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We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
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We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 8:00 PM EST - Monday Volatility: $VVIX $VIX $VXN $RVX Read more about $VIX $VXN $RVX $VVIX and the effects of options and hedging on the market here. We are still looking for the same key patterns discussed yesterday. Here's what to look for on $VVIX chart.
$VVIX is actually the chart that shows the clearest warning pattern as of Monday. It's a W pattern below the 200 EMA green line. That is usually a warning that volatility overall is likely to rise some amount. To be clear, we are not talking about a massive volatility spike that accompanies a market crash. We are just saying there's likely one more volatility spike for $VVIX $VIX $VXN $RVX, and one more dip of some sort for $SPX $NDX IWM some time post FOMC.  Hedging by Traders: P/C Ratio Even though implied volatility has been dropping, the demand for puts from traders and fund managers are still high, above the 200 EMA green line in the P/C ratio chart below. This is understandable as they want to be hedged ahead of FOMC on Wednesday. Key patterns to look for in the intraday charts of P/C ratio:
 Hedging by Dealers Keep an eye on the following key gamma levels. If prices drop below them, gamma turns negative. This means dealer will hedge by selling into weakness and buying into strength. This action will fuel volatility and causes big price swings.
IWM is actually below the key gamma level. This means that gamma for small-caps index is still negative. In other words, big price swings are still likely for IWM. Market Breadth: Advance-Decline Net Issues NYSE, Nasdaq and S&P small caps had been forming big W bottoms since 12/1. The pattern is stalling a bit, but is still intact. Of all the indices, Nasdaq breadth is still the weakest. Below is its daily area chart.
 Other Signals
Short-term Key Levels and Trade Plan Subscribe to get our latest analysis, trade plan 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 suggestions. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Subscribe to get our latest analysis, trade plan and live intraday trades. Current trade record here. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility.
Subscribe to get our latest analysis, trade plan and live intraday trades. Current trade record here. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 12 AM EST - Thursday 12/9/21 Read more about $VIX $VXN $RVX $VVIX and the effects of options and hedging on the market here. Hedging by Traders and Dealers Fear evaporated almost as quickly as it arrived. Last week, traders and fund managers were very fearful, and they rushed to hedge by buying puts at a high cost due to super high sudden volatility spike. Dealers had to hedge their books in a way that fueled volatility even more, and caused the melt-down in price. But those expensive puts are tough to hold on to when stocks started to turn slightly more bullish. So traders covered their puts or let them expire. Dealers reversed their hedging in a way that caused a big melt-up in price. Now market conditions have reached a state where gamma is positive. This means dealers will be buying into weakness, and selling into strength. This process dampens volatility and keeps stock prices from melting, up or down. However, FOMC is next Wednesday. Traders and managers will want to hedge for this event some amount. So despite the drop in P/C ratio we saw in the last couple of days, we are likely to see the P/C ratio rise again. In fact, we want to see it rise again, similar to what's shown in the 30-minute chart below. We consider the arrival of this pattern a signal that conditions have turned "Fully Bullish".  Volatility: $VVIX $VIX $VXN $RVX When traders start buying puts again to hedge FOMC, $VIX $VXN $RVX $VVIX are all likely to rise again, similar to the chart pattern shown below. We want to see that pattern show up, just like P/C ratio chart above. We consider that pattern to be the signal that conditions have turned "Fully Bullish".  Market Breadth: Advance-Decline Net Issues As discussed we've been discussing for the last few days, the daily charts of A/D net issues for NYSE, Nasdaq and S&P small caps are looking more bullish each day. Below is the daily chart for A/D net issues for Nasdaq. This is the area chart. Observe the W bottoms that is forming. Similar bottoms are forming for NYSE and small caps. This is a "Fully Bullish" signal for market breadth.  Other Bullish Signals
Short-term Key Levels and Trade Plan Subscribe to get our latest analysis, trade plan 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 suggestions. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 1:45 AM EST - Thursday 12/2/21 What's going on with the big dives in $SPX and IWM? Let's step back to a happier time in early November, when all the stock indices were marching up steadily. You may recall that we were posting Put/Call ratio charts that had very low put values relative to calls. What that showed was that traders were not bothering with buying puts to hedge. In fact, they were greatly under hedged as it turned out. Instead of buying puts to hedge, traders were buying calls. In response, dealers hedged their books in a way that resulted in dealers selling into market strength. This is the effect of positive gamma, where price swings are small and market grinds up slowly. Then OPEX came on 11/19 where all the November options expired, clearing the dealer hedging, and everyone started all over with a new monthly cycle. Things were still looking pretty calm