Today is Huge

Swingly Exposure Status: Risk Off

OVERVIEW
Economic Data: Expect Volatility

The market is poised for a significant event today, just an hour before it open 8:30 a.m. Eastern time, the April Producer Price Index (PPI) report will be released, a crucial catalyst for market movement. Economists surveyed by Dow Jones forecast a 0.3% uptick in the PPI from the previous month.

The Producer Price Index (PPI) is a measure of the average change over time in the selling prices received by domestic producers for their goods and services. It tracks prices at the producer level, before goods and services reach the consumer. Essentially, it measures inflationary pressures from the perspective of producers. When the PPI rises, it often suggests that producers are facing higher costs, which can eventually be passed on to consumers in the form of higher prices.

Yesterday's session remained flat and largely uneventful, mainly attributed to the anticipation surrounding the forthcoming PPI report scheduled for release this morning. It's uncommon to witness significant market movements just before a highly uncertain event like this, as it has the potential to sway the market in either direction. It's important to note that traders can be quite fickle in such situations.

We've observed a slight decline in the effectiveness of our recent trading positions at the individual stock level. Specifically, stocks like SMCI and CLSK have shown intraday reversals, leading to what can be termed as a "fake" breakout.

This trend may largely be attributed to the current positioning of major indices, indicating a short-term pause in the recent rally from the late April lows.

Nasdaq

QQQ VRVP Daily Chart

Large caps are maintaining levels above the Point of Control (POC) at $441, which served as a support area during Monday's session. This is a positive indication, suggesting that buyers are asserting more control, particularly evident when considering the low volume coupled with the formation of a bullish hammer candle in yesterday's session.

We foresee increased volatility in the immediate future, considering the decline in market activity despite the recent uptrend in share prices. With low market participation and the QQQ navigating a significant supply/demand zone, we anticipate a probable retest of the rising daily 10-EMA at $437. This level aligns with the weekly Visible Range Volume Profile (VRVP) Point of Control (POC), underscoring its importance as a key area of interest.

We recognise the potential for robust PPI data today, coupled with the hope for strong consumer price inflation (CPI) data tomorrow. This combination could serve as the final catalyst needed for the majority of investors who have been sitting on the sidelines to start buying up stocks. If this happens, this will cause significant volatility to the upside, leading to very explosive new highs in the Nasdaq.

S&P Midcap 400

MDY VRVP Daily Chart

The MDY has rebounded off its Point of Control (POC) at $546 for two consecutive sessions, indicating demand and preventing a significant decline towards its next substantial support level at $540, represented by its rising daily 10-EMA.

The recent price action suggests a near-term distribution phase, particularly notable with significant selling pressure emerging above the $548 mark. Additionally, the midcaps appear to be stretched above their rising daily EMAs, indicating a potential need for consolidation. We anticipate a period of rest, which could be constructive in helping the MDY establish a short-term base before potentially resuming its upward trajectory.

Russell 2000

IWM VRVP Daily Chart

The IWM is exhibiting a volatility contraction pattern (VCP) around its Point of Control (POC) level of $205. Small caps appear poised for a potentially explosive move in either direction. While we anticipate the IWM's share price to remain higher in the coming weeks, similar to larger indices, there's a possibility of a retest of its rising daily 10-EMA. However, the narrative could undergo significant shifts depending on today and tomorrow's PPI & CPI data.

The VCP observed over the last three sessions has sparked our excitement. The Russell 2000 appears to be coiling up, and with the improving macroeconomic conditions, we hold a strong sense of optimism about the potential outcome once this VCP finally resolves.

DAILY FOCUS
Hands Off: No Trades

Traffic light

The market is on the brink of receiving consecutive data releases on two of the most pivotal elements for the equities market: PPI & CPI. This period holds the potential for extreme volatility, capable of causing significant swings in your account balance. There's a chance of witnessing a massive green day today followed by an even bigger red day tomorrow.

Due to this uncertainty, we've decided to refrain from adding exposure to our positions today or tomorrow. Instead, we'll closely monitor how the market reacts to both data reports, observing any influx of buyer or seller aggression as a result. This cautious approach will allow us to navigate the potential volatility and make informed decisions based on market behavior.

Note: Meme Stock Frenzy

We acknowledge the recent surge in meme stocks like GME & AMC over the last several sessions. While we do not typically trade in such speculative names, we recognize the potential for significant profits.

We strongly advise any subscribers who are invested in these stocks to thoroughly evaluate their risk management strategies. It's crucial to ensure protection against any unexpected gap downs or sharp downward moves that may occur.

WATCHLIST
Still Setting Up

MYO: Myomo Inc

MYO Daily Chart

  • Myomo, Inc. remains range-bound, trading sideways and chopping above its initial breakout from its multi-month VCP.

  • Despite recent underwhelming earnings, the company demonstrates strong revenue growth. We're monitoring for potential trade opportunities.

  • If there's a break above its recent short-term VCP, especially with a strong reaction to PPI & CPI data, we'll consider entering a long position.

SMCI: Super Micro Computer, Inc

SMCI Daily Chart

  • SMCI maintained its VCP despite posting positive earnings last week.

  • We attempted to initiate a position on Friday in anticipation of a potential breakout.

  • If SMCI shows upward movement following the release of PPI & CPI data in the next two sessions, we plan to accumulate a substantial long position in the stock.

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This newsletter does not provide financial advice. It is intended solely for educational purposes and does not constitute investment advice or a recommendation to trade assets or make financial decisions. Please exercise caution and conduct your own research.

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