4/23 Daily Market Note: Massive Rebound since Sunday Night as Planned. Is the bottom in?
Worst Over?
Note: This note has personal journaling thoughts and shares perspective on how I view the market. This note is informally written.
Hey Everyone -
We are putting in a massive green session on top of yesterday’s advance ahead of FAAMG earnings. Is this the calm before the storm? We’ll find out soon enough.
There was significant bearishness heading into this past weekend and there was even more bearish positioning heading into this week with short interest reported to be higher than it was at the equity market pivot bottom in October 2023.
Long story short, the crowd got max long at the end of Q1 and went max short as the Fear & Greed index turned Fearful last week.
Before I go further, I need to make a couple distinctions on mindset based on timeframe.
Firstly, let’s review our planning. We were actively looking for bullish positioning since Sunday evening. You can read more about that here.
In addition, ahead of time, I sent out a very key message on 4/18 (link here) that we were approaching very oversold levels that we should be hunting for Longs as we approached RSI 30.
We reached RSI 30 on QQQ and SPY on Friday 4/19.
Now I want to make a very important distinction:
For swing/long-term investment players: Our goal is to capture a reasonable part of any pivot/reversal/trend move by looking for swing pivots. This goal is better accomplished by looking at massive oversold readings on high timeframes like RSI, Major Support, and other confluences. The last 2 days has seen NQ put in 600+ points and ES put in 100+ points of recovery. However, please realize that this move is still counter-trend in nature to the downtrend we’ve seen since Q2.
For intraday players: Our goal is purely to capture a small slice of the move on a repeated basis. The key word here is “small slice” and this is because certain scalpers typically do so on leverage. One small move in our favor is enough to make our day.
Allow me to give an example so that members understand what I’m doing. On today, I shared with Members the following note in the premarket: that “if NQ can regroup around 17340-17370, we can go for a 30-60 point advance towards 17400+”
Same story for ES - that we could maybe go up 10-15+ points from 5050 to 5065.
NQ is $20 per point. ES is $50 per point. The micro editions - MNQ/MES - are 1/10th of the size of the full contract. We can see that achieving conservative targets makes a good day rather quickly. For smaller players, please use Simulation Accounts for a considerable amount of time or small MES/MNQ contracts. MES is $5 per point. MNQ is $2 per point.
We can see as of this note that NQ (and ES) has literally gone parabolic on intraday terms to touch 17650, skyrocketing nearly 250+ points above my target of 17400.
If my intention is scalping, do I care that I missed such a big move? Not really. I just care that I am green. Yes I know, my positioning could have seen a +5000-7000 green day from today alone had I held on the full position. However, I want to say with transparency that I am not at that level to be able to manage a massive leveraged position, sit through a massive gain until the very end, and sell it at the very top.
While I aspire to be able to do that someday, I am not able to do that yet today. Humbly speaking, That is currently beyond my pay grade and experience level.
I caught a VERY small sliver of today’s advance as prescribed in my note. And for me, I was happy with it and that was it.
This is because I try to find small windows of bullish sequences (if available) day-in, day out. Red index day. Green index day. Flat index day. Doesn’t matter. Same process.
I wanted to write this blurb to ensure that folks understand my mindset when it comes to scalping and that even though the market skyrocketed well past my target, I did what I needed to do, I do not regret closing early, and I will continue to do what I need to do on a daily basis to keep being green.
Do not FOMO. There are setups literally every single day of the week if you are a scalper.
And if you are a swing trader/longer-term player, my note from last week should have been very additive/helpful to your strategy.
Given that I do not believe the downtrend has yet to play its full hand, there will be PLENTY of opportunity to buy-in lower later on.
Other good news includes our call that PDD would see a swing bottom at 110. It hasn’t traded a tick beneath this key level, and it saw ~130 earlier today.
In my longer term account, I closed my PDD Call Option for a 23%+ gain. It had at one point saw a drawdown of -35%. But as I often keep saying with China, things can turn dramatically quickly.
Given the large massive rally that we’ve seen in a 48 hour period, I need to watch the market for digestion before issuing new bullish opinions.
My next update will be in WhatsApp tomorrow in the pre-market. Stay tuned. Make sure to subscribe below to get all my latest updates.
As for where the markets are definitively going next, my honest answer will always be: I don’t know. I can give a lean and that’s it. My lean is that if the markets want to move higher, there’s more counter-trend upside but we haven’t seen the next leg of the selling yet if we zoom out. But that’s purely just a lean.
All I can do is react appropriately to what I see in front of me based on risk/reward. And right now, after a massive up move on ES/NQ, we need to be a bit more careful about new bullish entries.
That’s about all I can say for now. See you tomorrow.
My ES / NQ ideas are always shared in our pre-market plan before the opening bell. Join us below. More stock-selection strategy as well when appropriate.
-Larry
Disclaimer: None of this is financial advice. I am sharing my opinion/perspective on markets, but none of this is tailored advice.