Good morning X ☕️

It's been a big week for stocks. To help you stay up to date here is yesterday's market article as a thread.

Enjoy!

What is the #1 Most Important Factor of successful trading?

Do you know what single component of your trading plan will have more impact on results than anything else?

🔹It’s not how smart you are.

🔹It’s not your chart reading skills or some “magic” indicator

🔹It’s not the quality of your fundamental research

🔹It’s not a “Holy Grail” setup.

🔹It’s not how often you’re right or wrong.

✅ It’s how much you make when you’re right and how much you lose when you’re wrong.

That’s it.

💯 Proper position sizing is the most critical factor of successful, profitable trading. 💯

No setup has a 100% win/loss ratio. No system works in all market types.

As traders, we will be wrong. And we will be wrong more often than we are right.

Not many genuinely have a winning percentage of greater than 50%.

Outcomes can vary greatly even in multiple series of trades with identical results.

No one demonstrated that better than Van Tharp and his “marble game.”

@VanTharpInst

"The game works as follows.

🔵 I have a bag of ten marbles.

🔵 Seven marbles are 1R losers.

🔵 One is a 5R loser.

🔵 Two are 10R winners.

The marbles are randomly drawn out of the bag (and replaced) for 30 trades."

"Everyone gets the same trades. After starting with $100,000 the final values can easily range from zero to well over a million dollars.

The only variables important to this game are people’s individual psychology and their position sizing method."

"Your position sizing method produces huge variability in your performance."

-The Definitive Guide to Position Sizing by Van Tharp page 103

Weekend Market Review December 11, 2022

A quick thread to help you prepare for the week.

❓What are the charts telling you?

❓What is the market waiting for?

❓What is the bullish and bearish case?

$DIA $SPY $QQQ $IWM

We already know the market is waiting on CPI and the Fed so I’ll get straight to the charts.

If you missed that part, read this from Wednesday.

Midweek Market Update

Everything comes in waves

Markets, moods, culture, and fashion all move in waves or cycles. Things are always changing and the outcomes vary immensely. But the changes often occur in patterns.

“History doesn't repeat, but it does rhyme.”

-Seth Klarman

This phenomenon occurs on multiple timelines as well.

Short Cycles

The short-term cycle has been; wait, move, wait, move.

Last week the stock market did mostly nothing, waiting until Jerome Powell made comments that ignited prices and sent them moving higher.

This week feels like waiting again. Prices are down, last week’s rally has been mostly erased and there is a persistent lull signaling the market’s unwillingness to move until a suitable catalyst emerges.

Waiting

The Federal Reserve has been under a “blackout period” and the release of economic data has slowed down. This will soon change.

Moving

Inflation data in the form of the Producer Price Index (PPI) will be announced this Friday, December 9, and Consumer Price Index (CPI) numbers will come out on Tuesday.

Waiting will soon give way to moving.

The Charts

$SPY - Hasn’t failed, but hasn’t yet passed the 3-part test

• Downtrend line

• 200-day moving average

• All-time high anchored VWAP

$QQQ - Couldn’t see the breakout through. But so far hasn’t broken support either.

$IWM - The most vulnerable of the three, failed to break through resistance and is now below near-term support.

$DXY - The US Dollar rallied a bit. But so far it’s staying below recent support/resistance, which means the downtrend is still in place.

$VIX - Volatility jumped from foreseeable levels and so far is slowing down the same way.

Long Cycles

Oil and oil-related stocks have been the “go-to” bullish trade for many this year. However, since the price of a barrel of oil peaked in June, this chart has taken a different character.

This looks like an important spot for oil. Will it find support here at the September pivot low and 38.2% Fibonacci retracement? Or is headed lower?

$USO

Lower looks like the higher probability move. What’s really interesting though is the bigger picture business cycle implications.

@YocumsCharting mentioned this chart to me recently and got thinking back on my @CMTAssociation studies and test prep.

Intermarket analysis was a big part of those studies and this chart was often cited. It is generally thought that the longer-term market cycles of these asset classes move and progress in this order.

Relating that to current prices looks like this. It’s not as neat, but we can clearly see bonds turning down first, followed by stocks, and lastly commodities.

