Updates 4 PM ET - Thursday Entered into SOXL NQ failed to drop to test support at 17000 today. We used this fail signal as the new signal to enter long via SOXL.  Updates 2:35 AM ET - Thursday Upcoming key events The Fed feels it will be appropriate to begin cutting rates some time later this year. But first they need more evident that inflation will continue to drop and eventually get back to 2%. For now rates remain unchanged and QT remains unchanged. QRA was a non-event. Read more about rates and the economy here.  Big picture: bull market; short term: weakening momentum The indicators are still sending out the same message. This is a bull market with weakening momentum, with more selling than buying right now. However the indicators are not showing that this is the start of a bear market. So at some point soon the strong momentum should resume, just not this week. S&P and Nasdaq Advance-Decline Percents (Stockcharts $SPX ADP $NDXADP) are both showing lower high topping patterns on their daily chart. This declining market breadth is now reflected in declining price for ES NQ RTY. VIX daily chart below shows its 20-day EMA blue line about to rise above its 50-day EMA red line. This will likely push VIX up to 16, possibly 17. This supports the current sell mode for ES NQ RTY.  Key S/R levels NQ: NQ did not tag any key resistance levels on Wednesday. Instead it dropped sharply after FOMC. While NQ may quickly tag 17450 on Thursday, it is likely to keep dropping, down to 17000 by Friday. Then we may see some basing at that level, followed by a bounce from there back up to 17800 next week. ES: Similar to NQ, ES did not tag its Jan 29 high on Wednesday. Instead it dropped sharply after FOMC. While ES may quickly tag 4905 on Thursday, it is likely to keep dropping, down to 4820 by Friday. Then we may see some basing at that level, followed by a bounce from there back up to 4954 next week. RTY: RTY did manage to get close to its Jan 29 high on Wednesday after FOMC. Then it dropped sharply. While RTY may quickly tag 1990 on Thursday, it is likely to keep dropping, down to 1925 by Friday. Then we may see some basing at that level, followed by a bounce from there back up to 2025 next week. Our personal trade plan We scaled into half SQQQ position, with plans to add the remainng half at open on Thursday. See updated positions and buy target 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 1:30 AM ET - Friday Upcoming key events Jobs report is likely to bring about a relief bounce for ES NQ RTY. Read more economic analysis here.  Key S/R levels Most levels have been lowered to reflect the scope of the selloff.  Expect a moderate selloff after a quick bounce to retest R1 In the big picture context, current market is still in a bull trend. However, as we've been sharing with you, ES NQ RTY are starting a moderate selloff, a big dip within the bull trend. ES NQ RTY have been dropping since Dec 29, and are rapidly approaching the new lower S1 levels. After 5 days of selling, they are likely to bounce back up to retest resistance at the new R1. The job report may provide the catalyst for this bounce. The bounce is unlikely to last for very long. ES NQ RTY are unlikely to rise above resistance at R1. After that ES NQ RTY are very likely to resume the drop, which may go all the way to support level at S2. This selloff is likely to last until after FOMC on January 31. After that we are likely to see the big-picture bull trend resumes. How did we arrive at this projection? Based on the indicators below. Market breadth has dropped sharply We've been sharing with you about McClellan Oscillator (Stockcharts.com $NYMO) which measures market breadth. We wrote that once this oscillator turns negative, it will launch a selloff period. This oscillator has dropped to below zero since Jan 2, and has been dropping sharply since. This indicates that selling momentum has picked up substantially, and market is now in a moderate selloff period. The sell period typically lasts from 3 to 6 weeks, as highlighted in yellow below. This is why we project that the current sell period will likely last until FOMC on January 31.  VIX VVIX and VIX futures are all rising VIX VVIX and VIX futures intraday charts have formed W bottom patterns. They are all rising in a tightly coiling pattern, indicating more selling is to come. VIX may dip a bit while ES NQ RTY bounce, but it will resume the climb and will pick up speed once ES NQ RTY reach resistance at R1. If VIX spikes up to the zone 16 - 16.5, ES NQ RTY are likely to drop all the way down to support at S2. Rate rises as junk bonds formed a top 10-year Treasury yield (US10Y) has been rising since Dec 27. Junk bonds (JNK) has been forming a clear top on its daily chart. They confirm the selloff. Our personal trade plan VIX has been coiling too much, making it difficult to successfully trade UVXY. So we have new buy orders to enter TZA instead to capture the selloff. We want to capture the drop in RTY from 2030 (R1) to 1867 (S2) Click here for Signal Trades spreadsheet. 