The 250K Portfolio was down -16.3k and the 50K Portfolio was down -$3.4K today. It was the largest losing day in the portfolio. We are 4k from a worse case drawdown. The 250K Portfolio is down about -$5.5k in live trading on the month versus -$18.6K hypothetically since we waited for a drawdown to start.
The amount of noise in the market is extreme. Lately whenever we have a big winning day, the market seems to reach a greater level of noise and fire off a worse case losing day. We continue to morph as the market gets noisier and as we adjust.
The numbers in the CPI report were as expected but the noise in the market would indicate that the numbers were not what the market wanted.
I like to distinguish between noise and volatility. The VIX has dropped to 9 month lows, not seen since April 2022 and in the 18 handle. The daily ranges are relatively narrow. The back and forth price action intra-day in a narrower range is what I define as noise.
The market had 4 V Reversals intra-day - two were fast and two were slow. The frequency and amplitude of the moves shift quickly. The Nasdaq dropped about 180 points in 13 minutes shortly after the open. This was similar to last Friday's trade where the market made a similar move, a 180 point drop in 11 minutes shortly after the open.
CPI was released one hour before the market open but it was as if the market was in news release mode all day long. Last Friday, after the Jobs Report and after the initial volatility at the open, the market resolved into a trend higher. Today, the open was similar to last Friday's open but the noise continued throughout the day with stop running price action.
The excess liquidity in the market continues to generate an un-natural bullish trend that we would not have seen in previous years or decades with all else being the same. The Fed's balance sheet is still at $8.5 trillion while it was less than $4 trillion before the pandemic. Reduce the Fed's balance sheet by $4 trillion and let's see where the market is. 2022 wasn't much of a bear market. There were no real flash moves, crashes, or limit moves.
The Fed tries to talk down the market, maintains a higher for longer interest rate policy but continues to hold a bloated balance sheet.
We look forward to Friday's trade and the potential profitable trading cycle based on the drawdown curve as well as the amount of range bound trade and noise in the market that could indicate that we are due for a cycle of trade in our favor. While we have seen several cycles of large losing days since the beginning of December, we haven't seen the same cycle of large winning days.
Our live trade results for the month are much better overall than the hypothetical results since we waited for a drawdown to start. We continue to be cautious if we continue to see this type of noise on a daily basis.
