February 2nd, 2024

Market environments are shifting. I always emphasize the importance of understanding the three market environments: range-bound consolidation, mean reversion, or range expansion. What we rarely see is a tape that oscillates between these market environments, and that’s exactly what I’m witnessing now. The market is experiencing a significant amount of crosswinds, causing it to move between different market environments. As a result, I have decided to avoid trading for now and adopt a wait-and-see approach.

One thing you can be sure of is that I won’t write something in my morning note just to sound smart or share information that I’m not personally trading. I trade based on what I write, and if I’m not perceiving the market clearly, I’ll let you know. In the past two sessions, I went from holding a swing long position in the S&P, then getting stopped out from my longs, followed by losses on my scalps for end-of-the-month trades, and finally, incurring losses on my shorts yesterday. However, I know myself and understand why these things happened. Therefore, I’m taking today to observe and see if the market starts to provide clearer signals by Monday.

One of the best decisions I’ve made in my career is to quickly halt a drawdown and prevent it from lasting more than a few days. Remember, the year is long, and there will be ample opportunities ahead of us. Wishing you a fantastic day and weekend!

Cheers, DELI