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Good morning friends and officially Happy New Year!
We finally put 2023 behind us and the bulls are definitely still feeling buzzed about the incredible rally the markets were able to achieve in a very short period of time, although this morning they are getting some cold water splashed in their faces with /ES futures down almost 40 handles!! As I mentioned last Friday.....
"The bulls have had their way since the October 27th lows and the markets remain in a euphoric, nothing can ever go wrong state, and that makes me very nervous. That being said, the buyers seem fatigued to me and whether or not we see a pull back today or sometime next week, that is my short term thesis....I will look to sell longs and get more biased to the short side."
Well we got the liquidation break we thought might happen on Friday and I have sold some long positions (LUV, BA) and have added a few shorts (NVDA, CMG) but as always, "one day does not make a trend."
We are now seeing further evidence of downside movement and if more sellers do start stepping in today during regular trading hours, we will start to see "value" build lower and maybe even a VPOC above us!! Please note that I am not saying this is the definitive top and the markets cannot go higher as I still carry some longs in the portfolio (DLTR, DG, FL, CHWY), but this massive rally has been due for a correction and this feels really good from our pullback call last Friday. Big question now is...will we repeat 2022?!?! Remember, the first trading day of 2022 was the high and never looked back the entire year. The longs that are working I will continue to hold (on a very tight leash), but the overstretched, extended names I will look to short with more confirmation.
Quick note, with the liquidation break we had on Friday, we have taken out 2 VPOC's below us and we are now flirting with 4781.50 this morning. By the end of the day we will have 11 or still 12 below us and as mentioned last week......."This is getting VERY stretched!"
By the way, the reason for my short call last week was not just some "feeling" or "hope" that the markets would go down. As pointed out, I saw the poor and weak highs Wednesday overnight, Thursday and Thursday Overnight (meaning buyers were getting fatigued) and the number of VPOC's below us (14 below us.....getting very stretched) were major signals to me so I need everyone to know that I am paying attention to market data, not just some magic 8 ball!
/ES upside target is 4830-35
downside target is 4800-05
/NQ upside target is 17,080-090
downside target is 16,950-960
/RTY upside target is 2060-62
downside target is 2027-29
Futures are sharply lower this morning at time of writing with overnight inventory net short. We are outside of yesterdays range on a true gap so there is a good chance we correct the overnight inventory a bit (meaning we go higher first) but I will be looking to short on bounces. If we open and go straight down then that is the most bearish scenario!
Economic Data:
PMI Manufacturing @ 9:45
Construction Spending @ 10:00
More Color.......
/ES - Key Demand from last week is between $$4780-4800 ( Daily Trend-line) with
Supply above that at $4830-$4850. Small Gap up over weekend to $4815 as its finding
support. Ideally I would like to play a gap and go or break and retest playing long.
SPY - Gap up finding support at $475 with Key Supply and HOD at $478-$476. Demand
below that is at $469- 471 above the trendline on the Daily chart.
- Gap and Go with price holding $475 at the open playing long targeting $477 .1
- If price breaks below that I would like to play a break and retest from demand
targeting $473 first then $474
- If price breaks below $469 and holds I would like to play a break and retest at
$468 playing short targeting old demand at $465-464
SPX - Consolidating above Demand at $4750-4765 : I would ideally like to see price
hold above at the open , bouncing from $4770 long targeting supply at $4780
- If price breaks below $4748 it can leave room for Short targeting $4730
- If price holds above $4760 it can leave room for another new HOD
/NQ - Selling off from Demand at $17050 -$17030 : Demand below that at $16940-60
QQQ - Demand flipped to Supply at $409-$410.50 - If price holds above $410 I would
like to play a break and retest long targeting Supply above that at $412. But if price falls
below $409 and holds I would like to play a pull back for PUTS targeting $407.88
- Buyers trapped at the open where Demand flipped back to Supply ( Short )
- Sell off to $407 with price holding above $406 ( Long)
- Price hold above $410 flipping Supply Back to Demand
AMD - Selling off to Demand at $146 : if price holds above I would like to [play a break
and rest long targeting $147.44 first then $148.20
TSLA - Consolidating inside Demand at $248-250 after making LOD at $247.43
GOOGL- Consolidating above Demand at $138-$140
AAPL- Sell off overnight / pre market LOD : I'm only interested in Demand flipping to
supply at $191 holding to play short targeting another new LOD
Have a great trading day and everyone here at MEC wishes you a Safe, Happy and Healthy New Year!
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