Flow State #37
Welcome back everyone!
Emini and Nasdaq had a tremendous week, and there were many warnings sent when they were at their lows, advising against shorting the market. Additionally, I was very clear about suggesting long positions at the VAL (Value Area Low), which proved to be a strong support for the indices throughout the entire week. Traders had numerous opportunities to participate in this upward move. This scenario serves as a perfect illustration of the importance of sticking with the trend and buying when prices come down to a fair level before rebounding to new highs. As for Gold contracts, they underwent a rollover, causing prices to gap above the VAH (Value Area High), and this level is now acting as a critical support. Maintaining prices above this level will be crucial for further gains, potentially surging above 2000 points during the upcoming week. In the oil market, prices broke above VAH, delivering an impressive rally of 264 pips, which aligns with the warnings sent last week. I have consistently emphasized the possibility of a strong upward move, and we can now witness it as the price is almost reaching the 82 mark.
INTC 0.00%↑ Intel's earnings report proved to be a major win, causing the stock to spike through its previous highs. However, in the case of ROKU 0.00%↑ Roku, the spike was not aligned with my thesis, which came as a surprise. Nevertheless, it is worth noting that the market has been experiencing significant volatility lately, with even less-promising investments, colloquially referred to as "junk," showing some unexpected movements.
META 0.00%↑ Meta's stock broke higher after its earnings report, reaching a new high of up to 328! This impressive surge exceeded the expectations of many, but once again, we stayed on sides.
MSFT 0.00%↑ Microsoft experienced sell early in the week, reaching the trend pivot level, but it quickly rebounded with an impressive 12-handle bounce directly from this crucial support level. The swift recovery suggests strong buying interest at the pivot, indicating potential bullish momentum for the stock. As long as Microsoft and similar stocks stay above their respective pivot points, the outlook remains positive, and there is a likelihood of further upward movement. Pivot levels often act as significant markers in technical analysis, representing critical support or resistance areas that can influence market sentiment and trigger significant price movements.
AAPL 0.00%↑ Apple is currently maintaining its position at highs, and it is expected to report its earnings this week. As long as the stock stays above the key level of 193, the market sentiment favors a potential upward move, possibly breaking above the highly anticipated resistance at 200. I have been predicting this particular move for months now, and it is gratifying to see it coming to fruition. Similar to my accurate calls on Nvidia and AVGO 0.00%↑ Broadcom, this anticipation for Apple's breakthrough is turning into another successful prediction. As the earnings report approaches, investors are closely watching the stock's performance. Positive earnings results and optimistic guidance could act as catalysts to push Apple's stock price higher, especially if it manages to surpass the significant 200 resistance level.
Most of the stocks provided last week closed the week in the green, especially the ones recommended from the scanner. Before moving on to the rest of this week's newsletter, here are a few updates on the stocks mentioned:
MASI 0.00%↑ Masimo adhered to the support level given last week, resulting in a bounce from 111 to 124. This setup appears to have maintained its strength and could continue higher in the coming days.
SIRI 0.00%↑ Sirius XM, on the other hand, broke below a critical order flow support at 7, leading to a significant 50% drop to the 4-handle range. As long as the stock remains below 7, the bias remains bearish, but if it were to break above this level, it would be considered a very bullish signal.
AUR 0.00%↑ Aurora Innovation, once again, bounced off order flow support and managed to reach new highs on Friday, surpassing 3.
ZION 0.00%↑ Zions Bancorporation broke to new highs and managed to hold its ground to close out the week on a positive note.
LVWR 0.00%↑ Livewire maintained its lows and showed signs of strength with any upward moves reaching highs. As long as these lows hold, there's a potential for a spike through the resistance, possibly reaching 15.
In the tech sector, Nvidia bounced early in the week, making a strong push back up to its highs. On the other hand, Advanced Micro Devices was on the weaker side but also saw a bounce off its lows last week. Several tech stocks followed this trend, experiencing bounces off the VAL (Value Area Low) multiple times.
This has become extremely repetitive, as we keep pointing out that all stocks are holding key order flow supports before posting strong rallies through highs, in line with our expectations. This theme has persisted every week and is likely to continue this week as well. The market seems stable, and there are no imminent events that could trigger a crash, except for the potential invasion of Taiwan, which I have been warning about since last year and consider to be a potential sell catalyst.
Recent headlines have highlighted the US sending military aid to Taiwan, while China had previously made claims about invading Taiwan by 2027. The possibility of an invasion is not a matter of if but when it may happen. While we cannot predict the future, readers can equip themselves with tools to navigate the markets on a daily basis. It's important to clarify that pointing out this potential invasion is not an endorsement of war; rather, it's a recognition of the potential impact on the markets.
Now, shifting focus back to this week's events, once again, I do not anticipate any significant fireworks in either direction. Data releases have been relatively limited in terms of volatility impact, as many issues have cleared up according to the FED's assessment. In fact, the FED is now expecting no recession at all. While there may be some headwinds in the future, they are not evident yet, so there is no reason to force a pessimistic outlook. We will continue to analyze data releases on a case-by-case basis, just like the FED, and not assume the worst scenario.
In terms of inflation, it may become a point of concern if CPI (Consumer Price Index) continues to rise, moving further away from the 2% goal. However, for now, we will stay vigilant and avoid making unfounded assumptions. Our approach is to remain data-driven and react accordingly as new information emerges. After all, in the financial world, what truly matters is making profitable decisions, and everything else is secondary.
Real Estate
I believe there is no reason to talk about Real Estate since it aligns with all the data we have seen this year. The indices have rebounded from their lows, indicating a robust market. Consumer spending remains strong, leading to high interest rates that, in turn, drive up home prices. Additionally, regions witnessing an influx of movers are experiencing significant price hikes, further supporting the upward trend in Real Estate.
The Federal Reserve's Dot Plot, forecasting elevated rates until 2025, confirms the central bank's commitment to controlling inflation and ensuring a stable economy. The Fed closely monitors consumer spending habits and is prepared to maintain high rates until any signs of economic vulnerability are addressed. Only a drastic decrease in demand could potentially lead to a downturn in the housing market and broader economy.
Despite the current affordability challenges in Real Estate, buyers are still actively participating, willing to stretch their finances to secure their dream homes. This has led to an increase in credit card usage, highlighting consumers' urgency to enter the market. The resolution of recent bank runs has provided some relief, as banks appear to have managed their exposure to delinquent homeowners efficiently.
However, the potential for inflation to rise again remains a point of concern. Should inflation heat up, it could impact the overall cost of living and, consequently, the housing market. But such an outcome is uncertain at this point, and we must carefully observe economic indicators to assess any potential risks.
While complaining about high prices is valid, true change in the Real Estate market will only occur when consumers actively adapt their behavior. Renting might be a viable alternative for those finding home prices unaffordable. Additionally, the record printing of the USD has injected substantial liquidity into the economy, leading to rising costs across various sectors.
Before moving on I want to point out what indicators I use for my trend following system that will be launching soon.