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 4:00 PM ET - Thursday Exited SVIX We wanted to capture VIX dropping from 14.49 down to 11.8. So we entered SVIX on Friday Dec 22. This is a quick bull trade and with UVXY rising ahead of the holiday, we decided to lock in our profit.  Updates 1:00 PM ET - Thursday Upcoming key events 2023 is coming to an end. It's time to focus on January. Note that we've added the earnings dates of the Magnificent 7 stocks to the calendar below. The second half of January will have a lot of fireworks. Read more economic analysis here.  Key S/R levels All levels are still the same.  All indicators still support the bulls
We expect the current bullishness to last into the early part of next week, which is the start of January. Expect VIX swings in January Keep an eye on VIX as it is the leading indicator. We expect to see VIX drops to 11.8, then bases at this level for multiple days during the first week of January. ES NQ RTY are likely to rise and may reach resistance at R1 while VIX does this. Once we enter the second half of January, we are likely to see VIX rise again, and it may rise as high as 15.5 in this second attempt. Once VIX starts to rise again, ES NQ RTY will likely retest support at S1. If VIX manages to rise up to 15.5, then ES NQ RTY will likely retest support at S2. Our personal trade plan As we wrote on Fri Dec 22, we entered SVIX Fri morning to capture VIX dropping from 14.49 down to 11.8. If VIX anchors at 11.8 and then starts to rise, we'll aim to capture the rise in VIX from 11.8 to 15.5 with UVXY. Click here for Signal Trades spreadsheet. 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 11:40 AM ET - Friday Entered into SVIX As we wrote earlier today, we want to capture VIX dropping from 14.49 down to 11.8. So we entered SVIX earlier this morning. This is a quick bull trade as VIX is possibly undergoing a big basing period.  Updates 12:45 AM ET - Friday Upcoming key events According to WSJ, inflation is closing in on the Fed’s target. Read more about what to expect for Friday's PCE report here.  Key S/R levels All levels are still the same.  VIX woke up and is now the leading indicator Before Wed Dec 20, we shared charts which showed warnings of an upcoming dip for ES NQ RTY. These are the warnings that came true on Wednesday.
VIX has woken up at last. We now can use it as the leading indicator to guide us for the next few weeks. We have been writing about VIX spiking up to 14.3 for the short term. It rose to 14.49 on Thu Dec 21. We think that is VIX top for now until early Jan. We expect VIX to drop on from 14.49 high to retest 11.8 again between now and the first week of Jan. While VIX drops, McClellan Oscillator (Stockcharts.com $NYMO) is likely to grind downward but still stay positive. With this confirmation, ES NQ RTY should recover and likely to surpass resistance at R1 as part of the Santa Claus rally. This could start as early as Fri Dec 21 and may last into the first week of Jan. Once VIX drops down to 11.8, if it anchors at this level and starts to rise, VIX can reach as high as 15.5. If McClellan Oscillator swings negative also, then ES NQ RTY will drop and may retest support at S2. However, if VIX continues to drop below 11.8, then ES NQ RTY will spike up to resistance at R2. Our personal trade plan We now want to capture VIX dropping from 14.49 down to 11.8 via SVIX. Then if VIX anchors at 11.8 and then starts to rise, we'll aim to capture the rise in VIX from 11.8 to 15.5 with UVXY. Click here for Signal Trades spreadsheet. 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 2:45 AM ET - Monday Upcoming key events This week is light on economic news, but Powell is scheduled to speak twice at two different economic conferences. Given the latest softer jobs report, traders are likely to monitor his remarks closely for any hints of "no more rate raises". As we know, the stock market is currently driven by bond yields. According to WSJ: "Yields, which fall when bond prices rise, were also pulled lower by soft economic dataand hints from the Federal Reserve that it likely won’t raise interest rates again this year. But it was the Treasury move that many saw as the crucial catalyst." What is this Treasury move and what about the soft economic data? Read more here.  Is the bear market trend done? The WSJ article pointed out that Treasury yields dropped last week from:
