Updates for Monday 7/18/22

• We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.   
• Current trade record here​
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Updates 10:45 AM ET - Sunday

​Upcoming key events
​This week is lighter in economic news.   ​

Important earnings this week:

​The big picture:  gloomy fundamentals

• Inflation reached 9.1% in June, its highest rate in nearly 41 years.
• Bond market continues to signal that recession is coming.  Yields are starting to invert: 2-year Treasury is 3.124%, while 30-year is 3.083%.  Over the past several decades, yield curve inversions had frequently been followed by recessions.  
• According to WSJ, while the job situation is still robust, inflation has now outpaced wage growth, and is now starting to cut into spending.
• Fears of a global recession and deepening woes in Europe are pushing the dollar higher, with no end in sight. 

Short-term volatility signal:  "Rising Bull"
Yet weirdly enough, stock volatility continues to drop.  $VIX weekly chart below shows it has been forming a series of lower high tops for the last 6 weeks.   This has been providing  bullish tailwind for $SPX.

$VIX may drop all the way to its 200-week EMA green line (currently at 21.5) before a much bigger bounce.   This means more short-term bullish tailwind for $SPX.

​Market breadth:  providing bullish tailwind for stocks

• Both NYSE and Nasdaq Advance-Decline net issues are back to rising.
• Both NYSE and Nasdaq percentage of stocks above their 200-day MA are forming bottoms, especially NYSE.

Stock indices may be coiling to break out
In looking at Nasdaq futures NQ 4-hour chart below, it is now clearer that NQ has been bullish since 6/16 low.   And since that low, NQ has been coiling to form a base, as evident in the patterns of its 20 EMA blue line and 50 EMA red line.   

There is a high probability that this coiling base will result in a breakout, most likely post FOMC next Wednesday 7/27.   The breakout may push price back up to the highs of 6/2.   This is true for NQ as well as ES and RTY.​

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​Disclaimer
The information presented here is our own personal opinion.  Consider it as food for thought.  We are not offering financial advice.  We are not promoting any financial products.   We are not registered financial advisers or licensed brokers.  We make no guarantee that anything will unfold according to our projections.  You are proceeding at your own risk if you follow our trades.