April 17th, 2024

Inflation acknowledged. Fed Chair Powell finally acknowledges that inflation is a concern again in his speech yesterday. The Fed has continued to talk about cutting rates, but the bond market and the fed funds market haven’t believed them for months.

The stock market was doing its best to ignore bonds, but as I’ve written in my note many times, nothing matters until the market signals it does. I’m not a macro trader, but understanding the main macro theme in the market has been crucial for me and my trading. It helps me navigate market leadership and direction better. With the market refocusing on rates, as traders, we must keep an eye on ZN and its movements.

The indexes remain in range expansion mode and are vulnerable to lower prices. Whenever we’re hugging the daily Bollinger Bands to the downside and they are expanding outward, that signals to me not to pick bottoms, but to sell rallies. When considering that we’re below the YTD AVWAP’s in NQ and RTY, it indicates that many average long positions from the beginning of the year are underwater.

My plan for today is to focus on the short side in the major indexes. I anticipate the market to push lower, but remember, it’s still a bull market, so it’s crucial not to be overly aggressive with short positions at any level. Instead, be smart when shorting—keep positions small and avoid pressing too much into lows.

Never doubt the bulls’ ability to pull us out of a weak situation in a bull market. Being small and smart is key. Refrain from overtrading.

Cheers, DELI