Market breadth (Stockcharts.com $SPXA200R $NDXA200R) continues to show big-picture bearishness. The weekly chart of S&P percent below shows all of its EMA lines to dropping sharply.  Bounce has lasted 6 trading days. How much longer can it last? The hourly chart of Nasdaq Advance-Decline Percent below shows that it has reached into very overbought category. But it has not formed a top yet. The same is true for S&P A/D Percent chart. We want to see some kind of top formation like August 30 - September 1 top formation shown below. This chart is just starting a possible topping process. Bears should give it time. Wait at least until the 20-hour EMA green line crosses below the 50-hour EMA red line.  The daily chart of VVIX (volatility of VIX) shows that it has dropped into the bottoming zone. But it is only starting to form the bottom. It can take up to 2 weeks before it's done with the process. So again, bears should wait until VVIX 20-day EMA blue line drops below its 200-day EMA green line and gets down closer to its candles.  Bear market has a way of luring bulls in with its big sharp bullish reversals. These very sharp rises typically come from massive short covering by dealers who previously sold puts (bullish) and had to short stock futures (bearish) to balance their books. When the buying starts, these dealers have to unload the massive inventory of shorts. The result is a short squeeze. The way to trade this market is to trade the bear market selloff, and trade the relief bounce, but don't get married to either direction. You don't have to buy into the "bear market" label. Just trade the big swings. Key S/R levels The updated levels are shown in bold. Bulls will actually want to see ES NQ RTY retest S1 again, and find strong support. In that case, the setup may bring in enough buyers to send ES NQ RTY up to R2, or possibly higher. If ES NQ RTY try to surpass R1 quickly, they are likely to fail and it will be a steep drop down to S2.  Our personal trade plan Subscribe to get our daily analysis, trade plans and real-time entries/exits. 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 6:30 PM ET - Tuesday Exit remaining 1/2 SVIX position VIX is most likely going to base in the zone 13 - 14.5 until mid Sep. But there’s a chance VIX might just spike sharply just to shake out the weak hands like it did on Jul 6. We don't want to endure the possibility of a sudden VIX spike now that volatility pattern is becoming more unpredictable. So we decided to exit the remainder of our SVIX position for now. You can review the original analysis, setup and entry into this trade here, and the partial profit here.  Updates 12:16 PM ET - Tuesday Warnings to bulls: VIX is basing to rise VIX along with VIX futures (VX1!) and volatility of VIX (VVIX) are starting to form a pattern indicating they are basing to rise. They may continue to do this until FOMC on Sep 20 when they may spike up. VIX may spike up to the zone 18-19, or it may rise as high as 22. We won't be able to judge until it gets closer. S&P and Nasdaq percent of stocks above 200-day MA (Stockcharts: $SPXA200R $NDXA200R) are dropping as expected. Let's see if they can find support at their recent lows. We are raising the stop on our 1/2 SVIX position to ensure that we lock in more profit if market conditions change suddenly. However, we are not entering into bear positions such as UVXY or SQQQ yet. Updates 6:50 PM ET - Monday Upcoming key events This week is very light in economic data. But next week promises plenty of fireworks. Read more economic analysis here.  Key S/R levels ES NQ RTY successfully penetrated their R1 levels from Friday. So we have tweaked the R1 levels a bit, along with S1. ES NQ RTY are likely to chop below R1 early this week, possibly dropping down to tag the new S1 before resuming the climb to penetrate the new R1, possibly by Friday. Can they rise to R2 soon? Read more about that further below.  Big picture outlook: Bull is still in charge We've been discussing VIX and market breadth charts. So let's zoom out and take a look at the indicator that typically gives warnings way in advance: VVIX (volatility of VIX). The 2-hour chart of VVIX below shows the types of patterns to look for. Keep an eye on VVIX 200 EMA green line.
Right now, VVIX 200 EMA green line is dropping. So we expect the current bullish conditions to continue.  Another chart that is useful for quick check is UVXY. UVXY rises as VIX rises, and drops as VIX drops, only more so due to contango. Think of contago as very strong head wind that pushes UVXY down steadily. So the time to really worry about the bear is when UVXY 20-hour EMA blue line starts to form a W bottom (or V or U). Take a look at examples of these patterns in the chart below, marked with red arrows. As you can see, UVXY is not showing the worrisome W bottom yet. So bulls can breath a sigh of relief for now.  This week: Bulls should pray for a quick sharp pullback to recharge strength That said, ES NQ RTY are stalling out in their rise, stuck right at R1. Bulls should hope for a quick sharp pullback early in the week to help the bull recharge its strength. Here is the bullish setup bulls would want to see.
