Market On Open - Thursday 14 March
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Treading Water
by Alex King
Opex minus 1 day; FOMC minus 6 days. The calm before the storm. Markets are fairly directionless on the day at the moment, though there is plenty of volatility intraday for anyone with the time and discipline to trade on that timeframe.
In the larger degree, meaning, looking out over a number of months, I myself am pretty confident of a continued bull market. But in the near term, Q1 end is a naturally volatile time in markets. End Q1 2009, market reversed from down to up; end Q1 2020, the same; end Q1 2022, the market gave up any attempt to reclaim the 2021 highs and then dropped all the way into Q4. So one should be on the lookout for near-term pivots at least, even if one has medium-term belief in the bull.
Here’s the best near-term bear argument I can muster; that the S&P500 is at a local high and may sell off to retest the 2021 highs.
That is a zoomed-in snapshot of the ES chart you will find below. The Wave 3 illustrated started a year ago in March 2023. It’s testing a 3.618 Fibonacci extension of the prior Wave 1. And so far it has failed to push up through it, in four days of trying. So we can say that for now, there is resistance in the ES5250 zone. It could be that ES blasts up through that following opex and FOMC; at some point though, the monster run in the S&P500 has to ease off some. And what better way to freak out late bulls - of which there are a surprising number - than to dump all the way back to the 2021 highs (ES4800ish) and maybe a little peek below there. Cue panic, fear, MARKETS IN TURMOIL and so on and so forth.
I am not saying this is definitely going to happen nor that the chart pattern implies it is highly likely. I am saying that all markets have pullbacks and Q1 end is not a time to be a hero in advance. I am also saying that pretty quickly after opex and FOMC, the intended direction of markets will likely become clear, and that will likely be a train to jump onto and hold on for dear life - be it heading up or down. If you got it wrong after Q1 2009 opex, Q1 2020 opex, or Q1 2022 opex, you were hurting for a long time. So - it pays to be ready.
For absolute clarity - I personally am positioned entirely long at the moment. I may hedge or go net short, I don’t know yet. Per real-time alerts sent to paying Inner Circle members yesterday, I took the opportunity to bank some nice net gains in the S&P500, degrossing materially along the way. Just a little risk management ahead of quarter end.
Below we dive into our usual charts where we walk through the S&P500, the Dow, the Russell 2000, the Nasdaq-100, and then a clutch of specialist ETFs, being SOXX / SOXL (semiconductor), FNGU (tech majors) and TECL (also tech majors).
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