1/17 Daily Market Note: Intraday Flip
Short-term resilience in the context of longer-term distribution
Note: Thank you to Interactive Brokers for being my partner Brokerage where we get 4.8% Yield on Idle Cash which accrues daily.
Hi Everyone,
I’m in Toronto this evening as I prepare for a speaking event on China’s investment landscape. In brief, my core message is that China will continue to be volatile but opportunities are again soon resurfacing.
In last night’s letter, I observed rather large Distribution (selling) activity in the S&P 500’s orderflow data. That led me to believe that a small number of big players are beginning to leave the market - at least temporarily- and stand on the sidelines.
The data followed through with a very adverse session in the Hang Seng shedding another 500 points to reach 15,276 (~400 points away from 2022 and decade lows) and caused a opening flush in the S&P 500 and Nasdaq-100 today to the magnitude of -.7% and -1.25% respectively before recovering.
However, early into today’s session, I noticed that selling pressure began to abate, and larger buy orders began to come through.
With this in mind, I sent a message to our WhatsApp members group with a hypothesis that the “low of day” was possibly in on an intraday basis. Now what I can try to do is on days of significantly higher volatility (like today), I can put my best efforts to attempt to identify if there are any potential pivot points. On normal days, I resort to researching in the background as not every day offers opportunities like today.
In the rest of this note, I will briefly discuss my thinking on China stocks at this juncture and ultra-conservative ways to think about retaining exposure. In future notes, I will share more orderflow data as U.S. markets go through a shakeout phase which could leave some investors off-guard.