1/11 Daily Market Note: A Complex Session
Highly Complex Session - Facing the Dragon known as NQ
Hi Guys!
So yesterday we talked about the past several market sessions presenting higher prices but declining volume, cumulating into today’s highly complex CPI session.
Let’s quickly discuss the print from Bureau of Labor with the historical inflation chart below.
We can see that while Inflation has collapsed since 2022 into late 2023, we are now entering a period where further deceleration will depend on falling Housing values and calculated-Rents that make up a large weight in the CPI Index. Housing inflation is singlehandedly the largest roadblock to reaching the Fed’s 2% target mandate, which I believe will be hard to meet given the paradox touched upon below.
The great paradox at the moment is that these current high rates in our system today which is designed to slow down economic activity ironically prevent Homeowners from selling their homes, reducing housing inventory and keeping prices artificially high (yes, I think it’s artificial). For this reason, the journey from ~3% inflation to ~2% (the Fed’s target) will be hard-won. It’s achievable but will require more time than the market expects, thus creating today’s extremely volatile and highly complex session.
More important to the market is going to be the upcoming Earnings Season, which I’ll follow closely so make sure to Subscribe and Share. Today’s CPI session resulted in a very large liquidation of recent of late buyers in the market. We are able to witness “liquidation” via the concept of selling velocity (speed), size of the decline (candle size), and a subsequent bounce back. Liquidations are painful because they have flushed out have trapped late longs and late shorts - all at the same time.
In our pre-market today on WhatsApp, I shared an opinion that a first test of 4800-4805 for /ES (proxy of S&P 500) was an intraday opportunity. This resulted in a 15 point scalp opportunity on the first touch (where supports are strongest). Each point on /ES is $50.
Throughout the rest of the session we witnessed highly complex saber-tooth battling between Bullish and Bearish algorithms resulting in a 60-Point range for /ES (S&P 500 Proxy) and a nearly 250-Point range for /NQ (Nasdaq-100 Proxy).
Long-term investors of course do not care about Daily moves, but same-day operators/traders see such range expansion as event-driven opportunities for an intraday setup.
My edge continues to be intermediate-term investing and my long-time readers know that is where I primarily participate. But for personal development, I have an experimental account where I try intraday strategies.
The more I follow experienced Intraday Traders, the more I have sincere deep respect for them. One of my 2024 Goals is to slowly learn this space more, gain exposure, and share my journey along the way.
My personal growth in knowledge represents increased educational benefits for my readers and Community. I thank you for your support.
For the time being, as a Fundamental Research Analyst, my edge is definitely intermediate-term positioning as it allows markets to eventually trade to targets that aligns with my research.
During special events, like today’s CPI setup (a unique special situation), I will sparingly share setups that I believe may be helpful for members who may operate in shorter-timeframes.
Will continue to do strong research in the background and share updates in my next research notes. Have a great weekend.
Earnings season is coming. Fortune awaits those who do their homework.
-Larry