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Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for our Signal Trades. Updates 2:30 AM EST- Thursday 5/13/21 Perspective Market was not happy about the CPI report on Wednesday morning. As a result, $SPX $NDX IWM all dropped sharply, and $VIX $VXN $RVX surged up substantially. We shared with you yesterday warnings from various indicators: It appears that $NDX is continuing the process of pulling back, much more so than $SPX and IWM. There are important indicators sending out highly bearish messages about $NDX. They confirm that the sell-off may be substantial. Now we need to determine the potential scope of this major pullback. Could it be a crash? Table of Support & Resistance Zones The S/R table below has been updated. The green support zone is where this current major pullback may end. The orange resistance zone is short-term strong resistance level. Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. IWM IWM weekly chart looks very vulnerable to a major drop. It may not happen right away, but IWM is now sitting just below its 20-week EMA blue line. Not finding enough support here may mean IWM eventually dropping down to its 50-week EMA red line near 190.  Click here for our latest buy targets in Signal Trades.
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Excerpts from WSJ 4/28/21:
The Federal Reserve held its key interest rate near zero and said it plans to continue supporting the economic recovery, while acknowledging recent progress in growth and employment. Fed officials voted unanimously Wednesday to maintain the central bank’s policies, aimed at holding down borrowing costs, until the economy heals further from the effects of the Covid-19 pandemic. “Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the Fed said in a statement released after the conclusion of its two-day policy meeting. “The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors.” Fed Chairman Jerome Powell said at a news conference Wednesday that the recovery has advanced “more quickly than generally expected,” while adding that it “remains uneven and far from complete.” The Fed has held overnight interest rates near zero since March 2020, when the Covid-19 pandemic and related restrictions delivered a severe blow to the economy. Since June, the central bank has also been purchasing at least $80 billion of Treasury bonds and at least $40 billion of mortgage-backed securities a month to hold down longer-term borrowing costs for consumers and businesses. Fed officials reiterated Wednesday that they will hold rates steady until the labor market is back to full strength and inflation has reached the central bank’s goal of averaging 2%. Most indicated last month that they expect to leave rates near zero through 2023. They also repeated Wednesday that they want to see the economy make “substantial further progress” toward maximum employment and 2% average inflation before starting to reduce the pace of bond purchases. Mr. Powell has said that process would likely begin well before the Fed starts to raise rates. He said Wednesday “it’s not time yet” for officials to start discussing a pullback in the Fed’s asset purchases. “Economic activity and hiring have just recently picked up after slowing over the winter,” Mr. Powell said. “And it will take some time before we see substantial further progress.” The yield on the 10-year Treasury note edged lower after Mr. Powell’s remarks, closing at 1.621%, down from around 1.64%. Yields rise when bond prices fall. “The Fed has decided it is more willing to risk a bit of overheating than derail a burgeoning boom,” said Grant Thornton Chief Economist Diane Swonk, in a note to clients. The economy has picked up steam in recent months as vaccination rates have risen, business restrictions have eased and the latest round of federal stimulus money has fueled spending. Consumer confidence rose in April to the highest level in 14 months, the Conference Board said Tuesday. Inflation has also accelerated, as the Fed noted. The Labor Department’s consumer-price index jumped 2.6% in the year ended in March, compared with a 1.7% rise in February from a year earlier. The Fed’s 2% inflation goal is linked to a different measure, the personal-consumption expenditures index, which tends to run a bit below the CPI. The CPI pickup stemmed largely from a combination of higher energy prices and comparisons with price levels a year earlier, when they fell sharply with the onset of the pandemic, a measurement issue known as “base effects.” But some of the price increases reflected rising demand for many goods and services as the economy revived, analysts said. “We know that the base effects will disappear in a few months,” Mr. Powell said. While increased demand for goods and services is harder to predict, he said, “We think of them as not calling for a change in monetary policy, since they’re temporary and expected to resolve themselves.” Fed officials expect inflation to rise above 2% this year and recede to that level by the end of next year. They tend to look past volatile food and energy prices and have indicated a willingness to tolerate inflation moderately above 2% as long as it Is due to temporary factors. As more evidence of a speedy economic recovery emerges, officials will likely begin outlining when and how they expect to ratchet down the Fed’s bond purchases. Mr. Powell has said he wants to give plenty of advance warning ahead of such a shift. His challenge will be to communicate the pivot while minimizing disruptions