Signals & Trading Plan for Tuesday 5/28/19

The bullish divergence continues
We hope you all had a relaxing Memorial Day weekend, and got a chance to get away from staring at the charts.  Sometimes that is the best way to put things in perspective. 

On Thursday eve, we wrote this about the trading plan for Friday 5/23:
"There is a high probability at this point that $SPX $NDX $RUT will have a snapback rally tomorrow Friday and rise back up.  They are likely to run into resistance at the red lines and will turn downward to re-test the lows of today (yellow lines)."

We saw the mini snapback rally on Friday, and all three indices ran into resistance and dropped down before closing.  Many bulls probably headed into the long weekend feeling exhausted and worried.

However, the market is unlikely to be heading into bear territory right now.  We have been sharing with you what our system detected since last Monday 5/20/19.   That is the bullish divergence shown by $VIX and $VXN chart actions versus $SPX $NDX $RUT price actions.

It is highly unlikely that we would suddenly get a new bear market, or a Down Trend, or a crash, without fear building up steadily first.  And since Monday 5/9/19, fear has been going down, as shown in $VIX and $VXN daily charts below.

Market internals are also relatively healthy.  NYSE cumulative A-D line took a little dip but is climbing back up.  The percentage of bullish NYSE stock is above 51%.  Liquidity is still healthy.   So again, the underpinning for the next Up Segment in stocks is all there.

And we have a very nice setup in contrarian indicators.  Stock prices are very oversold short-term.  $SPX $NDX $RUT have been down since 5/3/19.  That is 15 trading sessions being down while not in a bear market.  Participants are feeling nervous, worried, and emotional.   So the odds are high that $SPX $NDX $RUT will start a new Up Segment soon.

Testing support levels
However, $SPX $NDX $RUT are very likely to at least test their first levels of support.    Here are their respective hourly charts with the updated support levels.

The odds are high that $SPX $NDX $RUT all will re-test at least their yellow lines, most likely tomorrow Tuesday.  There is also a high probability that they will dip into the zones between the yellow and green lines before being able to start a new Up Segment for real.  It's a little early to tell how deep will this dip be, or whether or not they will drop all the way to the green support lines.

Our Trading Plan
Here are our open positions purchased so far and the entry prices.
Note that each purchase is 10% of the final position (10% of TQQQ, 10% of TNA)

TQQQ (40% purchased):     56.32;    57.1;     57.52;   54.54
TNA (30% purchased):        60.43;    59.46;   59.53

At this point, our preference is to build up more TQQQ position, and wait to exit TNA at break even without adding any more TNA.

Our buy target zones for:
TQQQ:     52 to 53.10

Our eventual sell target zones for:
TQQQ:     68

We want to see how tomorrow Tuesday morning shapes up before placing buy limit orders.  We'll share that information with you.

Possible Head Fake
By the way there is a possibility that $SPX $NDX $RUT may actually exceed their red resistance lines by a bit tomorrow.  If this happens, it is more likely to be a bull trap.  We plan to monitor for it.  We don't plan to chase it up.  We are going to just wait for the yellow line test. 

Disclaimer
This information is intended to supplement your own research and trading systems.  This is our trading plan designed to suit our own investment needs only.  We are not making any investment recommendation to you or anyone else.  If you choose to follow our trades, you may make money, or you may lose money.

Before buying into them, we urge you to read more about TQQQ and TNA, which are highly risky 3x leveraged ETF.