Updates for Wednesday 10/26/22

• We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.   
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Updates 3:20 PM ET - Wednesday 10/26/22 

Bear market rally is still intact

• Market breadth remains strong today.
• $VIX has dropped down as low as 27.35, but is starting to reverse.   We expect $VIX to tag 30 one more time before resuming the descend down to 25 possibly in the next week.
• ES and RTY are quite bullish and have surpassed the R1 levels we posted yesterday (table below).  However, they have dropped below R1 again as $VIX is starting to reverse up.
• NQ got close to R1, but couldn't reach it due to disappointing big tech earnings (GOOG, MSFT).

Price actions this morning set up a bull trap, and we are likely to see sharp selling.   We are still projecting ES NQ RTY to drop and tag S1 as $VIX rises and tags 30.   

This type of swing is to be expected in this market.   But again, volatility and breadth support the bear market rally continuing.

We continue to hold TNA runner position as is, and wait for RTY to retest S1 to scale back into TNA swing position.

​Updates 11:40 PM ET - Tuesday 

Summary

• $VIX is dropping sharply, heading towards 25 possibly in the next week.
• Market breadth is still very strong on Tuesday.  
• ES NQ RTY have surpassed the R1 levels we posted yesterday (3850, 11725, 1790).

Against this bullish backdrop, Microsoft and Alphabet earnings resulted in sharp drops after hours.   

S/R levels
So expect some pullback on Wednesday, or at least choppy market conditions.  Below are updated S/R levels. We may see ES NQ RTY1 tag S1 before resuming the bullish rise.​

Is the rally over?
Not according to volatility and market breadth.

• The 20-day EMA line of NYSE and Nasdaq A/D daily charts have risen enough to cross above the 200-day EMA line.
• Nasdaq percentage of stocks over 200-day MA has surged up to 24% while NYSE has surged up to 26%.
• $VIX is dropping steadily and is now at 28.5
• $VVIX also dropped sharply on Tuesday.

Trade plan
The TNA runner position is still intact and we will continue to leave the stops at breakeven for now.   We will be monitoring for pullback overnight and at open to re-enter TNA swing position.

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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