to financial markets. The last time the Fed signaled a reduction in asset purchases, in 2013, it sparked a bond-market selloff known as the “taper tantrum.” An ensuing spike in Treasury yields jolted Fed officials who worried they might undermine the economy’s recovery from the 2007-09 recession. In contrast to that time period, the economy is now widely expected to recover faster. Yields on U.S. government bonds and certain derivatives suggest investors believe the Fed will be able to start raising rates by 2023, sooner than most central-bank officials have indicated. Continued increases in inflation could put the Fed in an uncomfortable position this summer, some economists say, if price pressures prompt market participants to push up borrowing costs sooner than the central bank anticipates. If the Fed starts tightening policy to combat inflation, it could drive interest rates even higher—potentially slowing the recovery. But if it doesn’t act in response to higher inflation, investors might worry it has become complacent. Mr. Powell’s strategy is to convince market participants that the Fed will remain patient as long as inflation doesn’t rise too much for too long, but will tighten policy if needed to keep price pressures under control. “We know that our job is to achieve 2% inflation over time,” he said Wednesday. “We’re committed to that, and will use our tools to do that.” The big event this week is FOMC meeting which starts on Tuesday, and the announcement scheduled for 2 PM EST on Wednesday. In preparation, you may want to read this informative piece from WSJ. The process of ending the Fed’s giant bond-buying program, and subsequently raising interest rates, will take years unless inflation unexpectedly surges. Its first step down that road will be to start talking about it in the coming months or weeks—Chairman Jerome Powell’s next big test with financial markets. Officials will begin by debating how and when to scale back, or taper, the $120 billion-plus of Treasury and mortgage bonds the Fed has been buying each month since last June to hold down long-term borrowing costs. That conversation hasn’t yet kicked off, according to public comments from central bankers and minutes from their March 16-17 policy meeting. The Fed said in a postmeeting statement that the U.S. labor market and inflation would have to make “substantial further progress” before it begins to reduce its bond program. Asked at a press conference whether it was time to start talking about talking about reducing bond purchases, Chairman Jerome Powell said, “Not yet.” ... On April 14, Mr. Powell took a small and subtle but important step by establishing parameters for the coming discussion, more clearly defining his goal. The Fed will be measuring the economy’s progress “from last December, when we [first] announced that guidance,” rather than from March, when policy makers reiterated it, he said. That means with each indicator of improvement, there is less ground to make up. This is delicate business for a central banker. The last time the Fed started telegraphing a reduction in its asset purchases, in 2013, it sparked a bond-market selloff known as the “taper tantrum.” Mr. Powell, then part of a small cohort of governors pushing to scale back the program, was in the middle of the discussion. Yields on 10-year Treasury notes, which directly affect long-term borrowing costs for consumers and businesses, jumped half a percentage point in just one month, rattling Fed officials who worried they might undermine the recovery they had been trying to nurture. ... Jeremy Stein, who served with Mr. Powell on the Fed’s board of governors during the 2013 unpleasantries, said a lesson he drew from the episode is that there are limits to the central bank’s ability to calm markets amid a shift to tighter policy. ... Mr. Powell has said he hopes to minimize disruptions this time by giving the market plenty of notice ahead of any changes to its bond-buying plans. ... The U.S. labor market remains 8.4 million jobs short of its pre-pandemic level, a figure Mr. Powell often references to illustrate the distance remaining to a full recovery. In welcoming the 916,000 jobs created in March, he said the Fed wants to see “a string of months like that so we can really begin to show progress toward our goals.” Since December, when the Fed set the guidelines for rewinding bond purchases, payrolls have increased by 1.62 million. That is certainly progress, though it doesn’t seem to meet the Fed’s mark of substantial. The jobless rate has fallen from 6.7% to 6% but remains well above the 3.5% level reached before the pandemic. ... Pulling back easy money this time could look different than the slow and carefully staged process that took place last time. After the 2007-09 recession Washington officials focused on reducing budget deficits, which seemed to hold back growth, and inflation was tame. This time, trillions of dollars of fiscal stimulus are coursing through households, businesses and local governments, charging up growth. Economists expect inflation to reach 3% by midyear due to temporary factors and then retreat. Primary dealers surveyed by the New York Fed in March expected the central bank to begin cutting bond purchases in the first quarter of 2022 and finish by the end of next year. The first increase in interest rates, currently pegged near zero, would likely come some time after. Fed officials expect to leave rates unchanged through 2023, according to their own projections. Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX.
