The week and month of January ended with another big reversal similar to last Friday. The S&P 500 made a Key Reversal after spending all week working to regain the losses from the gap down on Monday. The liquidity "fixed" the market back up to last weeks closing levels in the stock indexes before selling off again yesterday afternoon. The charts still appear to be making a toping pattern. The intra-day selling remains and most of the gains are still in the overnight session. January continued the 2024 trend of net gains overnight with net selling during the day session where most of the volume occurs.
There is a tug of war in a wide range between the bulls and bears to gain control. There are two recent cases where the stock indexes go into low volatility rallies where the market is up almost every day with higher lows almost every day followed by 1-2 days that reverse the entire gains.
Last week was one of the noisiest FOMC Weeks we have seen in a while. There was a clear trend in the data that trading on FOMC Week and especially on FOMC Day was the right trade setup based on the last two years. Last week was a wild divergence from the recent pattern with some of the harshest price action for any week. In hindsight skipping FOMC week would have certainly been better for most strategies.
The market sold off quickly on Thursday and Friday based on breaking news about "Tariffs". This type of price action could continue, and mean reversion and counter trend trades may work most of the time. Eventually, there has to be some trend to this market as no market remains rangebound forever.
Thursday's sell off recovered quickly and continued rallying at night with AAPL's earnings news. It looked like it would be a nice quiet Friday rally for the bulls after a gap up. The reversal sell-off Friday afternoon was one of the more persistent sell offs without recovery that we saw all week. The sell off on Friday did not make it through the lows of the sell off on Thursday in the Nasdaq. Oftentimes the trend doesn't finish intra-day and going long puts at the close for a repeat of last Sunday night's sell off was a trade idea that was not implemented but considered. The entitled bid seemed like a head fake all week based on the Pavlovic response to catching falling knives since March 2020.
We did not trade live yesterday as the noise from the week continued to expand. The cycle of noise (unfavorable price action) to tone (favorable price action) seems to be "lost" in a noise loop. V-Reversal NQ has traded this noisy environment very well and will be our focus for trading with a select group of Nasdaq strategies as well as new research. The market can break out of ranges in a big way and our Gap Continuation strategies have done well not taking many trades and keeping losses small while we anticipate a breakout.
We have found that in the current One Million MNS Portfolio that removing the E-mini S&P strategies or simply the day trade E-mini S&P strategies would have limited losses and generated a normal drawdown instead of a worse case drawdown.
It was interesting to see how well Gold trended at the end of the week in spite of the noise in the Stock Indexes.
The Stock Index Portfolio 24 hypothetical results were -$630 per E-mini and 1/10th per Micro.
The Top 50 Select Portfolio hypothetical results were +$3,210.00
The 50K Portfolio hypothetical results were +$3,722.50
The Two System Portfolio hypothetical results were -$745.00
The Five System Portfolio hypothetical results were -$1,470.00
The Portfolio Calculator through 1/31/2025 has been uploaded.
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