual committee members. The so-called dot plot showed that the median expectation for three rate cuts in 2024 remain unchanged, while the median expectations for interest rates in 2025 and 2026 went up by less than 25 basis points (0.25 percentage points), or by less than one cut.
Investors also appeared encouraged by Fed Chair Jerome Powell’s post-meeting press conference, where he indicated that he was not overly concerned about the uptick in inflation data in January and February, chalking it up to seasonal noise. Powell also pushed back against worries over potential signs of cracks in the labor market, such as the unexpected increase in the unemployment rate in February."
SECTOR BREAKDOWNS:
SPX and NDX
The SPX set new highs this week on the back of Jay Powell's dovishness. Nothing is going to slow down the markets' animal spirits until it is forced to experience losses.
But remember this: the market almost always trades in a way that will hurt the most participants. The market is currently extremely heavily weighed to the long side.
Therefore, a market move lower is a high probability event, even though I do not know when or what the trigger will be.
The "easy" money has already been to the long side. At some point, someone will decide to take the "easy" trade - to the short side.
NDX:
The NDX also set new highs this week perhaps not with the euphoria led by the Mag 7. The NDX is leading the other indexes and will continue to do so as long as investors keep ignoring the developing cracks in this rally's foundation.
Small caps (RUT) are not participating in the move up. I believe this has to do with asset allocation by professionals. Normally, small caps would be considered a higher risk allocation category. I believe the Bitcoin ETFs have attracted money that would normally flow into small caps.
Getting short the RUT here is valid since this week's close was not above last week's high. But, with the SPX and NDX moving higher, I would be trading against major trends. I am not willing to do that today.
WEEKLY FUND FLOWS:
Money markets saw large outflows relative to other asset classes with stocks benefiting. No other asset classes saw any meaningful change to their flows. While one week changes are not a trend, the above does support why the SPX and NDX are breaking out to new highs. As with any break out, now there needs to be follow-through, this week.
Bitcoin & Miners
BTC had another crazy week with an overnight flash crash driven by the sudden sale of 400 BTC sent the price down to $9000 before quickly recovering.
Weekly confirmed a HCD so I would not be surprised to see BTC test the $60k level.
Any drop would be temporary imo due to massive ongoing demand.
Along with other select miners, IREN price moved strongly up before printing a reversal on the daily.
However, POC is at $4.56 which has been supportive.
Also, price has been respecting the +/- 1 SD channel and there is confluence at the -1 SD level with the Volume Profile lower range and support from late January occurring there also.
CIFR has an excellent week with price testing to the all time closing high of $4.98 on 12/26/2023.
More importantly, CIFR finally broke from being negatively correlated to BTC itself.
CIFR has been one of two of the strongest miners, a trend that I expect to continue as the halving approaches.
BITF has retraced half of the past week's gains and I believe that over the short term we could see price weaken back to the $2 level.
I still remain very bullish on miners since there is no other way that new Bitcoin will enter existence.
I have nothing new to add to what I said last week:
"Let me be blunt: the argument that miners should be sold because their production will be cut in half after the Halving is very short sighted and wrong. Remember that at this point in time, the current miners are THE ONLY WAY TO PRODUCE MORE BITCOIN AT SIZE. If another new miner wants to the enter this space, they will do so without ever having had a chance to mine at a rate pre-Halving.
I believe that the current miners have a significant moat in that they DID mine pre-halving and most have BTC in storage. I think that by the end of 2024 there will be some consolidation amongst the miners which might be an additional bullish catalyst."
For now, since this is an Event Driven trade, I wait and watch. I would only add more if prices got to really stupid levels and we aren't even close yet. YES - the above is from last week. And it will probably be the same next week. And the week after that.
Doom Trades
$KRE
Price is stuck and bouncing between +2SD and -2SD. I am waiting to enter once we get a weekly close below $45.66
$VNQ
-2SD, POC and previous support levels have resulted on an area of confluence from $83.17 to $81.71. If price is able to break lower it would be significant in my opinion because of this confluence.
$BAC:
Another higher high and higher low week.. Until price breaks $31.29 to the downside or breaks through $38.68 to the topside, there is nothing to do but wait.
$TQQQ:
Price is stuck in a four week channel (grey box) and until one direction breaks, there is nothing to do. The topside of the channel is major resistance and I do not think euphoria alone will be able to propel price higher. However, I am watching for a break and close topside (or lower) before establishing a position.
$TLT:
Amazing how price is respecting the +2SD level while bouncing off of the -1SD level. Taking a trade here without having clarity about when (or if) the Fed cuts rates is not the high probability setup I demand. Wait and watch. Watch and learn.
Current Open Positions
$BOWL:
I said last weekend I was looking to close $BOWL. Only the midweek LCD and subsequent strong up days delayed me closing this position. If price closes below $13.08 I am out.
$AROC:
Triggered break level on Thursday, entered on Friday only to see the price close below the break level the same day. Monday is either stick save day or it is liquidation day.
Remember: BREAKS SOMETIMES TAKE MULTIPLE TIMES SO THIS COULD BE A TRADE I REENTER.
Also, I am using some additional momentum data to provide me a higher level of confidence on breaks and one trade does not invalidate that data.
$IONS:
A very bearish candle on Thursday was followed by a confirmed HCD. With price respecting the 1SD channel it has room to fall to the $39 level and must happen this week.
