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Thursday, March 28, 2024

Testy Tuesday – Nasdaq 6,750 or Bust Edition

Here come those tears again

6,750 is the 25% line on the Nasdaq and we've been here a few times and the bulls were very excited to buy the dip at 6,650, as that's where we popped in early March but, as I noted to our Members in yesterday's Live Chat Room, we're simply repeating a pattern that was supposed to give us an up and down day yesterday that ended flat and today we should be up 30 points on the S&P and tomorrow 25 more and then we crash back to where we started to finish the week.

Can the market really be that programmed?  It will be interesting to see if the news and data actually matter or if we're simply doomed to repeat the behavior we observed from Feb 22nd-28th after two weeks of mirroring the behavior from Feb 5th-21st (see yesterday's morning report).  There's a fine line between being locked in a range and being trapped in a market that is being driven by trading bots.     

When the markets are thinly traded, the Bots do dominate the trading and, if no one has a solid reason to re-program them, then they are going to keep trading the same way, over and over again until someone breaks the cycle.  According to Yahoo, the average volume of the S&P ETF (SPY) is 120M shares a day, but here's how it's been trading for the past week:

Date Open High Low Close* Adj Close** Volume
Apr 23, 2018 267.26 267.89 265.35 266.57 266.57 60,358,900
Apr 20, 2018 268.81 269.06 265.61 266.61 266.61 99,953,100
Apr 19, 2018 269.65 269.88 267.72 268.89 268.89 77,655,900
Apr 18, 2018 270.69 271.30 269.87 270.39 270.39 57,303,900
Apr 17, 2018 269.33 270.87 268.75 270.19 270.19 64,682,000
Apr 16, 2018 267.00 268.20 266.07 267.33 267.33 63,405,300

The up days have been HALF of a "normal" trading day and any volume at all seems to cause a sell-off – that's something to take note of and we'll watch that closely and see if the pattern holds up.   It means if we're "rallying" on low volume, it can all be unwound at a moment's notice (Thurday is when it's scheduled to unwind) and now "THEY" will have to manufacture some news to fit the market's behavior or people might start getting the feeling the whole thing is fixed

Image result for icarus stock marketWe have Durable Goods on Thursday Morning, perhaps that will be a miss.  Facebook (FB) reports earning Wednesday evening and they might say something disappointing that sends the tech sector plunging.  Google (GOOGL) had good earnings yesterday but a large portion of the good part ($3Bn) was due to their investment in Uber adding $3.40/share, boosting implied earnings by 33% on phantom gains.  That's why GOOGL isn't flying higher on those "great" earnings but it has been a "great" excuse to run the Nasdaq back to 6,700 and we'll see if they can even get to 6,750 this week before Icaras' wings begin to melt and we fall back to Earth on Thursday.

A warning sign would be if we struggle to get back to 6,750 at all so watch out for resistance on the /NQ Futures at 6,700, where it's a tempting short and that's lined up with 24,550 on the Dow (/YM), 2,685 on the S&P (/ES) and 1,575 on the Russell (/RTY) and, if 3 of the indexes fail their line then you can short the laggard with tight stops if any of them go back over their lines.  Oil (/CL) is a great short too at $69 this morning as it's more likely to go down than up and $70 is almost certain to be rejected so if you keep a tight stop and short at $69, $69.50 and 2x at $70, you can lose $100 (0.10) and $100 and make it all up with a 10-cent drop from $70 – so plenty of ways to win!  

As you can see, we barely touched $69.50 last week and got a nice $2 drop (thanks Trump!), which we talked about in Friday Morning's Report so it's just the same game plan we had last week that led to $2,000 per contract gains.  Speaking of gains, Coffee (/KCN8) blasted back to $120 this morning so congrats to our Webinar viewers who followed that one to the moon for $1,500 per contract gains – DON'T BE GREEDY!

Speaking of greed, our Greencoins (GRE) not only popped over a penny but have now popped over 2 pennies (0.02) for a MASSIVE 50x gain for the year and it is very greedy not to take 10% off the table when you get insane gains like this (as noted when we entered) as 10% of a 50x move means you are taking 5x profit off the table and you STILL have 90% of your coins to let run.  

Frankly, it may have been our sensible profit-taking at one penny (25x) that had been holding it back before but it seems everyone is done selling and now new buyers are coming in and, hopefully, we're on the way to $1 but I feel a lot better getting 2.5x off the table at 0.01 and 5x off the table at 0.02 and STILL 80% of our coins are left to run – so we're just playing with house money now and we can laugh about the reversals and PATIENTLY wait for more people to come in and play with us.  

Keep in mind that Cryptocurrencies are not investments, they are just silly but if silly makes money, we're happy to play.  We set up a massive win/win for our Members back on Nov 29th when GRE was 0.000220 and we promised to accept them as payment for annual Memberships at 0.000440 so the worst case for our Members was getting a 50% discount on their Memberships and, as it turns out, this is the best case as the GreenCoins are already 0.025 so it's up 56 times so any GRE our Members had left have paid for the next decade of Memberships and the GreenCoins we collected are up 25 times, so we win as well, getting 25 years of Membership payments while offering a 50% discount!  

THAT is how you hedge and play the markets.   It was a simple premise and we felt strongly it was a good deal and we reiterated the offer (at 2x) this quarter, as GRE was still ridiculously cheap, dragged down by BitCoin's problems.  Going forwars, we still think we're about at the point where 10,000 Bitcoins paid for 2 pizzas 8 years ago and, while we'd love to see $10,000 – we'll be thrilled to see $1 – up 2,272x from our November purchase!  

Meanwhile, we're watching and waiting to see how the markets play out in this first full week of earnings season.

The papers lie there helplessly

In a pile outside the door

I've tried and tried

But I just can't remember what they're for

The world outside is tugging

Like a beggar at my sleeve

Oh, that's much too old a story to believe – Jackson Browne

 

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