Daily Plan 8.23.23
Markets Close Lower in Line with Expectations - What’s Next?
Good evening, readers!
Let’s kick off this Newsletter with a recap of yesterday's session.
Yesterday's Session and Stock Movements: First and foremost, placing our short levels above the closing price of yesterday's session was done in anticipation of a selloff. However, events didn't align with my expectations. While we did break through these levels overnight (OVN) in what seemed to be a strong rally, we couldn't maintain the momentum. Early into the cash session, I sent out on X an update that aligned with the levels (exclusive) on both Emini and Nasdaq. This update projected the gap would close to the downside. Indeed, shortly after the open, both indices lowered as expected. Throughout the session, we observed a grind lower, with significant volume just below the short levels.
Gold had a tumultuous start, sharply gapping down to the short target at 1916 before reversing back to the short level. Meanwhile, oil remained relatively stable throughout the day, presenting limited opportunities for both buying and selling. It's worth noting the impending major event this week alongside Nvidia's earnings. Nvidia, for instance, rallied up to my weekly target of 480 before plummeting 30 handles to the LOD (Low of Day). What stood out in this target? A High Volume Node (HVN) that was glaringly apparent. Last week, I had underscored specific lows, and it was evident that this price point would be revisited. As selling ensued, this created a selling opportunity in Advanced Micro Devices (AMD), which has been on a downward trajectory for over two weeks. Despite my bullish stance on Nvidia, I've consistently recommended shorting AMD, which once again proved accurate.
Tesla managed to find support at the 224 level, sparking a rally up to 235, both levels mentioned in Flow State #40. Google, another heavyweight, began the session with a rally, edging closer to my 135 target—a potential hit in the days to come. I've covered numerous other stocks, and I would urge readers to stay updated with every post. Each provides insights on potent stocks, regardless of market direction.
There's no replacement for tools like Orderflow when pinpointing key levels, be it through the DOM or Volume Profile. Other tools, in this context, are less effective. It's essential to remember the wide-spread panic triggered by the breaking of the EMAs. Nevertheless, we remained ahead with our analysis, predicting last week's bounce and this week's continuation. Many stocks still showcase strength and will only waver if they break last week's lows. Today's sell-off was largely subdued, especially in major tech stocks on my radar. Lilly (LLY), however, surged to a new high of 556, a prediction I made when it was in the 450s ahead of its earnings release. Furthermore, I had highlighted its potential to showcase a parabolic movement above 500, much like Nvidia—a prediction that came to fruition.
Bonds have garnered significant attention, impacting markets significantly—a trend I foresaw even before it was widely recognized. Bonds ranging from the 2-year to the 30-year are all moving upwards, displaying unambiguous strength. Warning signs of a forthcoming market catalyst are emerging, and I believe there's merit to Burry's assertions.
It's crucial to approach the market one session at a time, filtering out market noise and distractions, just as we did last Friday and once again today with our accurate call on filling the gap up. On another note, rather than trying to pinpoint the exact timing of market shifts, it's prudent to await a solid rally and then purchase LEAP Puts on high-volatility stocks like Nvidia, Tesla, and Meta. Heating Oil is another commodity to monitor closely. Given its positioning on the COT Report, a bullish sentiment is evident. Today's sustained lows suggest an impending spike above the 3.22 highs from earlier this month. As we approach the Jackson Hole event later this week, I'll provide another comprehensive analysis and plan for that session.
Moving on, I'll share the remainder of the plan and my insights for tomorrow's session, coupled with pertinent levels.
Sector Performance (Previous Session)
XLU - Utilities: Utilities, represented by the XLU, were the only sector to post a gain today, rising by 0.25%. This indicates that utilities were among the market's few bright spots in today's session.
XLRE - Real Estate: The real estate sector held up relatively well with the XLRE decreasing by only 0.14%. This suggests that real estate stocks faced milder challenges compared to other sectors.
XLV - Health Care: Health care, under the XLV, had a slight decline of 0.22%. While the sector didn't see growth, its minimal decline showcases its resilience in today's market landscape.
XLP - Consumer Staples: The XLP, which tracks the consumer staples sector, saw a drop of 0.28%. This decline indicates that even defensive stocks like staples faced some headwinds today.
XLC - Communications: Communications experienced a downtick, with the XLC retreating by 0.30%. This may hint at cautious sentiment among investors in this space.
XLY - Consumer Discretionary: Representing the consumer discretionary sector, the XLY declined by 0.55%. This points towards a reduced consumer appetite for non-essential goods and services.
XLB - Materials: Materials faced challenges in today's market as the XLB dipped by 0.53%. This could hint at concerns surrounding the sector's near-term prospects.
XLI - Industrial: The industrial sector experienced a decrease with the XLI down by 0.54%. Investors might be expressing caution or profit-taking behavior in the industrial stocks.
XLE - Energy: Energy stocks struggled today, with the XLE declining by 0.98%. This sector, close to the bottom of today's performance list, suggests pronounced concerns affecting energy companies.
XLK - Technology: The technology sector had a challenging day, with the XLK down by 0.94%. This downturn hints at investor skepticism or challenges specific to tech stocks.
XLF - Financials: Financial stocks bore the brunt of today's negative momentum, with the XLF facing the sharpest decline of 1.00%. Whether due to concerns about interest rates or broader economic factors, financials were the hardest hit among today's sectors.