The market absolutely plunged on Monday morning, only to almost completely recover (or, in the case of the NQ, turn green!) by the end of the day. No surprise, right? You might assume I’d be pretty bummed. Nope! I actually love markets like this. I’m a swing trader, after all, and my desired holding period is weeks, not minutes. I don’t have a single option with fewer than 10 weeks left on it. So I’m not worried.
What I find exhilarating about this market is that it IS breaking down, and it keeps offering opportunities to get in at good prices. There are progressively walls of resistance being constructed, brick by brick. Tomorrow morning, for example, it’s entirely possible that Powell says things that the market doesn’t like, and we sell off hard, perhaps even taking out Monday’s lows. I don’t need that to happen, but it certainly could.
This intraday view of the NQ makes the same point: the ability to sell off hardly has been clearly demonstrated, and now it has to wheeze itself higher. It sure beats the holy hell out of dealing with lifetime highs all the time, which by definition HAVE no overhead supply.
As I mentioned, I took a cue from TNR today and bitched my second-largest position, my March IWM puts. (My largest position is my MSCI puts, which I never intended to be my largest, but the damn thing keeps getting more valuable). I really like the look of small caps:
In recent weeks, the market has been pulling the same cute routine: climbing, then selling off briefly in a panic, and then climbing yet again. The levels of support are quite plain. But if and when they break, oh-ho-ho, it could get very interesting very fast. Watch those supporting trendlines!
In some instances, we’ve already got the breaks desired. Take the NASDAQ Composite (please!) It is exactly what I want to see: a trend failure and then a rally JUST beneath the broken trendline. Oh, NASDAQ Composite: will you be my bride?
As we disco our way toward a revival of 1970s inflation, know this: I will be dressed to kill.