Pristine Market Analysis & Watchlist 2/21

Investors Hit the Panic Button

Team,

There are only five more trading sessions left in the month of February! I believe that the next 5 sessions will be the biggest test of mental fortitude so far this year. I’ll explain further below.

-Andrew

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The bearish thesis we’ve outlined over the last few weeks has taken full hold of the market! Let’s assess the damage, and what the risk/reward looks like moving forward now that the indices are trading well off their highs.

Economic Data

Global PMI data came out hotter-than-expected this morning, which added fuel to the fire of an already strengthening dollar and weakening treasury market!

Equity Dashboard

Equities finished on the lows! TLT long duration bonds finished on the lows! The dollar UUP finished toward it’s highs! Washout breadth! And volatility exploded higher across all of our tracked indices. We entered the panic phase of the selloff 👀

SPY Price Action Analysis

The S&P 500 topped on Feb 2nd, and has been stair-stepping lower in a narrow channel ever since.

• Heading into the week, the options market implied a 2/28 SPY close between 398.24 and 415.76. Well guess what? We are already knocking on the door of the downside target, and its only been one trading session. Is this where you want to be adding shorts, or taking profits on shorts? I’ll let you be the judge.

Despite the washout in equities today, the stock and bond markets are STILL pricing in two different realities, and only one will end up being correct.

Lisa Abramowicz @lisaabramowicz1

Since the end of January, there's been a significant repricing of Fed rate hikes. Last month, traders were pricing in terminal rates of 4.9% this year, with about 40bp of rate cuts by yearend. Now they're pricing in rates getting up to 5.3% and declining to just 5.1% by December.

The gap between the Nasdaq QQQ ETF and the 10yr US treasury future converged today, but it is still incredibly wide! The ZN_F 10yr treasury futures contract has a YTD -1.40% performance, while the Nasdaq is still sitting on a year-to-date gain of +11.17%. Let that sink in for a minute🤯

Beware the Jaws

While it is tough to load up on shorts after such a big down day in the market, it is important to note that if these jaws were to shut, that would imply further downside for the Nasdaq!

So what’s the plan?

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In the following sections of tonight’s update, I’ll cover my research in preparation for tomorrow’s trading session

✅ Trend Model Update - Our proprietary indicator that informs us on how aggressive/defensive to position in the market

✅Market Strategy - My trading plan

✅ Today’s Trade Blotter and Position Update

✅Daily Watchlist - We scan thousands of stocks and hand-pick the best reward/risk opportunities