Daily Plan 8.30.23
Markets Trend Higher Directly Off Orderflow Supports
A fuse was lit in the market when both Emini and Nasdaq touched their long levels right at the session's opening. Both immediately began their upward trend, and the surge came promptly at 10 am with the JOLTS release. Make sure to revisit yesterday's plan, as I anticipated a strong continuation while above these long levels. This prediction materialized, leading to significant rallies in both Emini and Nasdaq. Neither index fell below its level, both soaring straight through my targets: 4465 for ES and 15204 for NQ.
Emini rallied a total of 72 handles, reaching a high of 4509 by the close. Nasdaq, on the other hand, climbed by 380 handles to hit a peak of 15430. As impressive as these metrics are, this trend was evident across all stocks mentioned yesterday. Here are the results for the rest of the plan:
Google: +6 handles
Advanced Micro Devices: +5 handles
Meta: +11 handles
Apple: +5 handles
Nvidia: +26 handles
Microsoft: +6 handles
Tesla: +20 handles
Amazon: +2 handles
Contracts for all these stocks moved by multiple hundreds of percentages, with Nvidia and Tesla charting over 1,000% runs. Gold exceeded my expectations, rallying +21 handles after its third bounce from the 1945 level. Oil also surpassed my target, registering a +140 pip rally above its level.
This underscores that orderflow successfully navigated the upward move, steering clear of the short side entirely today. As volatility surges, we might witness another dynamic session tomorrow, be it a continuation of today's gains or a retrace. To access this guidance, you need to be a subscriber, ensuring you receive all pertinent levels and my in-depth daily analysis.
Regarding Flow State #41, which was posted on Sunday, Adobe has risen by over 20 handles this week, aligning with my bullish thesis. Texas Instruments increased by +5 handles, Deere by +13 handles, and Broadcom by +50 handles. With so many winners this week, it's challenging to keep count!
As volatility is just beginning to pick up, we might see even stronger movements to the upside, provided we maintain above the long levels daily. Some might view this as obvious, but these long levels are strategically placed to capitalize on key support, which, if breached, could trigger a significant pullback.
JOLTS experienced a notable decrease from the previous report, landing well below expectations. The ensuing question is: if we encounter another wave of layoffs, how will the market react? Many seem to overlook that I advocated for a reduction in JOLTS to curtail spending. Earnings indicated a weaker consumer sentiment, but since expectations were so low this quarter, surpassing them was hardly a surprise. Recall my earnings predictions, which were accurate nearly 80% of the time this quarter.
Tomorrow, we have key GDP reports releasing, and I believe these announcements could reintroduce volatility. Recent releases have been projecting higher inflation, yet we've seen no tangible evidence of it. Any surge in CPI will appear significant due to the YoY stalling, making any upward trend seem monumental compared to the last two years. Rates have been effective, but a significant CPI print could catch many off guard.
It's worth noting that in the last three months, JOLTS data has seen its most significant decline ever. This trend may worsen, especially from the Federal Reserve's perspective, which aims to maintain elevated rates. Ultimately, consumer behavior will determine the end of the spending era; banks continue to lend, and borrowers persist in borrowing. If you perceive this as a bubble, timing its burst could prove detrimental, so basing decisions on release data has kept us on the long side for an extended period before shifting bias. Act like the Federal Reserve: be data-driven. More precisely, heed the Fed's objectives to gauge if progress is underway. Currently, the progress is evident and devoid of any negative indicators. However, circumstances can change drastically in a week, but rest assured, we'll be prepared. Until then, savor this robust rally.
Sector Performance (Previous Session)
XLY - Consumer Discretionary: Gaining by +2.37%, this sector reflects the expenditure of households on non-essential items, leading the pack in performance.
XLK - Technology: With a rise of +2.26%, this sector showcases the strength of tech companies and their continued impact on modern markets.
XLC - Communications: At +1.88%, the communications sector, which includes media and telecom, indicates a robust demand for connectivity and content.
XLB - Materials: Gaining +1.78%, this sector emphasizes industries like chemicals, metals, and building materials, highlighting an increased demand in infrastructure projects.
XLRE - Real Estate: With a +1.29% increase, this sector underscores the value of properties, REITs, and housing markets in the current economy.
XLI - Industrial: Rising by +0.90%, this sector showcases the production activity and capabilities, signaling increased manufacturing and distribution efforts.
XLF - Financials: At +0.91%, this sector represents banking, insurance, and investment entities, indicating a steady financial environment.
XLV - Health Care: The +0.63% gain shows the dynamics of the healthcare industry, from pharmaceuticals to medical devices.
XLP - Consumer Staples: Gaining +0.27%, this sector, representing essential household items, suggests a stable demand for necessities.
XLE - Energy: With a slight uptick of +0.20%, this sector comprises oil, gas, and renewable energy companies, highlighting the nuanced shifts in energy consumption.
XLU - Utilities: Growing by +0.13%, this essential services sector emphasizes our consistent dependence on electricity, water, and gas.