Click here for our Signal Trades. Updates 3:05 PM EST - Tuesday 3/23/21 Money Twisty Flows As the end of the month and end of the quarter approach, there are streams of money flowing in opposite directions. Fund Rebalancing: In early March, JP Morgan came out with an estimate that balanced mutual funds, defined pension plans, Norwegian oil fund and Japanese government together may sell as much as $316B in equities to rotate into bonds. Bank of America released a report overnight with a similar conclusion, but a smaller number, about $88B rotating from equities into bonds. Quant Funds Algo Buying: According to Nomura analyst, the drop in volatility recently is likely to trigger algo buying of equities. Stimulus Checks Going Into Stocks: The $1400 checks are starting to get distributed into household accounts. Analysts are expecting that a good portion of this money will get invested in the stock market. Which way will stocks go will depend on which force is the strongest, the selling faction versus the buying faction. After dropping sharply on Monday and early today, $VIX just rose sharply and $VXN is starting to rise as well. Market breadth (A/D lines) are dropping sharply for NYSE and Nasdaq stocks. Yet US 10-year yield has been steadily dropping since Friday. IWM sold off hard today. $SPX sold off moderately. $NDX went sideway. Clearly there are lots of conflicting information. One thing we can be certain of is that this market is not ready to embrace any one direction yet. So as traders, we should be careful of not committing to a direction yet either. ... Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for all our Signal Trades. Updates 1:11 PM EST- Tuesday 1/19/21 $SPX $NDX IWM continuing to rise Yesterday we wrote: "there is a higher probability that $SPX $NDX IWM may continue rising up this coming week." And this scenario is unfolding right now.
We are continuing to hold our Quick Bull TNA, but not planning to add a new position right now. The inauguration tomorrow Wednesday 1/20 is still a potentially volatile event. So we are just personally going to wait it out one more day. We prefer to give up a bit of potential gain instead of being overly exposed. If you choose to re-enter long today, exercise more precaution with your stops. Updates 10:30 PM EST- Monday (for Tuesday 1/19/21) Perspective Since mid November until early January, the stock market has been very bullish. But now there is a more cautious approach on the part of traders and investors.
Market Internals Market internal messages are turning bearish, which confirms the more cautious vibes that we are picking up.  $VIX $VXN At this point, bulls can take comfort in the fact that there is no crash signal on $VIX $VXN charts yet. Additionally, on their daily charts, $VIX $VXN show formations of short-term tops. So there is a good chance that the bullishness will continue for a while longer yet. However, it is concerning that $VIX $VXN have been going sideway for multiple weeks now. They are still not showing signs of really dropping yet. So bulls should proceed with caution here, and watch out for one potentially very bearish scenario described on $VIX $VXN charts below.   Table of Support & Resistance Zones The S/R table has been updated to show a lower level of green support zones.  $NDX $SPX IWM Note how the new green support zones are near the bottom of the yellow channels for $SPX $NDX IWM. Given that the yellow up channels are still intact and continuing to rise, these green zones should provide strong short-term support. What this means is that if $VIX $VXN do spike up big, $SPX $NDX IWM may drop down into their new green support zones. However, $SPX $NDX IWM should find sufficient buyers in these zones to resume the rise up in their yellow channels.    Signal Trades On Friday 1/15, we had re-entered just Quick Bull TNA in Signal Trades. While there is a chance that $SPX $NDX IWM may encounter more bearish headwinds from rising $VIX $VXN, there is a higher probability that $SPX $NDX IWM may continue rising up this coming week. Of the 3 indices, $RUT IWM TNA have the most bullish momentum. So we are aiming to capture a portion of the ride up, while minimizing risks by not having too many positions. See Signal Trades for actual trades. Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Why 3x ETFs like TQQQ lose money over the long term The risks of investing in inverse ETFs Simple explanations of contango and backwardation Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for all our Signal Trades. Updates 12:30 AM EST- Wednesday 1/13/21 Summary
Market Internals Market internals are still sending out bullish messages overall.  $VIX $VXN Yesterday we wrote that it's decision time for $VIX and $VXN. During the day on Tuesday, $VIX and $VXN made the decision by forming lower high tops. Their bullish message is very clear.   ...
Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for all our Signal Trades. Updates 11:29 AM EST - Monday 1/4/21 $VIX $VXN rose as projected Just as we projected on Sunday, $VIX $VXN both rose sharply starting at open this morning. $SPX $NDX IWM dropped correspondingly. However, certain sectors temporarily survived $VIX $VXN bearish headwinds and rose instead. $SOX was one of those sectors, which greatly benefitted our SOXL position. At this point, in Signal Trades we have manually exited TNA due rising $VIX. We also tightened SOXL stop and got stopped out. Both trades yielded decent profits. See Signal Trades for trade history and current position. We have now booked 184.6% in profit since July 2020. There is a chance that the current elevated levels of $VIX $VXN may persist through Wednesday this week. This market is still quite bullish, but it is nervous about the runoff election in Georgia on Tuesday, and the vote certification by Congress on Wednesday. Updates 7:50 PM EST - Sunday (for Monday 1/4/21) Welcome back and Happy New Year! Summary Expect some turbulence early this week from $VIX $VXN rising moderately. Still bullish in the big picture for $SPX $NDX IWM. Market Internals Market internals still continue to diverge bearishly from $SPX $NDX IWM prices. With $VIX $VXN sending short-term bearish messages, bulls should proceed with caution.  $VXN As we mentioned above, $VIX and $VXN were sending out short-term moderately bearish messages on the last trading day of 2020. This combined with the bearish divergence from market internals means that the bulls should proceed with caution here. $VXN 2-hour chart below shows that $VXN has a good chance of surging quickly up to about 31, before it drops lower. If this setup unfolds this way, it is actually favorable for the bulls. It can trigger a dip in $NDX, relieves some selling pressure and brings in new buyers. ... Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for our Signal Trades. Updates 1:48 AM EST - Wednesday 12/30/20 Summary The dip for $SPX $NDX IWM came on Tuesday, just as we projected on Monday night. $VIX $VXN charts show that this is likely a shallow dip for $SPX $NDX, and the Santa Claus rally is likely to resume. Market Internals Having said that, we want to emphasize that market internals still continue to diverge bearishly from $SPX $NDX IWM prices. These dark clouds on the horizon will turn into a nasty storm at some point in the near future. Just not this week.  $VXN $VIX UVXY $VIX $VXN charts warned on Monday that they were going to rise. And just like clockwork, $VIX $VXN rose on Tuesday. So far the volatility rise is minor, and the resulting dips in $NDX $SPX are shallow. The exception is IWM which has a bigger dip. Here are the same charts that we shared yesterday, with Tuesday data added. For now $VXN $VIX UVXY have formed short-term tops and are likely to drop early Wednesday. However, $VXN $VIX UVXY may still rise further as we explained yesterday. Therefore, we have outlined bullish and bearish scenarios to monitor for. There is no guarantee which one will show up, but you will know how to interpret them as $VXN $VIX UVXY patterns unfold on Wednesday. ... Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for our Signal Trades. Updates 9:04 AM EST - Tuesday 12/29/20 Shallow dip Pre-market $VIX UVXY and general price actions indicate this will most likely be a shallow dip. We've exited QuickBull TNA for now because it's acting the most bearish of all the indices right now. There will opportunity to re-enter IWM TNA at a lower price. Updates 1:39 AM EST - Tuesday 12/29/20 Summary $VIX $VXN are not showing any crash signals. But they are showing that a dip for $SPX $NDX IWM is likely for Tuesday or Wednesday. Market Internals Market internals continue to diverge bearishly from $SPX $NDX IWM prices. These are the equivalents of dark clouds gathering on the horizon. At some point they can turn into a nasty storm, but right now they are just dark clouds.  Table of Support & Resistance Zones IWM and TNA S/R levels have been updated in the table below. Everything else remains the same for $SPX SPY $NDX QQQ TQQQ. ... Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. Entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX. Click here for our Signal Trades. Updates 7:45 PM EST - Sunday (for Monday 12/21/20) Summary $SPX $NDX IWM are likely to keep marching upward to higher highs by end of year. Market Schedule This Week This will be a short week due to Christmas. Stock market will close early by 1 PM EST on Thursday 12/24, and closed on Friday 12/25. Here are the important reports for this week. Tue:
Market Internals The current bullishness in stocks is starting to verge on irrational exuberance. But as the famous economist John Maynard Keynes said, “markets can remain irrational longer than you can remain solvent.” It is going to be disconcerting to continue looking at the bearish divergence between market internals and stock price actions. These are the kinds of signals that can fool eager early bears. In our experience, bearish divergence can go on for quite a while. At some point, the bearish messages will have a big bearish impact. But not right now. We have to trade what's in front of us, while keeping in mind that the good times will not last forever.  $VIX $VXN While market internals are showing the start of bearish divergence, $VIX $VXN are showing the continuation of more bullishness.   ... Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here. |
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