4/16 Daily Market Note: Investors attempt to slow down Bearish Momentum
When will the Selling stop?
Hey Everyone -
Heading into today’s session, our internal Community plan from the pre-market note was that the NQ (Nasdaq-100) could make a 30-50 point modest rally extension to 17930-17950 if we broke above 17900.
Although not always possible, for today, I was extra deliberate in providing a target range of upside potential.
We can see below that the two black lines which contain the 17930-17950 area for today’s session were almost precisely the exact areas where they rejected lower.
If we inspect closer, 17930 (lower black line) was the intraday ceiling up until Powell’s speech in the afternoon at 1pm and 17950 (higher black line) represented the other two times that the market tried to push higher Powell’s speech and failed (at least for today).
Where did this failure come from, was it random? Nope. From my note last night as said here: “I expect a first attempt to revisit 18000 to get rejected lower”
Market tried today after Powell’s speech to reclaim the 18000 level for NQ, but was unable to do so.
I do believe it will be more successful on a 2nd/3rd attempt - once it comes.
As part of my intraday scalping work, I was fortunately able to finish very early in the morning and avoid the non-directional chop that produced difficult trading conditions once regular trading hours (RTH) began.
In time, I hope long-term investors inside my Community see the immense value of me providing an intraday daily roadmap of critical areas to watch for the session, before it even begins.
These plans helped me scalp to survive in yesterday 4/15’s bloodbath (recap on Instagram). And it helped me to scalp to find Green in today’s non-directional chop, before the market opened.
My pre-market plan serves as my personal roadmap, and I focus on the exact levels/context I discuss.
Scalping has taken me a long time to learn, and even longer to get somewhat good at it (I consider myself an amateur). It is not an easy endeavor, but for a select group of folks who can eventually master this, I do think the long-term payoff of this skill learned is meaningful. I was essentially forced to learn this skill to survive the malaise in China’s markets (link to educational guide). If it wasn’t for China, I wouldn’t have needed to learn scalping. So, if you enjoy my NQ/ES levels, you can thank the China Bear Market.
I just want to quickly touch on the mindset aspect for scalping and then I’ll talk about market context. Some may think that scalping involves really high volume activity. While that can be true, that’s not my style as that is too time consuming. I pick one to two setups (like from my plan), do it if offered, and then I’m done for the day. The earlier I finish, the better. I don’t try to trade multiple setups during the session. Even if that produces more profits, I’d rather do other things (like DCF modeling, Youtube planning, go to gym/play tennis). In my mind, the goal of scalping is to leverage your time and be time-efficient and to have it serve as an additional source of income (if markets allow) on top of long-term investing gains.
If I can make 600-700 dollars in 30-45 minutes with scalping, that is a high form of leverage on my time. I’m not going to re-risk this to make more for the day. If I have such a good outcome, you can be sure that I am not trading for the rest of the day.
I also do not believe there is a single strategy/system that works in all environments. Folks know that I am a big fan of Put Selling, but as the markets approached the highs and yields went higher, I discussed that selling puts is going to be much more difficult ahead of time. As markets convert from a trending structure to a bearish/choppy structure, I also believed that the more reliable way to find profits is through scalping. As markets find a bottom later on and begin to have a trending structure again, I believe long-term investing/buy & hold positioning produces best results as scalping would truncate the upside potential.
Okay - Onto Market Context
My views from my note last night are unchanged. With earnings season approaching, I’m researching in the background what may be some good opportunities to share with the folks.
One such company, UNH, which we patiently waited for to scale in at 450-460 about a week ago, saw a nice 8% bump in the pre-market today on strong earnings to touch 480.
I believe the list of stocks I shared in last night’s letter will begin to show some colors once earnings season comes through. And I will try to find more good setups as they come.
-Larry
In case folks wonder why I tend to focus on NQ (Nasdaq-100), it’s because I have done a lot of DCF Conclusion Studies on the top weighted names inside the Nasdaq-100, so I have an understanding of the trading ranges of its top stocks. ES is highly correlated with NQ. In my opinion, Knowing NQ direction means you can read ES, given how tech heavy the S&P 500 has become.