Market analysis for March 11th, 2024

Welcome back traders! As we start a new week I'm always reminded the each week provides new opportunities. No matter how your past week went, today we start it all over again. I had a great weekend riding my dirt bike and rock crawling in the jeep with the family. My wifes birthday is the 9th and mine was the 10th so it was a double celebration. Thanks to all who wished us a happy birthday.

Last week was a strong one for us with most of us in the trading room having a nice bump in our net liq but Friday was a big turning point. I run a model portfolio of 20-30 positions so at any given time, no matter what the market is doing I always seem to have a few "hot spots" or trades that are giving be trouble. Lately those have been MSTR and NVDA. We've continued to work them both and our patience was rewarded Friday with some decents sized capital gains realized. Both trades look great right now! One aspect of dynamically trading is, you've got to judge the success or failure of a trade once its DONE. I put a video up last year on our two worst trades. Oil and Bonds. The comments were expected. "You should cut and run". You will get buried in those horrible trades", "Cut your losses now, those are bad setups" etc. Not only did both those trades turn around for us but they ened up bringing in nice profits. MSTR and NVDA are on that same path. It's interesting (but predictable) that the internet trolls love to point out when a setup isn't working but when we turn it into a nice profit they fall silent. I'll repeat...if you are using stop losses as your risk management approach thats great. Its easy to judge the result, but if you dynamic trade as we do, don't judge the trade until its done. Both MSTR and NVDA look set to bring in more profits for us this week.

​Markets continue to look strong (close to ATH's) but toppy. 

Fridays slide plus this mornings slight red on the futures was enough to give us a very slight sell signal. 

Is this enough to signal a change of direction? No. Not even close. We would need a much more sustained (maybe three days in a row) selling pressure and more important, we'd need to break below some of the substantial support levels that have been established. Right now this market looks tired but it's still a tired bull.

I.V. on the SPX is up to 17% this week with a 1.3% expected move. That's a HUGE improvement for us as mainly credit traders. This may give us the ability to get some Theta Fairy trades working again.

The QQQ's with their 1.9% expected move and 23% I.V. continue to provide us better setups. 

The fear and greed index is about where you would expect it to be with this sustained bull run.

The heat map from last weeks price action shows a mixed bag with the market leaders starting to lag. 

Like I said, this bull market looks tired but, it's still a bull market. Most of the market internals are still healthy.

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls climbed by 275K jobs last month, topping analyst expectations of 198K and increasing from the 229K (revised from 353K) jobs added in January. Also, the U.S. February unemployment rate unexpectedly rose to a 2-year high of 3.9%, weaker than expectations of no change at 3.7%. In addition, U.S. average hourly earnings came in at +0.1% m/m and +4.3% y/y in February, weaker than expectations of +0.2% m/m and +4.4% y/y. 
“The report didn’t necessarily amount to an ‘all-clear’ signal for the Fed, but there also didn’t appear to be anything in it that would derail its plan to cut rates,” said Chris Larkin at E*Trade from Morgan Stanley.
Chicago Fed President Austan Goolsbee stated on Friday that he anticipates policymakers will reduce interest rates this year as inflation continues to cool. “As inflation comes down, we would be moving toward less restrictiveness over the course of the year,” Goolsbee said in an interview on Fox News.
Meanwhile, U.S. rate futures have priced in a 3.0% chance of a 25 basis point rate cut at the Fed’s monetary policy committee meeting later this month and a 24.4% probability of a 25 basis point rate cut at the May FOMC meeting.

Our earnings trades have really produced for us the last few weeks. We've still got some potential opportunities coming up for us this week:
On the earnings front, notable companies like Oracle (ORCL), Dollar Tree (DLTR), Lennar (LEN), Adobe (ADBE), Dollar General (DG), Ulta Beauty (ULTA), Dick’s Sporting Goods (DKS), and Jabil Circuit (JBL) are slated to release their quarterly results this week.

In Friday’s trading session, Wall Street’s major averages ended lower. Marvell Technology Inc (MRVL) tumbled over -11% and was the top percentage loser on the Nasdaq 100 after the specialty semiconductor company issued disappointing Q1 guidance. Also, Costco Wholesale Corp (COST) plunged more than -7% and was the top percentage loser on the S&P 500 after the big box retailer reported weaker-than-expected Q2 revenue.
Both of these trades cash flowed well for us.

The market is awaiting more inflation data this week with today largely empty of pre-planned news catalysts:
On the economic data front, the U.S. consumer inflation report for February will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. Core CPI, Retail Sales, Core Retail Sales, PPI, Core PPI, Initial Jobless Claims, Crude Oil Inventories, Business Inventories, Export Price Index, Import Price Index, NY Empire State Manufacturing Index, Industrial Production, Manufacturing Production, and Michigan Consumer Sentiment (preliminary).

Despite making new weekly highs and breaking for the first time above the monthly trendline connecting the 2000 and 2021 highs, the SPY ended the week slightly lower, at $511.72 (-0.21%).  The monthly RSI is notable in that it is still well below an overbought reading.

​Much like the SPY, the QQQ is also flirting with its monthly trendline that connects the 2000 and 2021 highs. Closing the week at $439.02 (-1.48%), this index is currently presenting a bit of a concerning look on the monthly timeframe, but there are still several weeks for the candle to develop.

