Please watch the video if you can. I want you to understand why we probably are getting close to a pivotal moment in market action this year.
What I am going to show you, particularly those of you who hate looking at VWAP control point lines, is probably going to anger you, but I do it with purpose. I didn’t put it in the video because most would just shut it off.
Since November of 2022, we really have only traveled between 10737.50 and basically (with a tiny exception) traveled between there but never fully closing ABOVE 13330.75 through April 14, 2023, with MNQM23. If you like all the hourly daily weekly and monthly VWAP control point lines, all we have done is fallen through and climbed back into the rafters of VWAP lines during that time.
Every big up and down move has been on news considered dovish or hawkish in terms of future Fed policy, and the action has virtually nothing to do with earnings or underlying economic fundamentals. The question for most professional investors and hedge funds is only “Is the free money to borrow back into the casino” or “Has our free money been taken away”? That is basically all it is. In my opinion, this is not exactly rocket science to figure out.
What do Fibonacci patterns have to allow on where we are? Let’s have a look.
If you click on a copy of that image and expand it, the one thing you will see is that the 38.2% retracement is right at 13177. If we cannot remain above the line with any consistency, that would be bearish according to H.M. Gartley, as it portends weakness in price action that could lead to a selloff, and with any force of symmetry (at least price symmetry) you would either see targets (as shown by both either swing high of somewhere between 7681 or at worst 6961). The reason I took the liberty of using those numbers was that those were swing highs that did not sustain themselves, and because it was very near the 13330.75 VWAP line that continues to hold thus far. If you have followed my analysis, and it is the analysis I have used to trade successfully with, you know that I often use the swing highs and lows that structurally match price and do not perfectly match Fibonacci levels. That seems to work quite well, particularly when you set price targets in trading that fall just short of those Fibonacci levels so that I can let the market take me out of the trade at a profit. That eliminates the “top tick” greed of getting that last pip. I want to trade and scale higher every day, so I pocket the money and run. It is entirely possible from a price structure standpoint for those targets to be hit. That is why one needs to keep an eye out for them.
Just so you understand that I can see both sides of this (as a pivot would likely result in a pretty strong impulse rally if it hits, we could easily see highs along those upper VWAP lines around 14269.50 and 15263. Anything and everything is possible going forward, as the nincompoops in Washington are capable of anything depending on the political winds, which is all those people care about.
Which way could this go? Well, it all depends on who you listen to. The ultimate defender of woke ESG policy, Larry Fink ( whom Fox commentators seem ready to drool over) thinks rate hikes are coming and that it could be more than most think.
If rates rise, credit tightening will continue and there will be overall pressure on regional banks in terms of liquidity and which would be bearish for stocks and stock futures. What Larry, the “genteel retirement champion” as presented by Fox, also doesn’t tell you is that states displeased with ESG regulations that hurt state business are also pulling funds away from Blackrock, and the combination of interest rate policy and liquidation of assets will put state and institutional pensions at risk. I am sure Larry was able to control his tendency to sweat under pressure in a TV interview, but those possibilities are crossing his mind. They should probably be crossing your mind also.
Oilprice dot com also has an interesting take on the Fed pivot. discussing the longer-term repercussions of such monetary policy and interest rate decision policy.
Mish Shedlock sees pretty clearly the dilemma the Federal Reserve is in and does a great job of letting you see the data as it stands. He thinks pivoting lower is likely a bad idea ( as I do ) but I think he shows how difficult it is for any policymaker to take major steps at the current time to cut rates.
How am I dealing with this going forward? I am going to continue to watch movements in that hour to the 15-minute timeframe and look for breakouts in either direction that are backed with solid volume moves, and I will cut trades off if they run slightly against me, since reverse volume spikes are the current activity of the day. That policy allowed me to have the best week so far this year last week. I am not going to make cowardly quick jumps in and out, as only a couple of times in a morning session are their strong moves made with a solid volume thrust. It is only at those times that I will trade those moves but with the idea of breaking even or winning. If no money is made on that day, no harm no foul. I will continue to scale the next day, as there will be opportunities there. I want you also to note that MNQM23 volume this month so far has been weak (something I mentioned in the video). Every individual, institutional, and hedge fund trader is on edge, waiting for something to happen. That adds to the pressure of policy decision-making.
If you are long only in these markets, you MUST HEDGE. I can no more tell you which way this market will move forward at this time. All I can confidently tell you is that Federal Reserve, U.S. Treasury, and Congressional leaders need to get off of their butts and decide on economic, fiscal, and monetary policy, or everything invested in bonds, equity, and most real estate will be difficult if not impossible to invest in.
That is it for me today. I will be back next week to see how things unfold for MNQM23. Have a happy, prosperous, and productive week this week!