$UPWK:
Price retested the original break level and failed with a HCD confirmed on Friday. Even better, price should drop to the $11.25 level if it continues to respect the 1SD channel.
$BUD:
BUD retested the break level of $59.79 and failed. Probability is high that we take out Thursday's lows.
$OWL:
Monday is stick save day. Either price overcomes the admittedly low probability of taking out the +2SD level or it fails - super simple. However, my momentum data such as volume being higher than average volume of the 50DMA and strong new money flows is why I took this trade.
Closed Positions
$AAP:
I chose to close for a 48% gain on Thursday because the intraday price action was weakening after shooting up at the open. Price ended up closing lower than my exit level so perhaps this will prove to be a wise exit.
$DBX:
With price being stuck and time running out, I had to close this trade for a -42% loss.
Doom Update
DOOM 1: CRE IMPLODES
The above headline is proof of a semi-tinfoil hat theory that I share with a few others: that one of the reasons Treasury will "allow / encourage" smaller banks to fail is because deposits continued to flee large banks.
This is a problem for large banks of their own making. Since they were the primary beneficiaries of the decades long liquidity morphine drip so they chose to take on more risk instead of doing what they said they would: use the liquidity to loan to small and mid-sized businesses.
Because they did this, they ignored building up their deposit base as the second chart shows: small bank reserves are growing while large bank reserves are falling.
The first chart shows that now that the BTFP has ended, the balance is shrinking already.
DOOM 2: JAPAN GOES FULL KAIZEN
Here's my theory: large banks need to quickly reverse the above trends. If smaller banks, conveniently holding a disproportinate amount of CRE debt, are allowed to go under, they will be placed into FDIC receivership. In simple terms, the bad, toxic debt could be removed from the now failed small banks allowing "rescuers" to come in and buy the deposits out of receivership. The "magic" is that that toxic debt can be transferred to the Treasury's balance sheets thereby moving that risk and burden, to the UIS taxpayer. If this sounds criminal, it is. If this sounds like a transfer and destruction of public wealth, it is.
Japanese government bond yields moved lower after the BoJ made a much-anticipated policy shift and exited its negative interest rate policy. The JCB announced that it will set a policy rate target of 0 to 0.1%, up from -0.1%. The BoJ also ended its yield curve control program. However, Governor Kazuo Ueda affirmed that financial conditions would remain accommodative as inflation expectations were still below the 2% target.
What is interesting to me is the second graphic. If the US is the largest recipient of Japanese money bc of their purchases of US Treasuries, a marked decline in the second column would be evident in the future.
The JCB holds over $4 trillion offshore. If that money started to aggressively repatriate back to Japan, it would cause a global liquidity shock and destroy the "carry trade."
A recent Bloomberg survey showed that only 40% of 273 participants believe that Japanese investors will choose to repatriate.
IMO, the "rate increase" of .10% is not large enough to force either the carry trade or repatriation to begin.
DOOM 5: NATO AND RUSSIA
I do not have to explain my complete disdain for what appears to be a blind pursuit of war with Russia. French troops on the ground in Ukraine would be in addition to at least five other countries already there, as "advisors" only - BULLSHIT.
The French have broad support from Eastern European countries as would be expected since the French are proposing to act as "border guards." Exactly how long until there is an incident that "proves" Russia's desire to conquer the world?
China and Russia's veto this week of a cease fire resolution in Ukraine is all about putting the screws to Biden - the last thing any POTUS wants in an election year is rising fuel prices. Especially since we all know what happens if oil goes up vis a vis inflation.
None of the parties want peace. Each of them want continued war, for different reasons.
None of the reasons benefit you and I.
ADJUSTING MY MINDSET:
As you know, one of the things that I constantly try to rid myself of is bias. Whether it be emotional or intellectual bias, I endeavor to mitigate as much of their effect on my trade decisions as possible.
I have been pondering the current market in order to make sure that I am not allowing my own biases to enter my decisions. Surprisingly, I realized that there is a bias that almost all of us are injecting into our trade decisions.
There is constant dialogue concerning how the Fed, Central Banks and those in power are really screwing us. This is true. But along with this dialogue is a frustration that they are doing this and getting away with it. THIS IS BIAS.
Allow me to explain: when surveying the market allowing myself to be frustrated with what's occurring is tainting every decision I make. Instead of evaluating the market from a neutral perspective, I have been allowing my opinion that the parties driving the market are evil, corrupt etc. to corrupt my decision-making process.
There is at some level a stubbornness to accept what is occurring because I do not agree with it. This is not an effective way to process data points because it's hard to trade a direction that I believe is being driven by morally reprehensible decisions made by morally reprehensible people.
Just because I don't think it "should be happening" is preventing me somewhat from fully accepting what IS happening. Not to go all Sun Tzu but simply I am expecting my opponents to be different than they actual are. I am expecting their decisions and the results of their decisions to be different than what is actually happening. This is not intellectually honest and therefore, I must endeavor to view all data accepting the market for exactly what it is, what is occurring right in front of my own eyes.
Now that I am aware of the issue, I am correcting it.
VIDEOS:
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In our second podcast we debate Macro vs Fundamental vs TA analysis and which is best. We look at ENVX, CRWD, ZW, NET, S and PANW as test cases. We also discuss the post FOMC landscape.
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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.