Looking for direction
Join me as I organize my thoughts about the upcoming week
Last letter stated:
Depending on how things go with the trade wars, if things go to Trumps plan, we should see an early week rally back to the highs. If things go south, we could dump further, and gap fill down to 5870. I'm more on the side of chop to downward action for this week
This turned out to be the case, early on in the week Canada and Mexico agreed to Trumps terms, this allowed it to rebound Mon-Thur. As has been the case for the last several weeks, Friday saw a giveback, and currently we are sitting at -.24% for the week.
Market Review
The large gap down from trade wars put this week at a disadvantage. At the end of the day, we are closing right where we closed last week. This has happened the past couple of weeks, but it won't continue forever obviously. Will this week be the week that changes? We are ending above the 20 and 50d smas. So far they have acted as support for the Sunday night dump, but we continue to chop in the range between 5870 and 6100. We entered the range at the very beginning of November, when the 100 day sma was the whole way down at 5600. At the end of January it entered this range and is sitting at 5900 currently. This should be enough consolidation to proceed, but if it doesn't, we would expand our range down to the 200d sma at 5655.
No changes this week on this position. It is currently just barely red. I plan to only have 2-3 open next cycle and will save a contract or two for a nice red day.
I hit a new high of 9.19% YTD, but then the action Friday brought my account to 5.73%. Still, I'm easily beating SPX which is sitting at 2.09%. Beating SPX is my primary goal, so as long as I can stay above it, I'm happy.
TastyTracker.com
Nothing I really want to cover this week. I continue to tweak small things, but didn't have time to do any real work.
That's all I’ll cover this week. More details to come next letter. If you have and ideas or find a bug, the best way to let me know is in discord.
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Posts
Similar to seasonality, but even worse since it's just one data point. Still, it's important to remember that we can resolve current consolidation in either direction.
While we are currently trading in the upper half of the range, we are still in the range. Until we are out of the range, no direction has been decided, and we can easily drop into the bottom half of the range.
Just as quickly as Temu took the country by storm, it could go away. This is an interesting, LONG post about how low dollar shipments did not have the same customs applied as large shipments. This “loophole” is what enabled Temu’s direct to customer action, but it also enabled some clever logistics for larger companies.
That said, it's been delayed at this point. Likely, a major point of that rule was to increase efficiency and only worry about the larger players. In theory, that sounds logical. If larger companies are able to skip a lot of the duties, then perhaps closing that gap is worthwhile? Like other orders by Trump, who's to say if this is just a threat to get something, or if it'll actually happen.
Banana does some math here, illustrating that our neighbors need us more than we need them. Regardless of whether we are in the position of power, it's still bullying, and we all know global politics is a tricky subject that requires finesse.
I'll continue to shout from the rooftops that Trump brings volatility. As a seller of that volatility, I love that. But it does require us to be nimble and conservative so that we can survive the chop.
2019 29%
2020 16%
2021 27%
2022 -19%
2023 24%
2024 23%
We’ve had a very good 6 years. I don't believe we will end the year red, but it's not out of the realm of possibility to have a “classic” year at around 8-12%. We’ve only started the year, so there is plenty of time, if this were to fail here, to make it back up. I don't see a particular reason for that to happen at this point in time, but that's how these things work. All it takes is for Canada and Mexico to team up and say, you know what, we aren't playing ball, and the market could tumble very quickly.
We haven't made a new high for 16 days. It's 1.5% from the high. Intuitively, then you should know that the market is doing well. I don't read this as a bearish sign, it means the market remains strong. The specific gyrations of the week are just noise. Sometimes fewer data points on a chart tell a better picture. Zooming out, since 2023 it has been up and to the right.
This is bloody brilliant. I haven't heard Trump talking about EU, but getting out ahead of it, showing good will, will make him look like an ass to start threatening them. It is also good for our businesses, and the market in general. It also gives us more padding in case one of our threats goes south and burns a bridge during this administration.
Typically, the bears v bulls is a good counterpoint. With bulls at a low, this does give me more confidence that we will resolve higher, baring any negative Trump talk outcomes.
Quick Charts
Apple staying on the struggle bus. This week we dropped below the 100d and traded in a range there. If we can make it back down to the 200d, I'm a buyer and would look to enter again. Until then, let it cook.
IWM kinda looks interesting here. It's been slowly floating higher, hovering on its sma’s. I'm still too jaded to enter, but getting strikes below 220 could work.
