Updates for Thursday 6/4/20

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Updates 3:46 PM EST - Thursday 6/4/20
Quick Trade
At 3:10 AM EST today we wrote:
$SPX $NDX IWM dropping into the zone between Support1 and Support2.  ... From here, if $SPX $NDX IWM find enough buyers, either on Thursday or Friday, they will rise back up to retest Resistance1, possibly rising into the zone between Resistance1 and Resistance2.

This is what's happening now with $NDX.  It is entering into the zone between its Support1 and Support2.   Market breadth is back to neutral zone.  $VIX $VXN are forming patterns to drop a bit more still.   

This sets up the other move in the Minor Dip scenario, going from Support1/2 back up to Resistance1/2.   


Updates 1:59 PM EST - Thursday 6/4/20
Quick Trade
IWM is setting up for Minor Dip scenario.   Here's a potential Quick Trade to consider.

TZA

• Buy limit: 21.9
• Sell limit:  24.5 
• Stop: 21.82

Updates 10:09 AM EST - Thursday 6/4/20

Short Term Trades
Market breadth:  moderately declining day.

Volatility:   $VIX is dropping sharply.   $VXN is dropping by just a tiny amount.   

Since the messages from market internals are mixed, it is best not to assume that there is a clear direction just yet for today.

Big Dip Scenario is not happening today.   We are still monitoring for Minor Dip Scenario to happen.   

There is a chance $SPX $NDX IWM will try to get into the zone between Resistance1 and Resistance2  first before dropping down to Support1.   

Updates 3:10 AM EST - Thursday 6/4/20

Short Term Trades

Minor Dip Scenario
Based on futures actions in the early hours, and based on the lethargy exhibited by $NDX, we are likely to see some profit taking today.   This will likely result in $SPX $NDX IWM dropping into the zone between Support1 and Support2.  

From here, if $SPX $NDX IWM find enough buyers, either on Thursday or Friday, they will rise back up to retest Resistance1, possibly rising into the zone between Resistance1 and Resistance2.

The probability of this scenario happening Thursday is pretty high. 

If you choose to trade it, it's suitable for a Quick Trade that takes you either from Resistance1/2 down to Support1/2, or from Support1/2 back up to Resistance1/2.   This is not a trade with big magnitude.   

And as always, for Quick Trades, trade small with tight stops.

Big Dip Scenario: Snapback to 200-hour EMA
This scenario requires a more bearish signal from market internals to confirm growing nervousness and selling pressure.   

The more bearish signal will set the stage for $SPX $NDX IWM to drop substantially from Resistance1, snapping all the way back to support at their 200-hour EMA.

The more bearish signal consist of:

1. $SPX $NDX IWM stuck at Resistance1.
2. $VIX $VXN gap down  to 23 or lower and reverses upward sharply.
3. Market breadth shows a net declining day.

The probability of this scenario happening Thursday is medium.   However, if it does show up, it is an LRHR setup to enter short for a short-term trade, one that can drop all the way to the 200-hour EMA in a couple days.

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 up 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.

Proshares UltraPro and UltraPro Short ETFs
Direxion Leveraged and Inverse ETFs
Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation