Summary: Looking to build short positions on any market strength, but market isn’t looking very strong here.
News of Israel striking back at Iran triggered brief panic moves overnight. It lasted about 20 minutes. NQ stopped at the biggest support area. the next one is 1000 points lower.
I was anticipating a plunge, but didn’t expect one on war news.
Energy
Crude bounced off my support line, went through the $84 area resistance, and came back down to test support at $81 again.
I remain bearish on crude. I closed my expiring XLE 0.00%↑ puts yesterday, along with my weekly puts in SMH 0.00%↑ acquired on Monday.
Resistance is around $96.50, the gap is around $88 and strong support is in the low $80s.
This is a trade that is still firmly on my radar for several reasons, but the largest is an anti-narrative trade. Sometimes the market is totally wrong because it is either running on sentiment fumes (chip stocks today, commodities in spring 2008) or because the market is focused on the wrong news or has the wrong timeframe.
Going back to the Russian invasion of Ukraine, production cuts by OPEC have produced price spikes that fade because they’re chasing falling demand. The global economy has been weakening. Until this changes, crude oil has a bearish bias. Middle East news flow is the same old story of the bark being louder than the bite. Until that changes, fade price spikes. Finally, the inflation narrative is well known and those who believe it the most are in energy. Even if they prove correct longer-term, hiccups in the narrative will produce price flushes.
MetaGoogle
To keep a bear position in the market, I added May puts on XLC 0.00%↑.
This has been outperforming a bit.
Relative to QQQ 0.00%↑ it has been basing:
However, the chart looks like a double top:
META 0.00%↑ is the largest holding in the sector. It and Google are more than 40 percent, and Netflix added on takes the three above 50 percent.
SMH will deliver bigger losses, but considering the cost of options, XLC is a cheaper way of getting at a META meltdown that few are looking for right here.
Forex
The SlopeChart hasn’t updated yet, but USDMXN took out all resistance overnight in a move to 18.15, a low-to-high rally of 6.7 percent.
Chips
I posted this chart by itself earlier this morning: SMH 0.00%↑ was right at the gap area premarket. It is back in now. If the day is red or green for Nasdaq, it’ll come down to this one.
Apple
Still more important than Nvidia in terms of weight in the major indexes, sitting on final support. Earnings are two weeks away.
Final chart: the December Fed funds contract.