until 11/26, when news of the Omincron variant broke. Traders rushed to buy a ton of puts on a partial trading day with very poor liquidity. Implied volatility shot up, and gamma dropped. $SPX and IWM dropped sharply because everyone assumes things will be locked down again like March 2020. As $SPX and IWM drop, traders buy more puts and dealer hedge their books in a way that results in them selling into market weakness. This is the effect of negative gamma. It leads to very big price swings, up or down. At this point, gamma is still very negative, but it is approaching the gamma level of September low, and will probably reach it soon. Then gamma will likely rise again. And when gamma rises while $SPX IWM are way oversold, $SPX IWM can rise up sharply. This is how those big sharp V or W bottoms form after a major sell-off. The obvious question is when. No one can really give us a precise answer. But we will get a clue when the 20 EMA line on the Put/Call ratio chart starts to form lower highs, along with $VVIX $VIX $VXN $RVX charts. See the P/C ratio 2-hour chart below.  Volatility: $VVIX $VIX $VXN $RVX All volatility charts have shot up sharply higher late Wednesday afternoon, after the news came out that the first case of Omicron has been identified in CA. Traders used this excuse to hedge more, which meant implied volatility shot up, and gamma turned even more negative, and $SPX IWM dropped hard from the effects of negative gamma. One thing to note is that spot $VIX closed on Wednesday at 31.13, which is much higher than any VIX future. July VIX future is the highest, and it is still only at 27.4. What this tells us is that implied volatility from spot $VIX is reflecting the current short-term panic. Traders are rushing to buy short-term puts to protect their portfolios. All that hedging raises implied volatility of $SPX. Meanwhile, VIX future traders are not experiencing the same needs. And they don't anticipate volatility to rise that high, even as far out as July. UVXY has dropped after hours. VIX futures are dropping overnight as we write this. We are planning to hedge our holdings with UVXY, if UVXY retests the zone between 17.5 and 18, and finds support to anchor there. That may be a setup for UVXY to form a higher high. But we do have to be careful with UVXY as gamma approaches its negative bottom. When volatility starts to ease up, UVXY will drop hard. So our UVXY trades will be for intraday holding only.  Market Breadth: Advance-Decline Net Issues NYSE, Nasdaq and small-cap A/D net issues dropped substantially on Tuesday, but again not as low as Friday. Perhaps this is a hint that breadth is slowly improving from "horrible" to "just plain bad". Short-term Key Levels The table below is fully updated.  Trade Plan
Subscribe to get our latest analysis, trade plan 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 suggestions. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. See trade record here. Updates 12 AM EST - Monday 11/22/21 Key dates This is a major holiday week for US stock market.
Here's the economic calendar for the full week. Wednesday is heavy-duty report day. Monday: Existing Home Sales Wednesday:
Volatility $VVIX (volatility of $VIX) hourly chart below tells us that a quick dip in price is possible early in the week. $VVIX 20-hour EMA red line and 50-hour EMA blue line are still above the 200-hour EMA green line and rising. This means the possibility of a $VIX spike is still high, just like the pattern shown at (1). There's a good chance we'll see this spike on Monday. We don't, however, expect this spike to be very big or long lasting. Alternatively, if the red and green EMA lines start to turn down like the pattern at (2), then $VVIX is dropping and conditions are back to fully bullish.  Equity Put/Call Ratio Today we want to show P/C ratio daily chart just to put things in perspective. This chart tells us that while a quick price dip is possible, a crash is unlikely. Reasons:
 Advance-Decline Net Issues The A/D lines for NYSE and Nasdaq have all dropped sharply for multiple days now. This is particularly true for Nasdaq. This is a bearish divergence from the bullish price actions for $NDX and $SPX.  Seasonality Statistically, this is a bullish period of the trading year. Dealer Hedging As long as the $SPX $NDX IWM stay above these price levels shown below, dealer hedging activities will keep price swings smallish, resulting in calmer market. If $SPX $NDX IWM drop below these levels, dealer hedging activities will feed into price swings, resulting in much more volatile market.
Observe that IWM closed on Friday at below the key level of 234 above. So we may see bigger price swings for IWM TNA Monday. Short-term Key Levels The table below has been fully updated.  Trade Plan Subscribe to get our latest analysis, trade plan and live intraday trades. See 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 suggestions. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. See trade record here. Updates 12 AM EST - Monday 11/15/21 Key dates Here's the economic calendar for the full week. Look for these key reports that may move the market. Tuesday: Retail Sales; Industrial Production Wednesday: Housing Starts Thursday: Jobless Claims The key events this week will be the monthly options expiration. Wednesday: $VIX options expiration Friday: options expiration for equity, equity index, ETF, ETN Click here for earnings calendar for this week. Volatility So far $VVIX is following the Rise>>Anchor>>Spike pattern that we started showing early last week. There is a high probability that $VVIX will follow the updated path shown below. Not a guarantee, but a high probability.
