I will now proceed to describe what happened yesterday on MNQH22 in the eyes of institutional traders yesterday.
“Hey, Joe, did you hear that non-food and non-energy components of inflation was 0.2% year-over-year? That is the lowest in over a year!” Everyone, including Joe, rushed to buy things on the bullish news, and then they actually started thinking, “but isn’t ALL THE INFLATION in the food and energy sectors, which is what the average investor is worried about?” When they fired a few brain cells, they remember they’d been fooled by the bullishness and then started to hit the sell button, and we basically ended up where we were yesterday before trading began.
Nothing has really changed. Most halfway-informed institutional investors know that new restrictions on Russian oil kick in early next year and that will allow Russian oil to be sold on the black market while the US suffers from shortages of its own making through bans on domestic drilling. Most US institutions know that nitrogen fertilizer bans the likes of what is happening in Europe will happen here in 2023, leading to food shortages at some point.
The charts you see above are hourly charts for MNQH23, and if you notice the green line, it represents the VWAP line from 12/9/2022. With all the noise and excitement, we haven’t gone anywhere much.
If we can remain above 11975, there is a chance, particularly with a dovish Fed announcement regarding slower rate hikes (a bad move in my opinion), we could still see another run at 12330, the euphoria high yesterday, and over the next couple of days reach from 12461.50 to even up to 12628 (remember the weekly resistance at the trend line around 12667 is still there.
If rates are tightened more, then we could see the old low at 11645.25 retested, and potentially another correction into 11744.50 and 11547.25. The thing to note is that Fibonacci retracement lines on the hourly chart have strong confluence with VWAP lines, so the road up and down the “building with the bombed out floors” could be bumpy.
Do I care which way it goes? No. I had to take a phone call early yesterday and missed the up-move, but I didn’t worry about it. I waited for price momentum and volume to shift to the downside, and I shorted MNQH23 for a nice profit.
I don’t think anyone else knows what will happen either. Yesterday’s manic depressive market moves seem to foretell if nothing else more confusion and bureaucratic verbal bovine scat to come. You came for the voices, but you will be forced to stay for the smell also.
Things look neutral to slightly bearish early this morning, but anything and everything could and probably will change by 1400 EST today.
More will be coming soon.
MBA Mortgage Applications
7:00 AM ET
Import and Export Prices
8:30 AM ET
Atlanta Fed Business Inflation Expectations
10:00 AM ET
EIA Petroleum Status Report
10:30 AM ET
4-Month Bill Auction
11:30 AM ET
FOMC Announcement
2:00 PM ET
Fed Chair Press Conference
2:30 PM ET