We have three potential earnings trades for today:

Our trade docket for today is full.
ORCL, CASY, ASAN earnings trades. /ZN, DIA, /MCL, GLD ladder trades. DELL, GOOG, META, MSTR, NVDA, SBUX, PYPL, PLTR, WYNN, FSLR, SMCI, VKTX. Our daily SPX/NDX/Event contract 0DTE's. SPY/QQQ 4DTE trades and last but not least AAPL. We'll also check in our the Wheat setup. I think its getting close to an entry point.

Intra-day levels for me today:
/ES; 5127/5152/5168/5193* (key level. ATH) to the upside. 5109/5096/5086* (key support level)/5061 to the downside.
/NQ; 18111/18188/18237/18313 to the upsdie. 17930/17876/17793/17714 to the downside.

News catalysts for the week:
Tuesday 12th March
08:30 ET
US CPI for February
The US Consumer Price Index is a measure of the average change over time in the prices paid by urban consumers for a basket of goods and services.
It tracks price movements from the perspective of the consumer and is a key indicator of inflation.
The CPI is divided into various categories such as food, energy, housing, transportation, and medical care, providing insights into price trends across different sectors of the economy.
Changes in the CPI can impact consumers’ purchasing power, cost of living adjustments, and monetary policy decisions made by central banks.
What to Expect
Markets are paying attention to inflation reports.
Higher-than-expected inflation could cause markets to push back on Fed rate cut bets, which could cause weakness in US stocks, and strength in the dollar.
The reverse is also true, lower-than-expected inflation, would likely cause the markets to bring forward rate-cut bets, which would cause strength in US stocks and weakness in the dollar.

Wednesday 13th March
10:30 ET
Weekly EIA Crude Oil Inventories
The Weekly Energy Information Administration Crude Oil Inventories report provides data on the change in the number of barrels of crude oil held in inventory by commercial firms in the United States over the past week.
It is an indicator for assessing supply and demand dynamics in the oil market and can influence crude oil prices.
What to Expect
A larger-than-expected increase in inventories suggests oversupply conditions, potentially putting downward pressure on oil prices, while a larger-than-expected decrease indicates tightening supply conditions, which could lead to higher prices.

Thursday 14th March
08:30 ET
US PPI for February
The US Producer Price Index measures the average change over time in the selling prices received by domestic producers for their output. It tracks price movements from the perspective of the seller and is an important indicator of inflationary pressures in the economy.
The PPI is calculated for various stages of production, including finished goods, intermediate goods, and crude goods, providing insights into price trends at different levels of the supply chain.
Changes in the PPI can influence the decisions of businesses regarding pricing strategies, production levels, and investment, and can also impact consumer prices (CPI), wages, and monetary policy decisions, making it, in some ways, a leading indicator of inflation.
What to Expect
Inflation is closely watched by the markets.
Higher than expected inflation could prompt the markets to push back on bets for rate cuts this year, which would cause weakness in US stocks, and strength in the dollar.
The inverse is also true. If inflation comes in lower, this could mean that the Fed is getting closer to their inflation target, which could cause markets to ramp up bets for rate cuts this year, which would cause strength in US stocks, and weakness in the dollar.
Weekly US Initial & Continued Jobless Claims
Weekly US Initial Jobless Claims and Continued Jobless Claims are key economic indicators that provide insights into the labor market’s health.
Initial Jobless Claims refer to the number of individuals who file for unemployment benefits for the first time during a given week. This metric helps gauge the rate of layoffs and indicates the labor market’s immediate health.
A lower number of initial claims suggests a stronger job market, while a higher number may indicate economic weakness.
Continued Jobless Claims, on the other hand, represent the number of individuals who continue to receive unemployment benefits after their initial claim. This figure reflects the ongoing level of unemployment and can indicate the persistence of joblessness in the economy.
What to Expect
As this release is coming out at the same time as the US PPI, it is likely to be overshadowed by this.
Nonetheless, higher-than-expected Jobless Claims indicate higher unemployment, which is often seen by the markets as a downside risk to inflation. This could cause strength in US stocks and weakness in the dollar, as it could cause traders to push forward their bets for Fed rate cuts.

Friday 15th
10:00 ET
The University of Michigan Sentiment March Prelim
The University of Michigan Consumer Sentiment Index is a monthly survey that measures the confidence and optimism of US consumers about the economy.
It provides insight into consumers’ perceptions of current economic conditions and their expectations for the future.
The index is based on surveys conducted with a representative sample of households regarding their views on personal finances, business conditions, and buying intentions.
High consumer sentiment generally indicates optimism about economic prospects, which can translate into increased consumer spending and economic growth. Conversely, low consumer sentiment may suggest pessimism and potential retrenchment in spending, which could dampen economic activity.
The University of Michigan sentiment report also contains expectations for both 1 and 5-year ahead inflation expectations, which the markets pay attention to.
What to Expect
High sentiment would indicate that consumers are doing well in the face of high interest rates, and have general optimism over economic conditions, which could increase the chances for a soft landing for the economy. However, if consumer sentiment is much higher, this could be an upside inflation risk, as it could underline higher consumer spending.
Having said this, the markets are more likely to react to any meaningful deviations in inflation expectations. Higher 1 and/or 5-year-ahead inflation expectations could cause markets to pull back on bets for Fed rate cuts this year, which would cause weakness in US stocks, and strength in the dollar.

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My lean today is neutral to slightly bearish.