No surprises in VIX here. We pop on Mondays and close near the lows on Thursdays, with a slight tick up on Friday. This has been amazing if you can enter Sunday or Monday. Not only does the market move higher, but the vix moves lower…the perfect option selling market.
Oscillators only slightly down from 20 last week to 11 this week. Undecided.
Above 50 day ema down from 55 to 53. Undecided.
Some buying this week.
F&G back down, from 46 last week to 39 this week.
Sentiment down from 43 last week to 33 this week.
This week we added June as a hold and moved the cut back to July, and then removed the October cut, putting us at 2 more cuts in the next 2 years.
Earnings and Events
2024 Results
Q2 Winners: ELF, FSLR, CHWY, CRWD, AVGO, ADBE, ORCL, FDX.
Q3 Winners: GS, SPOT, LMT, ENPH, TMO, RTX, MCD, PYPL, PLTR, UBER, UPST, SHOP, LLY, TTD, SE, ORCL, MU
Q3 Losers: UPS, QCOM, LRCX, MBLY, W, INTC, ROKU, SMCI, ABNB, DG, AVGO
Q4 Winners: TSLA, CVNA, PLTR, ELF, SHOP, SPOT, DIS, SNOW, DE, CRM, LULU, ULTA, AVGO
Q4 Losers: HOOD, ROKU, W, MELI, NVAX, RKT, AMAT, TGT, ORCL, ADBE, MU
2025 Results
Q1 Winners: JPM, GS, MS, NFLX, PLTR, SPOT, UBER, NET
Q1 Losers: UPS, DECK, PYPL, ELF
Last Week
Going into earnings this week, I was bullish elf and net. Couldn't have been more opposite reactions.
PLTR +34% - Even more extended than it was
PYPL -13%
SPOT +14% - After 4 years, my student discount has run out this month, So I will be cancelling. Since 1/2023 the stock has not missed a beat (see what I did)
AMD -7%
GOOGL -9%
CMG -2%
AMGN +3%
UBER +12%
DIS -2%
QCOM -3%
LLY +8%
RBLX -7%
PTON +8%
AMZN -4%
ELF -29%
NET +20%
This Week
Interested in: MCD SHOP SMCI UPST DASH LYFT HOOD TTD MGM DDOG DE TWLO AMAT ABNB ROKU
jPow will be in the news this week. CPI, PPI, Jobless, Retail. Decently busy.
Thoughts
I'm inclined to believe that this consolidation is closer to the end than the beginning. I'm also of the opinion that we will break higher and not lower. That doesn't mean there couldn't be a fake out, where we tap 5800 one more time before heading higher.
At the moment, the market is chopping, and it really could choose either direction. Trump's tweets and actions provide good volatility, but they usually don't lead to sustained downward action. It's a lot of threats to get people to fall in line. So while I believe we will move higher, it is still prudent to be light on our positions, allocating more capital to each one. That way if something does go wrong, and things escalate, then we can 1) know our account is safe 2) take advantage of the opportunity.
Events and earnings continue to take a back seat to Trump. I do think there could be a couple winners this week in earnings, and I'm crossing my fingers that we don't have the Sunday drop, since I haven't heard anything coming into the weekend. That could mean we trend higher this week, and decent to good earnings could help fuel that move.
Rating
My attempt at being clearer on my expectations for the upcoming week:
Bullish
Bullish/Neutral
Neutral/Bullish
Neutral
Neutral/Bearish
Bearish/Neutral
Bearish
I thought last week we would go down a bit, so I had chosen #5. That was wrong, and it was another #4 week. For this upcoming week, realistically I think it could be #3, but I'll say #2 and shoot for the moon. Things are neutral at the moment with mixed signals, we are close to highs, and we have been chopping here for several months.
1 Year Ago
One year ago this upcoming week we had a small down week. We were talking inflation and interest rates. Lastly, we talked about February weakness, and remaining cautious even though it hadn't played out at that point (we didn't have a red month until April).
Conclusion
Cautiously optimistic. We are in the middle of ranges, and a lot of indicators are indecisive. This could be made worse or better at the drop of a tweet from Trump, so we need to be conservative and prepared for either scenario. Be prepared for volatility, and you will be successful the next four years. That said, we are in the upper range, and at a point where we COULD think about moving higher this week to break out of the recent range. While I'm prepared for chop to upside, I think we are getting close. There's a potential we end next week over the range, and then come back to test the breakout the following two weeks.
Good luck out there!
As always, staying realistic and nimble is key to moving forward productively.
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