Signals & Trading Plan for Friday 8/23/19

Updated Thursday 8/22/19  11:48 PM EST

Fed Chairman Jerome Powell is scheduled to give a big speech tomorrow Friday at 10:00 AM EST from Jackson Hole.  

Updates from market internals
Market internals are back to sending mixed messages, showing that under the hood stocks are struggling for directions. 

NYSE and Nasdaq Advance/Decline lines turned up sharply today, which is bullish for stocks.  

NYSE and Nasdaq percentage of bullish stocks also turned up today, confirming the above bullish message.

However, CBOE equity put/call ratio spiked up immediately at open today, and rose up a good amount, showing that traders were getting nervous.  This spike in the ratio matched the corresponding drop in $SPX $NDX $RUT prices this morning.  

The leading signal of all market internal indicators is volatility.  $VIX $VXN are confirming that they are forming a complex base, from which they can spike up a good amount.  We may see $VIX spike back up to 22, and $VXN surge back up to 25.  As volatility rises substantially, $SPX $NDX $RUT prices will drop substantially.  

So despite the fact that market internals are sending out mixed messages, $VIX $VXN suggest that $SPX $NDX $RUT will swing low one more time before Major Pullback2 is done.

Major support and resistance zones
This table has been updated to reflect the fact that we don’t think $SPX $NDX will climb that high above today’s high, before they are likely to drop down to finish the last leg of Major Pullback2.

Planning your trades
Everything of course pivots around the outcome of Powell’s speech.

But in terms of capturing the major moves, monitor $SPX $NDX for failure to rise above the Major Resistance zone.  We will monitor for this scenario, and look for bearish confirmation by market internals. This is potentially a good setup for shorting $SPX $NDX.  

The other major move, of course, is monitoring $SPX $NDX for finding support at Major Support zone.  We will monitor for this scenario once price drops down to this level, and look for bullish confirmation by market internals.  This is potentially a good setup for entering core long positions to ride Surge7 back up.

We plan to trade both of these major moves ourselves.

Disclaimer
The information presented here is our own personal opinion.  It is intended to supplement your own research and trading systems.  Consider it as food for thought. We are not registered financial advisers or licensed brokers.  We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions.  

Note that we trade highly risky 3x leveraged ETFs.  You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you.    Please read more about them before trading them.