The Duck Market.
While the major indexes have been drifting sideways since October, don’t let the surface calm fool you. We are currently navigating a “Duck Market”- placid and unmoving on top, but with a frantic, high-speed struggle happening just out of sight. That duck is paddling. And that pond is not stagnant.
Capital is not exiting
It is just going round in circles. There’s a massive, internal rotation where capital isn’t leaving the market, but simply swapping seats. While former leaders like Microsoft might experience sharp pullbacks that weigh on the QQQ, that same liquidity is frequently rotating into “old economy” sectors like Energy or Materials, which props up the SPY.
For the index trader, this creates a frustrating tug-of-war where the headline price remains pinned in a range despite the violent churn happening under the surface.
Not all tech is the same
While we’re painfully aware of the sideways movement of QQQ, not all tech stocks are doing it tough. Here’s what is happening to semi-conductor stocks:
ITM Doesn’t Predict
As ITM traders, we wait for the chart to tell the story, not the headlines. In a sideways market where capital is just chasing its tail, the ‘story’ is often one of failed breakouts and ‘fake-outs.’
With the Iran war, oil prices and bond yields shifting, the indices are caught in a constant state of rebalancing. For index traders like us, this means the ‘sideways’ move since October is actually a series of miniature bull and bear cycles compressed into a tight range.
Follow the Duck
Until the money stops sloshing around and starts flowing in a single direction, the most disciplined move is to recognize the range for what it is. We aren’t looking for the frantic paddling underneath; we are waiting for the whole ‘duck’ to finally decide which way it’s swimming.
The ITM Strategy
The In The Money strategy is built for this. We don’t need to guess which way the water is moving – we just wait for the price to break the surface. When the indices finally resolve this October-to-March range, the ITM indicators will confirm the new trend, and we will be ready to catch its wake.
Fowl Play
And just to show AI isn’t as smart as everyone thinks . . . I gave the same instructions to GPT and Gemini. This is Gemini’s version:
In its eagerness to show me ‘frantic paddling,’ it gave our duck an extra leg! It’s a perfect reminder for the ‘Duck Market’ we’re in: never trust the surface – always check the mechanics underneath.
To the markets . . .
Another dismal week – nothing to recommend it at all. Let’s check the charts.
SPY Charts
Not good news, I’m afraid. The Darvas box is no more. SPY has definitively dropped right out of it and heading south. The purple support line may hold – if it doesn’t then the next one is at 610 – we will be out of the market by then I imagine. There’s now less than 20 points between the SMAs, so that means a death cross may be on the cards. It does strike me as strange that the volumes are up only a little – in a rout they usually increase greatly.
The long term chart is equally as dismal – the uptrend didn’t hold and we are off south again.
SPYG Charts
SPYG has also dropped out of its consolidation range – and a death cross may happen as soon as this week. Keep watching.
It looks as though the support line has been pierced in the long term chart.
QQQ Charts
QQQ is still in its box, but it’s not looking great. I mentioned several weeks ago that QQQ has a strategy in the upcoming book. It is not the 10/200 cross, but a more responsive one, and the death cross happened some weeks ago. I do hope that if you are trading QQQ that you have been noticing these warning signals and are now on the sidelines.
The long term chart has the blue support line still holding.
VIX Chart (Volatility)
The VIX is elevated as you would expect. You can see it was rising while SPY was still going sideways. That is a warning that the ‘paddling’ underneath is getting frantic, and a break is imminent.
ITMeter
SPY
QQQ
The week ahead . . .
The focus, naturally, is on the war with Iran and the Straits of Hormus. It is throwing markets into a turmoil – although I am a little surprised that they aren’t reacting more. I have no idea when it will be over – but when we have an end date then I imagine there will be a rapid upswing. But that’s not happening just yet.
The week ahead . . .
Monday – March 16
• Retail Sales and Industrial Production released.
• Early read on consumer spending and manufacturing momentum.
Tuesday – March 17
• Housing Starts and Building Permits.
• Key indicator of housing sector activity.
Wednesday – March 18
• Earnings: Micron (MU), General Mills (GIS), Macy’s (M).
• Micron results closely watched for signals on memory-chip demand.
Thursday – March 19
• Initial Jobless Claims and Existing Home Sales.
• Earnings: Accenture (ACN), FedEx (FDX), Alibaba (BABA).
Friday – March 20
• No major economic releases scheduled.