If we get this setup and get a shallow dip for ES NQ RTY this week, the bull is possibly recharged enough to reach R2 by FOMC on Sep 20. Our personal trade plan Per our analysis last weekend, we scaled into SVIX on Aug 28. And per our analysis on Aug 31, we took partial profit on 1/2 SVIX position. At this point, we are waiting for the bullish setup discussed above to show up before scaling back into SVIX. In the spreadsheet, we've shown our new buy orders. Click here for Signal Trades spreadsheet. 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 5:15 PM ET - Monday Scaled into bull position SVIX Per our analysis last night, we scaled in when SVIX dipped in the morning. Our target for this trade is 10% gain.  Updates 12:50 AM ET - Monday Upcoming key events This week is filled with economic data that is likely to move the market sharply.  Big picture outlook: Da bull is back? In preparation for Aug 21, we shared with you a big picture analysis. We were worried about VVIX (volatility of VIX) forming the dreaded "Coiling Towards Catastrophe" pattern on its weekly chart. Market breadth confirmed this bearishness by continuing to drop. By end of day Aug 25, a different picture emerged, one that is much more bullish. Let's take a look at the indicators. Market breadth charts formed W bottom >> bullish support By Friday, the 15-minute charts of S&P and Nasdaq percent of stocks above 200-day MA ((Stockcharts: $SPXA200R $NDXA200R) showed a clear W bottom. S&P grazed 50%, and Nasdaq grazed 62%. They both then stabilized and turned up. This suggests that stocks may be done with the big drop for now.  "Coiling Towards Catastrophe" signal failed >> bullish support For last Monday, we wrote an in-depth explanation about the big bearish signal from VVIX which we dubbed "Coiling Towards Catastrophe". By end of week on Friday Aug 25, this signal failed to materialize. VVIX 20-week EMA blue line failed to cross over the 50-week EMA red line. A key failed signal is always significant. It is saying that there is not that much volatility in the system to push VIX into the stratosphere. Not anytime soon. And after a good size sell-off, a failed bear signal is a healthy bull signal.  VIX may be forming a topping pattern >> bullish support VIX has formed a lower high pattern relative to Aug 18 peak. If VIX continues this pattern and its 20-day EMA blue line drops below its 50-day EMA red line, then VIX is on its way possibly to 13 or lower.  How long will the bull signals last? Here are the key signals that we'll be monitoring to confirm that the bull is back in charge.
If these signals start to fail, then the bull may be in trouble again. But we suspect that market will calm down between now and about mid-September. Then we may see a setup for a bearish volatility surge. However, at this point we are not sure if this September surge will send VIX above 19. If VVIX keeps grinding downward, then conditions will still lean bullish. But if VVIX anchors and starts to rise, then the bear is likely back and may come back with a vengeance. Key S/R levels All R1 and R2 lelvels have been updated. Support levels remain the same. If ES NQ RTY retest or get close to S1, that may be a decent setup to enter bull positions. They are likely to reach R1 if bullish conditions persist. They may even rise all the way to R2 by mid September.  Our personal trade plan We will be looking for a bullish setup to enter SVIX on Monday. See our buy orders in the spreadsheet. Click here for Signal Trades spreadsheet. 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 5:47 PM ET - Monday 8/14/23 Opened new position: multi-day bull We entered into TQQQ as outlined in our trade plan earlier today. Entered just above the low of the day. This TQQQ trade aims to capture the anticipated relief rally where NQ can rise from 15000 to 15610 (S1 to R1).  Updates 12:50 AM ET - Monday 8/14/23 Upcoming key events Most of this week will be quiet until Wednesday and Friday. Read more economic analysis here.  Earnings this week Chart courtesy of Earnings Whispers.  Multi-month outlook: Bull market is still intact but needs recharging Our multi-month indicators show the bull market is still intact, but its strength is waning a bit. It will take multiple weeks of recharging to get this bull back close to full strength. If we have a big VIX fear spike in September, then this bull may be recharged enough to run through the first quarter of 2024.  Calming messages from volatility and breadth VIX daily chart below shows that it has been forming a top consisting of lower high candles since Aug 4. This suggests that VIX is more likely to drop in the short term rather than rise.  The hourly chart of S&P Advance-Decline Percent below shows a clear W bottom has been formed. These W bottoms suggest that more stocks are able to advance rather than before.  The S/R table below has all the support levels lowered.  Short-term outlook: Relief rally likely coming this week Right now market flow is very bearish:
