Daily Plan 8.25.23
Markets Close Lower in Line with Expectations - What’s Next?
Good evening, readers!
Let's begin this newsletter by revisiting the highlights from yesterday's trading session.
Nvidia has undeniably been the star of the show for the past few months. Its performance has been nothing short of remarkable. The eagerly awaited earnings not only met our expectations but exceeded them, with a rally that reached 500 and then extended further to 520. Moreover, I made a significant prediction regarding the 21 June 2024 Swing Puts, which saw a staggering 30-handle drop in just one session. What a fantastic way to commence this trade, especially with the added advantage of a solid cushion as we approach the Jackson Hole event tomorrow. For those of you in the know, this event is greatly anticipated and is expected to introduce considerable market volatility. Today, the Nasdaq plunged by over 400 handles in anticipation, marking a total tech meltdown. We're observing industry titans being significantly challenged, and the dynamism this brings is electrifying for those who both long and short the market. Notably, Meta and Tesla took a downturn after I highlighted them, alongside Nvidia, as potential LEAP Put swing candidates.
I'd like to emphasize that both indices almost reached their long targets overnight. This was somewhat in line with my expectations of some extension following the Nvidia earnings report. However, since this happened when many were likely away from their screens, I'll focus this recap primarily on the cash session's events.
The Nasdaq's performance today truly surpassed my expectations, plunging over 200 handles beyond my initial projection. This reinforces my frequent advice to retain runners even after achieving base position targets. By holding onto just one lot of the Nasdaq from its short level to its low today, you could have profited by $8,000. Today, the bulls were unquestionably dominated, which aligns with the cautions I previously relayed regarding the potential for substantial selling. Furthermore, I ensured everyone was on track with today's short setups by providing an update in the Substack Chat.
Switching our focus to the Emini, it started the day with a promising rise, but that momentum was short-lived, leading to a downfall below the designated short level. As of writing this, we've seen a drop of over 70 handles from the 4451 short level. Holding onto one lot of Emini would have garnered a gain of $3,500. While this might seem modest in comparison to the Nasdaq, it's an anticipated outcome given Nvidia's influence on the tech sector's major downfall today.
The closing figures for the indices reveal a crucial support stance. While Emini remains slightly above its trend pivot, Nasdaq has unfortunately breached below its corresponding marker. For keen insights into tomorrow's trading session, ensure you're subscribed so you don't miss the comprehensive analysis in the sections that follow.
Sector Performance (Previous Session)
XLB - Materials: Materials faced almost no decline in today's market, with the XLB decreasing by just 0.07%. This suggests a relative stability in sentiment surrounding the sector's prospects compared to other sectors.
XLE - Energy: Energy stocks experienced a minimal setback, with the XLE declining by 0.22%. Despite the decrease, energy remains one of the better-performing sectors of the session.
XLF - Financials: The financial sector took a minor hit today, with the XLF falling by 0.44%. Whether influenced by shifting interest rates or other economic factors, financials faced less adversity than many other sectors.
XLP - Consumer Staples: Representing the consumer staples sector, the XLP registered a drop of 0.63%. Even though defensive stocks like staples faced challenges today, their decline was moderate in comparison to other sectors.
XLU - Utilities: Utilities, tracked by the XLU, posted a decline of 0.66%. This indicates a slight wane in confidence among investors in the utilities space for today's market.
XLV - Health Care: Health care stocks faced challenges, with the XLV down by 0.76%. The downturn showcases potential uncertainties or cautious sentiment specific to health care stocks in this session.
XLRE - Real Estate: The real estate sector encountered headwinds, with the XLRE slipping by 0.87%. This points towards a more challenging landscape for real estate stocks today.
XLI - Industrial: Industrial stocks took a hit, with the XLI falling by 1.04%. This downturn reflects concerns or diminishing confidence among investors in the industrial stocks.
XLY - Consumer Discretionary: Representing the consumer discretionary sector, the XLY decreased significantly by 2.18%. This hints at a potential reduced consumer appetite for non-essential goods and services.
XLC - Communications: Communications struggled in today's market, with the XLC plummeting by 2.38%. The notable decline showcases decreased investor sentiment in the communications sector.
XLK - Technology: The technology sector was today's hardest-hit area, with the XLK tumbling by a considerable 3.27%. This significant drop indicates challenges or a shift in investor sentiment against tech stocks, making it the least performing sector of the session.