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Things You Should Be Watching and Things You Shouldn't
David Frost
October 13, 2023
⚾PRE GAME WARMUP
A slight pull back during the overnight session. Let's take the downside project first...
Below yesterday's low of 431.23 we’ve got some "unfinished business" around 430.45, which is close to the big phat round number of 430.00. It’s a support zone.
Below on candle closes (staying down there) begins to open the door for the next leg lower taking price to visit 428.70 give or take. Anymore downside action beyond that will be a real time as and if needed posting situation...
The flip side and any bull case begins with getting above 433.70 which opens the door for a push higher, where they would be back in a big "eating time off the clock range from the last couple of days. The door would open for a run back up toward 436.00 and likely a spike above...
Anymore bullish behavior and the numbers will show up in our real time formation...
🎬THINK IN PICTURES
Let’s take a look at an artificial intelligence stock.
In the spirit of “all charts act and react the same way,” we have an interesting situation. Palantir Technologies (PLTR) is a relatively newer stock on the scene having been around since September of 2020. It’s a baby in market terms.
There’s a certain trade we take all the time. The “spike the low and rip it back in the other direction” trade…
Below is a long term monthly chart where we see exactly that pattern emerge…
From a technical perspective, if she can stay above $14.70 and continue closing weekly and monthly above, the target becomes $24.00 per share. That’s a nice big move.
🌗RECYCLE TIN FOIL HAT
It’s Friday the 13th and Saturday October 14th is the Solar Eclipse.
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💣RECKONOMICS
This is an easy one to pick apart…
“They” say CPI rose by 0.4% in September, more than expectations.
Who’s expectations is the first question. What was the methodology they used to come up with the forecast in advance of the number? Have they been correct in their previous forecasts on a regular basis, or not?
Whenever the CPI or any other alphabet soup economic dater points are released, don’t they usually either come in better than or miss expectations? How many times do they come in right on “the number?”
The least likely is to come in right at the [made up] expectations number, which also mean they’re wrong the majority of the time.
Which begs the questions, why are we paying attention to a predictable miss of a number when they can simply just publish the number without guessing in advance. (even though the number is derived from a formula nobody can understand)
The knee jerk reaction from a dater point release is nothing more than a short term market jolt one way or the other. They do create opportunity for traders to take advantage of “the morning trade.” They do not have as much meaning as they would have you believe.
CPI for example contains a basket of goods and services decided by academics and bureaucrats. They don’t necessarily apply directly to everyone, the only thing that matters is whether or not you’re impacted directly based on what you buy.
We don’t all buy the same stuff and therefore it’s a generic reading that has no utility in our daily lives.
But the charade of the eight thirty am dater release continues on. As long as they give us our pound of flesh from a trading perspective, we’ll play along…
🩺PSYCH WARD
Todays piece is about blinders and information overload.
Yesterday in the LIVE room we had a typical scenario. We’re waiting for Mrs. Market to reach the “buy” price for our morning trade opportunity. As she comes down and into the specific level, there was a flood of comments in the chat box outlining exactly why the market would not bounce there and keep going down…
The traders in the room were either watching Tout TV or reading articles outlining a multitude of reasons for the bear case.
During the trade, every one of the comments were put in ice and ignored (by me) on purpose.
None of the macro economic issues matter during the heat of the moment when Mrs. Market happens to be running a test of an important place. Once finished, she normally reverses back in the other direction providing “the trade.”
We do the same basic trade every day. Different numbers, but same concept around the morning rush hour opportunity…
What’s the lesson?
We have to learn how to separate the macro items that were ever present last week, the week before and beyond that.
These items have nothing to do with the intraday activity, the numbers and whether or not Mrs. Market is going to “give you the trade…”
We need to put on blinders, have tunnel vision and focus on the price action and numbers in the moment.
Our job is to find the place Mrs. Market is going to give us the “deal,” and move on…
The rest of the stuff is simply just noise.
🏆MEMBERS SAYIN’
You were right, the afternoon market is not the same as the morning market. Thanks for shining the light. Tom B.
Took 3 trades today, went 3 for 3 and made 13 points in less than 2 hours. I’m calling that good and hanging it up for the day. Thanks as always for your insight. Mike V.
COMMON SENSE MARKET STUFF EVERY DAY
DISCLAIMER STUFF: Nothing found in this communication is financial advice. This newsletter is strictly educational and not intended for or should be thought of as investment advice or a solicitation to buy or sell any assets or to make any financial decisions whatsoever. Please be careful and always do your own homework.