Daily Plan 3/23/23
Credit is a privilege
Good morning traders!
Another great session behind us where we navigated through an event ultimately ending up on the right side.
Above 4017 yesterday I was Bullish and until FOMC, this price held and was never revisited.
The moment we spiked on 25bps news, I warned in telegram that I would look to be taking off longs here up at 4050s and hold some for a pop higher. Shortly after we popped to a new high into 4060s before again selling back down near 4030s FOMC open. From here I have already gave my thoughts on 25bps as this was predicted in yesterdays plan. See below.
Now I did speak on 25bps inside the plan but I think yesterdays thumbnail shows exactly what my thoughts were.
Ones that want to read the context, here you go:
My prediction for todays decision will be 25bps hike.
How I will trade will be solely based on levels.
All I can see for today is a selloff and even if we move up to my 4120s long target, I will be ready to deploy swing shorts. There will need to be more context on this as the decision is key for next few sessions.
Upon selling my main levels on downside will be 3951 by EOD & 3880 by EOW.So now we know price went our way for the session but what was said that caused this sell?
The moment we began to sell off from highs was when Nick Timiraos from WSJ was called on during the Q&A. He asked how the terminal rate forecast has changed and is it justified with this brand new development from the banking crisis.
Powell’s answer to keep it simple was we are currently uncertain if this will work and we will have to wait and see how the data reacts. Which is why he has changed his perspective on terminal rate but we have one major problem. Tightening credit conditions is the same as hiking rates. When consumers are cutoff on credit to purchase goods this will bring a massive hit to demand. As much as this is what we want, prices will go right back up when conditions return.
What I believe is going on is there is a new floor being set for prices and this is why we have not seen a massive sweep to new lows. Inflation is here to stay! Think back in time how cheap goods were and how they have gone up 10X in price in todays time. That is what’s going on now and to justify this thesis the consumers have not let up on spending for these prices. Data reveals consumers are showing strength but with hike in rates and tighter credit conditions. I think we will see major changes in the consumer spending and credit reports in the near future. Factors are now shifting in this bear market and only way we make legs lower from here will be another crisis or war. At these times I do not see any reasons for a selloff to new lows which is why I said prices are balanced here inside 3800-3900s.
Looking ahead
No events to be noted for todays session so we will be absorbing all of yesterdays trades along with information given in FOMC.
More times than not we will balance the next session after a sell so I will be looking for this with possibilities of holding runners to lower 3900s.
Todays session will have both short and long opportunities with my main focus on the short side today as I want to have runners on if we crack lows. By this I mean if we sell at the open to 3975 and bounce to 4000, the lows I’m referring to are intraday lows so 3975.
Approaching todays session you may look for both sides of the trade so long at low end of balance and short at upper end. As we move into the session and see how stocks are playing out, we will have a much better idea of balance will hold for the session or we may get some direction. Overnight stocks are robust, Nasdaq trending higher as Tech was on a tear.
Before jumping into the Daily Plan levels make sure to note the value areas for the week and see where we are currently.
Make sure to also read this as this is detrimental to understanding what I do, Volume Profile is the soul of my trading.
Nearly every stock is at the swing level that was provided in the substack last week, go check it out: