Updates 1:38 PM ET - Wednesday 6/15/22 Short-covering rally starting today... At this point, there is a very high probability that the Fed will raise rate by 0.75 percentage points, and murmur something about being committed to fight inflation. The market has been anticipating this since the Fed floated this idea in WSJ articles in the last few days. And the market's response is likely going to be short-term bullish, evident by volatility forming short-term tops, and stock indices attempting to climb. Post FOMC, we expect to see a quick retest of ES NQ RTY lows from yesterday, followed by a more earnest attempt to climb. In other words, the short-covering rally is going to start early ahead of Friday OpEx. This also means that the rally is likely to be done by Tuesday. (Market is closed Monday for Juneteenth holiday.) Key S/R levels These are going to be key levels for ES:
Trade plan We plan to enter a Quick Bull position to capture this rally, but as the name implies, it will be quick. We still plan to enter Multi-day and Multi-week Bear positions at lower entry price. We'll update spreadsheet shortly. Updates 12:30 AM ET - Wednesday 6/15/22 Bear market sell-off stabilized a bit ahead of FOMC After three days of straight selling, all stock indices stabilized a bit and formed doji candles on their daily charts. As of tonight's writing, they are attempting to climb a bit. But this bear market is not done yet. It has a long way to go still. We are projecting the following levels before we see some kind of real bottoming:
Conditions continue to be bleak for stocks, bonds, and crypto.
Volatility signal: "Fully Bearish" $VIX $VVIX both took a breather on Tuesday. They may be forming temporary tops, but $VVIX will have to form multiple same-high spires above its 200-hour EMA for volatility signal to ease from "Fully Bearish" mode. It is far from this pattern right now. For this reason, we think $VIX can still rise up to 48 before it tops out. What to expect with FOMC As of Tuesday, there were serious indications of the Fed raising rate by 0.75 percentage point instead of 0.5. According to WSJ: “My sense is that the Fed has decided to do 75 basis points rather than 50 basis points because of the data we’ve gotten over the last week or so showing higher inflation and maybe some more disturbing news on inflation expectations,” former New York Fed President William Dudley said. Whether the Fed will actually do it, or just stick to 0.5 remains to be seen. And no one knows for sure if the market will perceive the FOMC announcement as bullish or bearish. On top of this, we have a huge quarterly OpEx on Friday. So we want to lay out a few scenarios below for you to track. Bullish response: market likes what it hears and begins to unload puts right after FOMC, ahead of Friday OpEx. This will start the short-covering rally right away. But because this rally is pulled forward, there will not be much fuel left for the rally to continue after OpEx. Given the 3-day weekend, we think the rally will peter out by Tuesday. Bearish response: market freaks out after FOMC announcement. Selling resumes and keeps going until Friday. Implied volatility ($VIX) jumps due to increased demands for puts. As a result, dealers have to short stock futures even more to keep their books neutral. Dealers in effect will sell into weakness, taking away liquidity and causing huge price drops. This is the stomach-dropping scenario. But on OpEx Friday, a lot of these puts will expire. In response, dealers will cover their shorts, thereby launching a short-covering rally that may last until Wednesday. Keep in mind though that in both scenarios, the rally will not last very long and what comes after is more selling. A lot more selling. Trade plan Click here for live trades. Subscribe to get our latest analysis, daily trade plans and live intraday trades. Current trade record here. 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.
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Updates 12 AM ET - Monday 6/6/22 Upcoming key events The CPI report on Friday will be closely monitored as it comes right before FOMC announcement on 6/15. The week of 6/13 will be a fairly explosive week, followed by a 3-day weekend. So mark your calendar not to go on vacation during that week.  Bear market is closer to the end than to the beginning Take a look at the weekly chart of Nasdaq percentage of stocks above 200-day MA. This percentage is the worst among all the stock indices. But it is in the process of forming a bottom. As long as this percentage can stay above its recent low of 12%, the bottom becomes stronger. And if this percentage dives below 10%, that is historically capitulation area.  OpEx week can lead into big summer rally The upcoming OpEx on 6/17 is very very big. Over $3.2 trillion in options are set to expire, and the majority of them are put options. Traders and portfolio managers have been purchasing massive amount of puts to hedge against the drop in stock prices. When a trader buys puts, a dealer is selling it from his book. To keep his book neutral from the direction of the market, the dealer has to hedge. He typically hedges against his sold puts (bullish) buy shorting stock futures (bearish). When these puts expire or are monetized by traders, dealers have to cover their shorts to stay market neutral. The result is a short covering rally because dealers are now buying into strength. Their buying raises stock prices, prompting traders to sell more puts, which then forces dealers to cover more shorts. And a virtuous cycle starts for the bulls. Imagine over $3.2 trillion options, most of which are puts, expiring on 6/17. The resulting short squeeze can trigger a massive rally that may last multiple weeks into the summer. Read more about how options are impacting the underlying stock market here.  Short-term volatility signal: "Transition" However, before we get there we may have to endure another week of choppy or slightly bearish trade actions. $VVIX is hinting that it is getting ready to rise, at least back up to the zone between 106 and 110 (20-day and 50-day EMA lines). As $VVIX rises, stock prices are likely to drop some amount. So we should be prepared for choppy to bearish price actions. Read more about volatility and volatility ETFs here.  Key support and resistance levels Given the likely choppy market conditions, we are looking at tight trading ranges to start the week
Between now and 6/17, we should be prepared for price actions similar to the period between 2/24 and 3/15. Recall that March FOMC was on 3/16, and March OpEx was on 3/18. And similar to June, March OpEx was the end of the first quarter, and was quadruple witching as well. And the stock market turned bullish on 3/15, right before all these key dates. 
Trade plan Click here for live trades. Subscribe to get our latest analysis, daily trade plans and live intraday trades. Current trade record here. 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.
Updates 11 AM ET - Monday Upcoming key events The key events coming up are actually mid-June, on 6/15 and 6/17. That will be a fairly explosive week, followed by a 3-day weekend. So mark your calendar not to go on vacation during that week.  Is this the bottom of the bear market? No one really has the answer for that, but there are some interesting projections by various analysts. The latest projection from Bank of America calls for S&P at 3000 by October, which is a depressingly low number. Below is the daily chart of Nasdaq percentage of stocks above their 200-day MA. This is what we call the percentage of "happy stocks". On 5/20, it got a low as 12%. Historically, when the percentage of "happy stocks" drops below 10%, it is a reliable indication that the bear market has reached capitulation level. 12% is not as clear of an indication. Meanwhile NYSE only got as low as 22%, and small caps got to 17% as the latest low. So we can't say that the bear market has reached capitulation level. This is not good big picture news for the bulls.  Improving breadth supports bear market rally However, in the short term, bulls should rejoice. The sharp jump in the percentage of "happy stocks" indicates improving breadth.
This is confirmed by the sharply rising Advance/Decline lines for all stock indices as well. Short-term volatility signal: "Fully Bullish" Our volatility signal turned "Fully Bullish" by end of 5/20. That was after a very sharp drop where the S&P dipped into "bear market territory" officially. But volatility charts ($VIX $VXN $RVX $VVIX) all showed that volatility was steadily declining. That was why the volatility signal turned "Fully Bullish". What this demonstrated was the accuracy of our volatility signal. We must confess that even we sometimes have a hard time fully believing it. The bearish sentiments were so strong during the week of 5/16. It can make you doubt your own system. But there is no doubt now that the volatility signal has been right all along. And as of this Friday, it is sending out a bullish message, showing that volatility is not ready to rise yet.  Key support and resistance levels The battle ground for this week will be between these key levels:
(Support is the low of 5/27. Resistance is the high of 5/4.) The bulls have the advantage for now. As long as ES NQ RTY stay above their support levels, they will try to clim up towards resistance. To track their upward progress, use their 15-minute charts to monitor the 200 EMA green line. For example, ES 15-minute chart below, as long as ES 200 EMA green line is still rising, its bullish momentum is still intact. Once this green line starts to go sideway, pay close attention to the message by $VIX and $VVIX. If one of them turns bearish, the volatility signal will become "Transition" at that point. Do note that the resistance levels listed above are very strong. They are where the bulls got trapped post FOMC on 5/4. So a lot of sellers are likely to step in at this level.  Trade plan Click here for live trades. Subscribe to get our latest analysis, daily trade plans and live intraday trades. Current trade record here. 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.
Updates 12 AM ET - Monday 5/23/22 Upcoming key events FOMC minutes on Wednesday and GDP report on Thursday will no doubt move the market in some ways. But given the disastrous earning reports of Walmart and Target last week, Friday's reports are going to be monitored closely to gauge whether or not consumers will continue to support this economy. And speaking of earnings, the following earning reports will also be closely monitored on Thursday after hours: COST (Costco), NVDA (Nvidia).  Bear market is not done In the big picture context, the bear market is not done yet. The horrible combination of super hot inflation, supply chain disruption, unending pandemic, China shutdown, Ukraine war is not improving. Not anytime soon. A recent WSJ article discussed how this could be the lost decade for stocks. We are inclined to agree. But a bear market rally is imminent Having said all that, we will now say that a bear market rally is imminent. It is likely to start as early as Monday based on volatility signal (see more on that further below.) Besides volatility signal, there are other important signs of market stabilizing for the short term.
Short-term volatility signal: "Fully Bullish" $VIX: "Fully Bullish"
 SVXY: "Fully Bullish" SVXY 15-minute chart below shows 2 sets of W bottoms formed since 5/2.  ES: "Fully Bullish" Don't let ES $SPX dip towards 3800 on Friday fool you. That was a bear trap. Price dropped just enough towards this key level to trigger the criteria for the algos to go short. Then price reversed hard. And reversed across the board for S&P, Nasdaq and small caps. All this happened in on a Friday afternoon. That's a bullish turnaround. However, we don't think ES, along with all the other indices, will just take off right away on Monday. Below is ES hourly chart with key consolidation zones highlighted in yellow. While we don't think ES will retest 3800 again this week, we think bulls and bears are going to fight it out in ES support zone between 3855 and 3950 for a bit. If ES can get down close to 3855 one more time and find enough buyers there to help it reverse sharply upward, then the bargain hunters are likely to step in to help with momentum. Once ES reverses upward, it can rise up to the top of the next consolidation zone at 4045. Ultimately, ES may rise back up to 4300 before signal turns "Fully Bearish" again.  Trade plan Click here for live trades. Subscribe to get our latest analysis, daily trade plans and live intraday trades. Current trade record here. 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.
Updates 3:14 PM ET - Friday 5/20/22 Volatility signal failure >> "Fully Bearish", but... We wrote at 9:20 this morning that key charts are showing for setups for retest of lows. We've been saying that a successful retest means volatility signal will turn "Fully Bullish". All the indices came very close to forming the pattern we've been hoping for. But the pattern failed. $SPX $NDX IWM all dropped below support from 5/17. That failure turns the signal back to "Fully Bearish". However, our SQQQ position got stopped out (at breakeven) after a strong directional move. All indices reversed sharply upward. At this point, there is a lot of conflicting data that requires further analysis. How the market closes today will offer a lot of clues. One important clue we've been tracking is that while $VIX rose up, it has not risen above the high of 5/12 yet. And $VVIX 200-hour EMA is still trending down. But we do not feel comfortable recommending either bullish or bearish entry at this point. We'll be providing a full analysis this weekend, and hopefully the end-of-day and end-of-week charts and data will reveal where market is really heading next. Updates 9:20 AM ET - Friday 5/20/22 Retest of lows likely This morning the key charts are showing setups for a retest of lows.
A successful retest of these zones may be our entry points to go long. We don't plan any Quick Bear trade here. We are getting ready for the Multi-day Bull positions only. Updates 1:30 AM ET - Friday 5/20/22 Bear market is still here, but getting close to short-term "Fully Bullish" To be clear, this bear market is still raging. But in the short term, our volatility signal may be turning "Fully Bullish" by tomorrow. What's the catalyst for stock indices to turn bullish? OpEx. Today is May options expiration for equity. This market is heavily hedged with puts. As these puts expire, dealers will buy to cover their shorts put in place previously to hedge their own books. All these short covering actions will provide fuel for a bear market rally. However, there may not be as much fuel this time as there was back in March. This is because traders are not as heavily hedged with puts. And some of these puts have already been unwound by Wednesday VixEx. So the remaining fuel for a red hot rally is low. Nevertheless, the key charts are showing very high possibility of signal turning "Fully Bullish", setting the stage for a bounce. We may only have enough fuel for this bounce to rise up to the high of 5/17. But we expect it to be a multi-day bounce. Let's take a look at the key charts containing our signals. $VIX: very close to "Fully Bullish" All of $VIX EMA lines along with $VIX itself are forming a pattern very similar to 3/15.
We expect $VIX to drop from here, at least back to 5/17 low. If it can drop lower than that, then this rally has longer to run.  SVXY: "Fully Bullish" but... Zooming in on SVXY 15-minute chart below, we see that:
This pattern technically "Fully Bullish", but we really would like to see SVXY dipped towards 46 one more time.  ES: very close to "Fully Bullish" ES 15-minute chart below shows it is likely to be forming a W bottom with its 20 EMA blue line. We would like to see ES consolidate a bit more below the 200 EMA green line, giving this line time to go sideway, setting the stage for a big rally. Having said this, if ES retests 3856 successfully today, we will consider it "Fully Bullish". Note also that in ES chart below, we've marked the likely resistance zones as ES climbs upward. These resistance zones apply to $SPX as well. $SPX is likely to lead the indices up, so keep an eye on these zones.  Trade plan Click here for live trades. Subscribe to get our latest analysis, daily trade plans and live intraday trades. Current trade record here. 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.
Updates 11:09 AM ET - Wednesday 5/18/22 New bets on fear As May VIX options expire this morning (VixEx), it appears that there is renewed fear on the part of traders. They are buying VIX calls, placing fresh bets on rising volatility. These bets may override the bullish effect of expiring equity options (Friday OpEx). We think the odds are high here that $VIX will retest at least 30, possibly rising as high as 35 if the fears persist. This means that $SPX $NDX IWM will most likely be testing the low price zones formed between 5/12-5/13. For today, we are sticking with a Quick Bear trade via UVXY to capture this rise in $VIX. Keep in mind that this is a tough environment to trade in because VixEx and OpEx are producing opposite effects. Updates 1:45 AM ET - Wednesday 5/18/22 Short-covering rally is likely to continue...but weak The current rally is happening because of VixEx and OpEx. $VIX options are expiring today, while equity options are expiring this Friday. Equity options are mostly puts purchased for hedging. As these puts are unwound, dealers buy to cover their own shorts which were set up originally to protect their books. All this short-covering activity reduces volatility and boosts equity prices. Going into this week, we were hoping for $VIX to retest at least 30 or higher before dropping down again towards 20. This would mean a retest of the lows for $SPX $NDX IWM. If successful, it would set the stage for a sustained rally all the way up to $SPX at 4300 or higher.  However, we haven't gotten this retest yet. And at this point, as we approach Friday, there's no reason for volatility to rise. Not while these bearish bets are getting unwound. So we have to assume that the current short-covering rally will continue up, at least until Friday. However, unlike March OpEx where there was a huge volume of puts, this put volume this time is not as high. So there may not be as much fuel to help push the rally past Friday. And there are very few calls, and not a whole lot of demands for equity from non-options buyers. So we have our doubts about the longevity of this rally. Finally, NQ $NDX are not rallying as strongly as ES $SPX are. We want to see the weakest sector have a super rally as proof of strong short covering activities. Key levels for $SPX ES Still, even if this rally isn't going to last that long, it is likely to last until Friday, or into early next week even. Regardless of what you trade, keep an eye on ES and $SPX levels. For Wednesday, ES $SPX are likely to be traverse between 4040 and 4110. In order for this rally to continue, ES $SPX need to stay above 4040. If that support level is maintained, the short-covering activities can push ES $SPX all the way to 4110, and then 4155.  Trade plan
Click here for live trades. Subscribe to get our latest analysis, trade plans and live intraday trades. Current trade record here. 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.
Updates 10:30 PM ET - Sunday Upcoming key events There are 2 key dates that may see a rise in $VIX. First is April VIX options expiration this Wednesday. Once these options expire, we may see a fresh rise in demand for new $VIX calls (long volatility) and equity puts (short stocks). This demand may increase substantially as traders feel the need to hedge ahead of FOMC announcement on May 4.  Key Price Levels The table below has been updated for all but IWM TNA. L1 is a strong support level, and this is where we expect the current sell-off to end.  The Big Picture: bad news and good news We've been relying on the Percentage of Happy Stocks chart to show us a pretty accurate snapshot of big picture market moods. ("Happy Stocks" are stocks that are above their 200-day MA). Below is the Nasdaq Happy Stocks chart. There are two important messages on this chart. Bad news: Last week we wrote this about the percentage of Nasdaq Happy Stocks: It is on its way to retest 20% zone. This path seems to be happening for not only $NDX, but also $SPX and IWM as well. This signal is currently "Fully Bearish". We're unlikely to see real recovery before Nasdaq tests 20%. Good news: This is a chart pattern that we typically see at the end of a bear market, not at the beginning. This pattern is close to capitulation. The percentage may bottom out anywhere between 20% and 10%. After that we typically see a very bullish sharp rise back up as a new bull market starts.  Volatility confirms "Fully Bearish" Read more about $VIX $VXN $RVX $VVIX and the effects of options and hedging on the market here. On 3/29, volatility of volatility ($VVIX) gave us the initial warning that market conditions were "Approaching Bearish" as a new volatility cycle was starting back up. Since then, $VVIX has been coiling upward. $VVIX 20 EMA blue line and 50 EMA red line are about to cross over the 200 EMA green line. As you can see from previous patterns, this is typically a setup for $VVIX to surge. We may see $VVIX revisits the high of March 8.  Meanwhile $VIX weekly chart showed that it has formed a couple of contracted weekly candle, anchored on its 200-week EMA green line. This is typically a setup for $VIX to surge.  Supplemental Indicators: confirm "Fully Bearish" (mostly)
Dealer hedging: $SPX $NDX IWM are currently below the key levels where dealer hedging turns to "fueling volatility". This means that dealers are now buying strength and selling weakness, potentially creating big swings in price. This is typical of "Fully Bearish" conditions. Nasdaq is the leader on the way down Keep an eye on $NDX. It has a good chance of finding bottoms at February 24 low. When $NDX finds strong support, $SPX and IWM will also.  Trade plan While the signal is "Fully Bearish", we will focus on trading SQQQ and UVXY. We won't attempt any counter-signal trades because our record for those trades have not been as successful.
Subscribe to get our latest analysis, trade plans and live intraday trade adjustments. Current trade record: 340% since July 2020 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. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Current trade record here. Click here for live trades. Updates 3:00 PM ET - Sunday Upcoming key events This is a short week as the stock market is closed on Friday for Easter weekend. The CPI report on Tuesday is expected to be hot, but by now everyone knows and expects this number to be high. So there may be no negative surprise here. But April options expiration (OPEX) is earlier than usual, and $VIX monthly expiration follows on 4/20 rather than precedes OPEX. Given the 3-day holiday weekend, sandwiched between the two expiration dates, there may be some unusual swings.  Key Price Levels The table below is the same as Thursday.
 The Big Picture: bad news and good news We've been relying on the Percentage of Happy Stocks chart to show us a pretty accurate snapshot of big picture market moods. ("Happy Stocks" are stocks that are above their 200-day MA). Below is the Nasdaq Happy Stocks chart. There are two important messages on this chart. Bad news: By 3/29, Nasdaq percentage of Happy Stocks ran into strong resistance at its 20-week EMA blue line (48%). It formed a topping candle and dropped sharply. It is on its way to retest 20% zone. This means we are likely to see selling this week for tech stocks. NYSE and small cap charts are showing similar patterns. This means selling for the S&P and small caps as well. Good news: This is a chart pattern that we typically see at the end of a bear market, not at the beginning. This pattern is close to capitulation. The percentage may bottom out anywhere between 20% and 10%. After that we typically see a very bullish sharp rise back up as a new bull market starts.  Volatility confirms "Fully Bearish" Read more about $VIX $VXN $RVX $VVIX and the effects of options and hedging on the market here. On 3/29, volatility of volatility ($VVIX) gave us the initial warning that market conditions were "Approaching Bearish" as a new volatility cycle was starting back up. Since then, $VVIX has formed a W bottom and its 200-EMA green line is coiling upward (see 15-minute chart below).  $VIX itself also formed a W bottom and its 200 EMA green line is coiling upward as well. We may see $VIX tags 20 quickly on Monday. After that it is likely to climb up, possibly reaching 29 before this volatility cycle ends.  Supplemental Indicators: confirm "Fully Bearish" Equity Put/Call ratio: The P/C ratio daily chart below shows only EMA lines to make it easier to discern its pattern. Observe how the 20-day EMA blue line is forming a W bottom, ready to rise back up to form possibly a lower high top. This confirms the "Fully Bearish" mood happening right now. What the P/C ratio pattern is telling us is that traders have been buying more puts, and are likely to keep up the demands for hedging puts as market sells off. This creates a vicious cycle with dealer hedging, becoming a technical force that can drive price down short term. Dealer hedging: Given the current dealer hedging of their books, if $SPX drops below 4475 and QQQ below 357, sharp price swings will kick in. This is because as price drop below these levels, dealers will need to buy into strength and sell into weakness to stay delta neutral. This means they will be fueling volatility, creating a vicious cycle. Bonds: Bond volatility (MOVE) has been rising sharply again. All bonds are selling off, and Treasury yields are rising sharply. We may see capitulation in the bond market in a couple weeks, but until then traders will be selling bonds, and selling equities as well. Dark Pool Index: This index has been forming a topping pattern, confirming the "Fully Bearish" conditions for now.  Trade Plan We think there's a strong possibility that $SPX will drop down to retest 4300.
In the spreadsheet, we show our plan to continue scaling into SQQQ and UVXY and where we plan to take profits. Looking further down the road, once conditions become "Approaching Bullish", we will start scaling into:
Click here for live trades. Subscribe to get our latest analysis, trade plans and live intraday trades. Current trade record here. 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. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Current trade record here. Updates 6:30 PM ET - Sunday 4/3/22 Upcoming key events This week is light in economic reports, but there are few Fed speakers as well as the release of FOMC minutes to stir things up a bit.  Key Price Levels The table below has been fully updated. These new price levels will be in focus this week. Table is available in members section. Weekly index charts confirm "Approaching Bearish" $VVIX has been warning us that volatility is about to rise some amount. This means stock indices are about to pull back a certain amount. Stock conditions have changed to "Approaching Bearish". This is confirmed by the topping candles formed on $SPX $NDX IWM charts. How much of a drop can we expect and how long? We don't think stock indices are starting a lower-low leg in a bear market. Rather, they are building the 2nd leg of a really big W from which they can propel themselves higher, getting out of the bear market for real. This potential path is shown on $SPX weekly chart below. Here are our projections:
 "Happy stocks" charts confirm "Approaching Bearish" The weekly chart of Nasdaq percentage of stocks above 200-day MA shows a big topping candle formed right at the 20-week EMA blue line. The odds are high that this percentage will drop, possibly to retest 20% again. This confirms the "Approaching Bearish" condition for $NDX. NYSE and small cap charts are showing similar patterns as well.  Volatility confirms "Approaching Bearish" Read more about $VIX $VXN $RVX $VVIX and the effects of options and hedging on the market here. Volatility of volatility ($VVIX) formed a complete W bottom by 4/1, setting the stage for a possible multi-day climb back up. $VIX $VXN $RVX all confirm the "Approaching Bearish" conditions.  Supplemental Indicators Equity Put/Call ratio: This ratio has stopped dropping and started rising steadily since 3/25. This means traders are starting to buy more puts for hedging and shorting purpose. This confirms the "Approaching Bearish" conditions. Dealer hedging: If $SPX $NDX IWM drop and stay below Friday's lows, current state of dealer hedging will fuel volatility. This is because dealers will be selling into weakness and buying into strength, thereby creating sharp price swings. Bonds: Bond volatility (MOVE) has been rising sharply for the last several weeks. Junk bonds (JNK HYG) weekly charts show topping patterns. Junk bonds tend to behave like equities. This confirms the "Approaching Bearish" conditions. Dark Pool Index: This index is starting to show a topping pattern, confirming the "Approaching Bearish" conditions. Trade Plan After $VIX $VVIX form a W bottom, they will be ready to rise for multiple days. We plan to capture this rise volatility and drop in price via UVXY and SQQQ. The charts below show the possible price paths for UVXY and SQQQ. Note that we plan to scale into both positions at the lows of last week, and take partial profits along the way. Click here for UVXY SQQQ charts and current buy/sell orders. Subscribe to get our latest analysis, trade plans and live intraday trades. Current trade record here. 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. |
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