Flow State #90
Welcome back everyone!
A large number of new subscribers have joined after witnessing the entire sell-off from 5600. There is plenty to discuss, and this post will not be driven by fear. Instead, it will focus strictly on the current Federal policy and how to navigate these conditions. While my perspective on the current sell-off was accurate, it was the volume profile that provided the setups to capitalize on.
First, I will cover the recent movements observed in the indices. Then, I will move on to discuss the thesis for the upcoming week and tomorrow regarding the E-mini and Nasdaq futures.
SPX, NDX, DIA, IWM
In the last two trading sessions, the market has experienced a massive outflow. The IWM is leading the decline, down 6.7%, followed by the NDX down 4.83%, the SPX down 3.57%, and the DIA down 3.23%.
There is plenty of panic, with many funds suggesting that rate cuts are coming much earlier than the Federal Reserve intends. While this may be true, the data still needs to confirm it. One of the main indicators, unemployment, only showed a 0.2% uptick, putting it at 4.3% in the last release. This aligns with the Fed’s policy and is a positive sign for rates to begin to decrease. The Fed also wants to avoid a significant slowdown in economic activity, which is currently happening. GDP remains strong, providing confidence that a rate cut is not imminent. Inflation is not an immediate concern, but there is a dilemma regarding a potential surge in inflation once the Fed cuts rates. Indices are still near all-time highs, so there is nothing to worry about at this moment.
We could see a snowball effect with investors rushing to sell, but in my opinion, this is unlikely. Looking back to the last press conference by the Fed, the market responded positively, and everything seemed fine. The shift occurred when Japan hiked interest rates after keeping them at lows for over ten years. Massive funds are using the low interest rates to support carry trades. I won’t delve deeply into this, as there is currently plenty of coverage on it. It’s important to understand that macroeconomic factors will not guide intraday or weekly trades as much as people might think. Simply put, volume profile is all that matters for being positioned to capitalize on these moves. This is exactly how we have remained on the right side of the sell-off since 5600.
Below, I will cover what is setting up for tomorrow’s session and this week in both the E-mini and Nasdaq futures. This analysis will provide critical insights to help navigate the current market conditions effectively.