$SPY - stocks - black line

$LQD - bonds - orange line

$GSG - commodities - aqua line

Now bonds and stocks are trying to turn back up. Of course, we don’t yet know if this upturn will survive and continue. And we’re not seeing that move from commodities yet.

But if we do,

• Wouldn’t that suggest that this cycle relationship is playing out as expected?

• And wouldn’t that in turn suggest continued upside for stocks and bonds?

What do you think?

I publish this Midweek Market Update every Wed. on my @SubstackInc

I haven't shared it as a thread before so I'm eager to see how it is received.

If you enjoyed it pls like each tweet and retweet the first.

You can also subscribe here. Thanks!

🟢 Weekend Market Prep 🟢

$SPY is down three weeks in a row and below the June lows. You need to have a plan.

Look here for some ideas. 👇

Hurricane Week!

Fiona hit Puerto Rico and Ian hit Florida. I hope all of you and your families are safe and relatively undamaged. Sadly, I know many are not.

Ian and Fiona weren’t the only storms brewing as the market felt a bit precarious coming into the week.

The indexes tried to hold up but weakened into the close Friday. Not a great end to the week/month/quarter.

Each day that we don’t make upward progress is a day that adds fuel to the bearish fire.

So far the "bounce" story leaves much to be desired. Price action just isn’t supporting it. In fact, the indexes have been in a bearish consolidation pattern, working off the downside extension and allowing the short-term moving averages to catch up (down?) to price.

That looks more like continuation than reversal.

The overall trend is still down. While a bounce would be very welcomed by the bulls, it would still be a counter-trend move and would need to be treated as such.

Here are the charts-

$SPY - not a bullish finish to the week

$QQQ - looking vulnerable

$IWM - A possible bear flag pattern here gives a measured move target of around the $144 price area.

$DXY - The Dollar did come down this week which gave the bulls some hope. So far it hasn’t been enough.

$VIX - Implied volatility is still elevated and may want to go higher still.

The bull and bear case here is very simple.

• Do we break above this potential island bottom, stay above, and move higher?

• Or do we break down from the bearish consolidation and keep going lower?

Flushing into the close on Friday isn’t bullish.

This week watch $SPY 372.30 on the upside. Seems like a tall order.

On the downside, with prices below the June lows, we have to look further for potential support. The pre-covid high in the area of 340 could be a spot.

See this thread for monthly charts and a bigger-picture view.

Monday markets - how'd we start?

Not great. I'll sum it up with just a few charts.

$SPY - apparently people were watching the 200-day MA.

$QQQ back under the trendline

$VIX up

$DXY Dollar up

I've got to agree with @allstarcharts here. A rising Dollar is a headwind for stocks. Without some relief, it will be harder for stocks to get back to highs. After 8 strong days maybe there will be some resistance at recent highs.

Maybe.

Welcome to this week's edition of the Weekend Market Review. 

This week started of a bit shaky as the action on Monday left the $SPY $QQQ and $IWM all putting in potential reversal candles just ahead of some resistance.  

Tuesday gave some follow-through and confirmation of the reversal, but it never felt especially powerful as it was becoming clear that there wouldn't be any serious moves by traders until after the CPI report came out Wednesday morning.  

Good morning Twitter. Weekly chart time.

Some ranges and potential resistance levels coming in view.

Starting w/ the futures

S&P 500

NASDAQ 100

RUSSELL 2000

US DOLLAR

$VIX

$AGG

Bitcoin $BTCUSD

$XLF support/resistance line is the 2007 pre-GFC high

$XLE

$USO

$UGA

$XME

Now some individual names

$AMZN

$AAPL

$TSLA

$AMD

$GOOGL

$MSFT

$NVDA

Stage shift? Or too early to tell?

$PYPL

$DKNG

$SHOP

That's all for now. Off to the soccer fields for a work party.

Let me know what you see. And read my weekly market review here. 👇

It's been a busy week!

Many thanks for all the new follows, retweets, and comments.

Twitter is such a great place full of unique and helpful communities.

#FinTwit and #ChartTwit are the best!

Here are some of my more active tweets the last week or so

July 18, 2022 market review

On July 9th $QQQ was breaking above the downtrend line.