 Equity Put/Call Ratio In the P/C ratio 30-minute chart below, its 200 EMA green line has flattened out and is likely to continue sideway. This indicates that traders have gone from a super bullish buy-calls mindset from early November, to a more cautious "buy-puts-to-hedge" mindset.  Advance-Decline Net Issues >> bullish NYSE and Nasdaq A/D lines are still above their 200-hour EMA on their cumulative hourly charts. Overall message is still bullish. However, keep an eye on Nasdaq A/D as it is getting close to its 200-hour EMA green line. If this green line starts to flatten out and go sideway, or turn downward, it means Nasdaq market breadth is turning bearish.  Seasonality >> bullish Statistically, this is a bullish period of the trading year. Dealer Hedging >> bullish As long as the $SPX $NDX IWM stay above the price levels shown below, dealer hedging activities will keep price swings smallish, resulting in calmer market. If $SPX $NDX IWM drop below these levels, dealer hedging activities will feed into price swings, resulting in much more volatile market.
Short-term Key Levels The table below has been fully updated.  Trade Plan Subscribe to get our latest analysis, trade plan and live intraday trades. See 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 suggestions. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 10:51 AM EST - Tuesday 11/9/21 Volatility As we've been anticipating, the minor spike in $VVIX $VIX $VXN $RVX is happening. Pay close attention to $VVIX hourly chart. As we posted earlier this morning, $VVIX is likely to bounce around between 105 and 118 next few days. When $VVIX anchors at the 200-hour EMA green line is when it is likely to really spike. This will most likely happen early next week, ahead of OPEX (11/19). This is where we are likely to exit long, locking in profits for TQQQ TNA.  Updates 8:50 AM EST - Tuesday 11/9/21 Volatility >> time to think about locking in profits As we get closer to November options expiration (OPEX 11/19), it's time to monitor $VVIX more closely. $VVIX has a minor spike above its 200-hour EMA green line as anticipated. Now it's likely to spend some time bouncing between 105 and 118 to anchor some more. Then it will be in a better setup to have a moderate spike above 118, around OPEX.
 Equity Put/Call Ratio >> bullish In the P/C ratio 30-minute chart below, keep an eye on the 200 green line. It needs to flatten and go sideway for a few days before it can really spike. So for right now, it is bullish. When this ratio spikes, it means traders are buying more puts than calls in an effort to hedge. That's more bearish.  Advance-Decline Net Issues >> bullish NYSE and Nasdaq A/D lines are still above their 200-hour EMA on their cumulative hourly charts. Overall message is still bullish.  Seasonality >> bullish Statistically, this is a bullish period of the trading year. Short-term Key Levels The table below is still the same.  Trade Plan Subscribe to get our latest analysis, trade plan and live intraday trades. 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 suggestions. We trade 3x ETFs such as TQQQ TNA SOXL LABU UVXY using proprietary analysis of volatility. Updates 12:00 AM EST - Monday 11/8/21 Key dates Here's the economic calendar for the full week. Tuesday: Producer Price Index (PPI) Wednesday: Consumer Price Index (CPI) Friday: Consumer Sentiments; Job Openings (JOLTS)
Here are the companies reporting this week including PYPL, TME, COIN, DIS, DHI, PLTR, TCEHY. Volatility There is no guarantee in any pattern, but keep an eye out for the following pattern that $VIX $VXN $RVX may follow.
 Equity Put/Call Ratio In the P/C ratio 30-minute chart below, keep an eye on the 200 green line. It needs to flatten and go sideway for a few days before it can really spike. So for right now, it is bullish. When this ratio spikes, it means traders are buying more puts than calls in an effort to hedge. That's more bearish.  Advance-Decline Net Issues >> bullish NYSE and Nasdaq A/D lines are still above their 200-hour EMA on their cumulative hourly charts. Overall message is still bullish.  Seasonality >> bullish Statistically, this is a bullish period of the trading year. Positive gamma >> bullish Gamma is positive right now for $SPX $NDX IWM. This means that dealers are hedging their books by buying into weakness, and selling into strength. The net effect is supportive of a steady march upward, without outsize swings. Short-term Key Levels The table below has been fully updated. Trade Plan Subscribe to get our latest analysis, trade plan and live intraday trades. 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 suggestions. |
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