• Markets likely to focus on reactions to the week’s earnings and data.
The Futures
Slightly positive – no idea why.
The ITM ‘Swansong’ Edition
I’ve been avoiding putting anything on the blog about the upcoming book, as everything seems to have been conspiring against me in getting it done.
However, the end is in sight. I am awaiting the final proofs (the have to come from the US!) and working madly behind the scenes on the supporting website.
My intention is to ‘unpublish’ all previous ITM books as this is the definitive edition for both bull and bear. Hopefully launched in 2 weeks and of course my wonderful readers will be able to get them at cost price for a week or so.
Just to show it isn’t a figment of my imagination, here’s the first proof:
Fingers crossed for a good week!
Heather
Trade the tide – not the waves
14 Responses
Hello Heather, anxious to get a copy of your new book. Will you let us know how to purchase. On blog or website. Really appreciate all you do and impart every week. Thank you very much. Luke
Hi Luke – I will post it here, but for the first 90 days it can only be available on Amazon (their rules) – but I will reduce the price as much as possible so that Blog readers can get it cheaply.
I am just waiting on the final proofs to arrive now – so within a coule of weeks.
Fingers crossed.
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h
Do you suggest going in 100% SPY ITM options, or keep a percent age in cash of SPY ETF
Michael
Hi Michael that depends totally on your situation. As I explain in my new book, my accounts are a lot larger than they used to be, and sequestering part of it to be in straight SPY / QQQ shares helps me sleep at night.
If I were younger and they were smaller then I would go 100% DITM options. But my only income is from the market, so I have to be protective of my capital and that it will last until I shuffle off this mortal coil!
So – young / small account / time on your side – I would do 100% DITM. As you get older and your account gets larger think about keeping some in stratigh SPY / QQQ. I do go through this in the new book, but if you think I need to do a better explanation please get back to me!
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Hi i read a lot of books on the market and Im very impressed by the books you wrote Im waiting for the new one to come out Its nice to see good advice in all the garbage out there I would like to be informed when a new blog is published Just wondering why you don’t recommend sellling short term calls against your long options? Not right when we get a golden cross but later on into the cycle Waiting for the new book! Thank you for all your time.
Shmeul
Hi Shmuel, thank you for your kind words! Re short term calls – I don’t dissuade people from selling against long term options – I just have never found that practically it made me any money.
As options in SPY have generally been very cheap you had to get pretty close to current price before it was worth doing – say 1% – which meant that if there was a big move you would miss it. Even in the sideways market we have had for the last 6 months, within the box there were many days where the swing was quite large, which means that you would be whipped in an out of trades, and your account would slowly bleed.
I have done blogs on this before – but not for some time now i think of it.
Good that you raised it and I will do the next one on it with actual numbers and we can see if it is worth it.
Thanks!
h
Entertaining and clever, as always!
Love the “Duck Market” metaphor, and the podcast is a nice bonus 🙂
Looking forward to reading the new ITM Edition.
Thank you Heather!
HI Ben – thank you – how kind.
Actually for the companion website to the new book I’ve been tweaking the podcast characters and how they respond – I think it is getting much better.
There will be a podcast for every chapter – something to look forward to!
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H
Is just the QQQ strategy changing with an additional 100 SMA? Or all of them? It’s a great idea to have a diesel when everybody has a gas engine… what was I thinking! I guess aviation fuel is flying high too. We flew before the war – will find out very soon how it affects the airplane club. Looking forward to the new book. R
Hi Randy – the Bear Strategy has changed completely – the book explains why, the results are still great. SPY and SPYG no change except results updated. QQQ new, not included before.
Plus so much extra on the website, I’m really thrilled with the way it is working out!
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Hello Heather, will you post new book release on this site, or via an email.
Trading guidelines are so great for an older, retired guy like me. Appreciate your analysis of markets soooo much. Luke, Houston, Tx
Hi Ron – I will post it here, but for the first 90 days it can only be available on Amazon (their rules) – but I will reduce the price as much as possible so that Blog readers can get it cheaply.
I am just waiting on the final proofs to arrive now – so within a coule of weeks.
Fingers crossed.
x
h
I like the duck analogy. And can I say we are all tested at moments in life, I have been tempted to sell, but I am holding and hoping for a positive turn and prepared to sell if we get the signal. We don’t know the future. Praying for peace and calm.
HI Kate – peace and calm?
Oh yes, please!
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