March Update: Opportunity has (likely) arrived
MANY Risks. MANY Opportunities. Which side will you choose?
Note: The market is becoming more intertwined with the political environment. Everything discussed is just my opinion.
Traders & Investors -
I’m going to offer my thoughts on the outlook. First just a quick recap, we had a couple themes this week discussed inside our community in my Whatsapp notes.
On Monday (due to me experiencing the rippling effects of last Friday’s massive selloff), I talked about my fear that the short-term theme had turned into a Sell the Rip situation. That pre-market gains were unreliable (they were indeed unreliable this week) and that I was on watch for rallies to fade. My primary market (NASDAQ/NQ) reversed every single rally attempt on Monday, on Tuesday, on Wednesday, and on Thursday. It brings me NO joy to make bearish commentary like this. It was a test of resolve as a long-focused trader.
Mid-week we caught a VERY big overnight bounce on Trip.com (an idea I discussed as a Strong Buy for various timeframes from ST to LT). TCOM was a savior in an otherwise brutal week.
On Thursday, I shared in a WhatsApp voice note that in the near term “it is FAR too late to be bearish and that a relief bounce was coming.”
On Friday, we got the bounce I was looking for (hey, at least we made 0 attempt to hedge or short the HOLE which would have been ridiculous). This being said, to manage expectations, all Friday’s rally did was revisit the MID-range of Thursday.
So, overall a very tough 6 day stretch from last Friday, when this selloff originated.
Friday’s session was very interesting to me. The market is trying to digest geopolitics extremely quickly and I do think the Trump meeting with Zelensky had something to do with the rally. I think the meeting shows the following conclusions:
That the U.S. will stop providing further aid to fund the conflict. Without the U.S., the war is as good as over. If Zelensky signed the deal, the war would have cease-fired. If he DIDNT sign the deal (which he VERY foolishly decided not to), the war is STILL over. Friday’s meeting implies to me that geopolitical tensions have just come DOWN.
Notice how Trump wants to stop wars from happening. Due to the U.S. adopting a “America first” philosophy, I interpret this as Trump not willing to back Taiwan in the same way Biden did. If my interpretation is correct, this cuts off a MASSIVE tail risk for the market and that opens up the door for U.S. & China to compete on economics BUT NOT over the Taiwan strait.
In both instances, if we quantify Uncertainty as countable factors (1, 2, 3) - I believe they went Down, not Up.
Please note, this is purely my opinion. I’m sharing my interpretation of the situation. As with subjective matters, only time will tell whether this view plays out.
What I will do now is provide my own roadmap of how I think about the situation in a more market focused way.
Let’s look at NASDAQ-100 (NQ) and breakdown what caused this -2000 point negative sequence from last Friday’s peak to this Friday’s trough. Nasdaq is my primary market. S&P 500 and Hang Seng are my close secondary markets.
This keeps it as objective as possible in an emotional market. Let’s look here.
Timeline of Events (The below are my personal estimates)
Last Friday: Options Expiration
Contributed -550-600 Points to the downside in NQ
Monday-Tuesday: Further Semiconductor Export Curbs
Contributed -500-550 Points to the downside in NQ
Thursday-Friday (Intraday Low): NVDA Earnings Downside Push
Contributed -600-700 points on the downside in NQ
Friday (Mid-Day to Close): Televised Oval office meeting with Trump & Zelensky where deal talks broke down
Contributed +250 Points to the Upside in NQ
If we think about the point-decline attribution, roughly 25% of the selloff came from Positioning Unwind (Options Expiration last Friday), 50% came from Fundamental Factors such as Export Curbs and NVDA Earnings and the remaining 25% came from General Volatility in the current direction (which was Down).
In the coming days, I will be watching the market very carefully as I do believe we this latest selloff has the potential to retrace roughly 40-50% of its recent losses.
It will be difficult to recover the full selloff right away because of the Semiconductor Export Curbs, which are mathematically such a big component of Nasdaq. Because that’s a policy that won’t quickly change, even though I am Bull, it is difficult for me to make a call that we see all-time highs in the short-term.
I believe the market will find a way within 30 days to reverse the Options Expiration selloff and also partially the NVDA selloff. Options Expiration was an event to rugpull a bunch of Call Options, make them go far out of the money, assign people a ton of assigned shares from selling puts (to stress test them), and reset the Option Chain for new participants going forward.
As long as we don’t get any NEW tariffs, this brings me to believe that NQ should retest 21300-21350 (at least) at some point in March. This would translate into roughly 515-517 on QQQ ETF. QQQ ETF is now roughly 508.
In other words, I see roughly 350-450 points of high-probability upside on NQ from here at 20900. Even IF we go lower, I still see touching 21300-21350 on NQ happening for the reasons discussed above.
So, am I saying that this is the EXACT low and we rally back to all time highs right away, immediately, and in 1-Direction UP? No lol. No, please don’t interpret it that way. There will be a lot of chop.
But within the messy chop, I DO see us recovering HALF of the recent NASDAQ QQQ ETF losses.
Do NOT even think about all-time highs until this first stage is met.
And that, is a very very good start. We have to be reasonable with expectations. The more reasonable we are, the more our positioning is rational and therefore has higher probability to work.
From there, I’ll evaluate the situation further and come to more conclusions then.
Though the environment is unclear, based on today’s context, I would say it was time last Thursday when I mentioned to get your Shopping List ready on tactical timeframes and have the intention to continue scaling in.
What if I am wrong? Well then I’m wrong. This is the market. Things are inherently uncertainty. No one gets it right all the time. And the risk is mine. My win rate is 65%.
What if I’m right? Well, well. Then the risk is also mine, and I stand to make something substantial here by Summer and I wanted to share my thinking with you just to help out during this period of massive uncertainty out of goodwill.
Cool? Things WILL get better. That, I can be certain. Okay now, I wish you all a great weekend. Keep a calm mind. I will be here to help.
I will update Members on my views every day Monday-Thursday in my pre-market notes on Whatsapp.
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