If there is a big immediate negative catalyst, this bearish setup will create a vicious cycle of selling. We will see VIX surge hugely, while ES NQ RTY dive sharply. However, all of these bets are time sensitive. VIX expiration is this Wednesday, and equity expiration is this Friday. Most of these bearish bets will expire worthless if we don't get a big immediate negative catalyst. The calming messages from VIX and A/D Percent tell us that nothing super scary is on the horizon right now. As expiration approaches with no big bad bearish catalyst, traders will unwind their bets, and dealers will have to reverse their books, swinging over to the bullish side. This provides fuel for a short squeeze where EQ NQ RTY may rise sharply, creating a virtuous cycle in the process. This relief rally may enable ES NQ RTY to rise from S1 up to R1. They may even try to climb as high as R2, but they are very unlikely to surpass R2 for now. The Fed Jackson Hole Symposium starts on Aug 24. You may recall that last Aug, Jerome Powell's opening speech killed the relief rally in late Aug and sent the market down for another bearish leg. We may see a similar pattern at this year's symposium. We don't think a fear spike will show up until closer to that big window of weakness between Sep 15 and Sep 21 (see schedule of key events above). During this period, VIX may rise as high as 22-23, and ES NQ RTY may dip as low as S3. The good news is this fear spike should recharge the bull for another run through the first quarter of 2024. Our inner bull is hoping for this scenario to come true so that we can enter multi-month and multi-week bull positions. Our personal trade plan We have started to scale into TQQQ to capture the relief rally where NQ can rise from 15000 to 15610. After the relief rally, we are likely to see more selling. We want to wait for VIX to drop into the zone 13.5 - 14 and SQQQ to retest the zone 17 - 17.5 before entering SQQQ. This SQQQ trade aims to capture NQ dropping again from 15610 to 14686. Click here for Signal Trades spreadsheet. 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 1:45 AM ET - Thursday 7/6/23 Multi-month bull signal intact The four key indicators below tell us that the bull market that started last October remains intact. There is no setup for a crash or even a massive pullback right now.  Multi-week bull signal is fading All 4 indicators below are now saying "no longer supportive of multi-week bull". Therefore:
 Key S/R levels All RTY levels in the S/R table below have been updated. The others remain the same Yesterday, we wrote: "Since the multi-week bull signal has faded, ES NQ RTY are vulnerable to a pullback." Wednesday brought the start of the pullback, most evident in RTY. We expect ES and NQ to follow in RTY footsteps down. None of them seems capable of pushing through R1 in the short term. ES NQ RTY are likely to dip down to S1 while VIX rises up to the zone 17-18. Then we may see the start of a new multi-week bull that can take ES NQ RTY from support at S1 up to R2.  Our personal trade plan No more quick bull trade for now. We've shared the setup for a multi-day bear trade via TZA. Click here for Signal Trades spreadsheet. 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 2 PM ET - Monday Upcoming key events There is a moderate amount of market events this week. Powell is scheduled to speak starting on Wednesday in his semiannual report to Congress.  Earnings this week Chart courtesy of Earnings Whispers.  Multi-week Signal Indicators: Bullish Our two key indicators below tell us that the bull market is still intact. In the big picture context, ES NQ RTY along with SVIX SVXY will remain in bullish trend until both of these indicators below change. If only one indicator changes to bearish, then equities may be transitioning, but they don't turn bearish instantly. Note that when we say "turn bearish" for the multi-week signal, we don't mean just a dip. When these two signals below turn bearish, it means the big-picture multi-month bull trend is done. Market will then transition to some variety of bear market.  Multi-day Signal Indicators: Bullish but more dip warnings Background info on $VIX, $VVIX, SVXY, UVXY, ES, NQ RTY While the bull market remains intact, the multi-day indicators are sending out more warnings that a good size dip is very likely this week for ES NQ RTY SVIX SVXY. But this is only a dip that may last 1-2 days. It is not the start of a new bear market.  Key S/R levels NQ resistance levels have been updated. All others are the same.  VIX and dip levels We want to share SVXY daily chart below to give you an idea of how the multi-day and multi-week signals have been unfolding since Feb 2. Admittedly, our system was not well equipped enough to catch all of the moves. Still we caught some, and used this data to fine tune the model.
We may see some choppy movements ahead of VIX OpEx on Wednesday, but overall we expect to see SVXY SVIX dip and then possibly bottom out in the zone around their 20-day EMA blue line (about 23 for SVIX). As for ES NQ RTY, they are likely to dip and retest S1 before bouncing up higher.  Our personal trade plan We currently have buy orders to scale into 2 SVIX positions when it gets down closer to its 20-day EMA blue line. Note that we're scaling in a pretty wide zone from 23.5 down to 22.7. In our experience, detecting the bottom of the dip is not easy. But after a medium dip, SVIX will try to retest the previous high before it drops lower, if it drops at all. Therefore we will hold off setting an immediate stop until SVIX 20-hour EMA line turns up from dipping. MEMBERS: Click here for Signal Trades spreadsheet. We have found that we have to analyze at least 3 time frames to get a feel for key S/R levels that are suitable for a given trade. 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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