Updates for Wednesday 10/14/20

Click here for current Signal Trades.

Updates 4:43 PM EST - Wednesday 10/14/20

$VIX $VXN
$VXN formed a short-term top towards end of day and dropped.    So we placed various buy limit orders in Signal Trades for TQQQ, and eventually got filled at 151.

However, we are not comfortable with after hours and futures price actions.   So we scaled down to just 1/2 TQQQ position and took a small loss with the other half.

$VXN and $VIX should be done rising based on their patterns, but sudden news may trigger some more profit taking and nervous selling overnight.   Still we are not observing the highly bearish end-of-up-channel signal yet.  

We think it's a matter of $SPX $NDX finding sufficient buyers near their respective green support zones in order to rise.   If not, they may drop lower in the green zones.

Updates 2:48 PM EST - Wednesday 10/14/20

$VIX $VXN
$VXN is not done forming its topping pattern yet.   Even though it got into the zone between 35 and 36, it may still continue grinding upward.   If it rises above 36, it risks breaking out of the channel.

$VIX is not done rising.   Its message is clear.

$SPX IWM are dropping into their green support zones.   $NDX is approaching it.

The following headline does not help the bulls:
"Dow falls 150 points after Mnuchin throws cold water on hope for a stimulus deal before election"

Clearly $VIX $VXN picked up on the market's nervous attitudes before this headline appeared.   And right now these highly sensitive indicators are telling us they are not necessarily done rising yet.   

Our strategy is simply to wait for now.   Please remember that as a trader, your goal is not just to make profit.   Your goal should be to keep it and not give it back to the market.   Trading right now can grind down your account.

Updates 12:09 AM EST - Wednesday 10/14/20

$VIX $VXN
We have canceled all our buy orders for TQQQ and TNA this morning.

At 10:16 AM we posted that $VXN was rising.   Since then, $VXN has been continuing to rise, and now $VIX has joined in the rise too.

Monitor for:

• If $VXN anchors between 35 and 36 and drops >> bullish for $NDX $SPX IWM.
• If $VXN rises higher than 36, it's breaking out of its down channel >> bearish for $NDX $SPX IWM.

​
We are not placing any trades until there is a clearer resolution.   
​
Updates 10:16 AM EST - Wednesday 10/14/20

$VIX $VXN
$VIX is dropping down towards the bottom of its channel (bullish), while $VXN is rising towards the top of its (bearish).

This resulted so far in $SPX IWM being more bullish than $NDX.   Mixed message like this means lack of uniform enthusiasm from buyers.   They are getting selective and nervous.

We prefer to wait for this low-risk setup to test long:  $SPX $NDX IWM  successfully retesting the lows of 10/13.  

See Signal Trades for our buy and stop orders.

Updates 9:04 AM EST - Wednesday 10/14/20

Pre-market
$VIX appears to be anchoring itself in the zone between 26 and 27, and forming a short-term topping pattern there.   If it anchors to drop here, it will likely drop down to the bottom of its channel, in the zone around 23.8.  

If $VIX follows this path, conditions can turn short-term bullish today.   $SPX $NDX IWM are likely to then resume their rise to reach up into the orange resistance zones.  

The low-risk setup to monitor is $SPX $NDX IWM  successfully retesting the lows of 10/13.   You can test a long entry here, with a tight stop.   We plan to test TQQQ in Signal Trades with this setup.

However, this setup is not a super strong, super bullish setup.   So don't build up a big position here.   Trade long, but trade small and be prepared to take profits when $SPX $NDX IWM get close to the top of their orange resistance zones. 


Updates 7:05 PM EST - Tuesday (for Wednesday 10/14/20)

Summary
Bullish or bearish? 
We are at a turning point right now, so there is no clear and easy answer to that question.   Instead, we want to share with you what to look for that will determine the answer for Wednesday.

$VIX $VXN
Take a careful look at $VIX and $VXN hourly charts below.  We've noted what kind of signals to look for that will determine whether conditions are bullish or bearish for $SPX $NDX IWM. 

Table of Support & Resistance Zones
The S/R table has not changed since yesterday.

​$NDX $SPX IWM 

If we observe bullish signals from $VIX $VXN, then obviously $SPX $NDX IWM up channels stay intact.   This is a high-probability scenario.   Ideally $SPX $NDX IWM drop lower into their respective up channels, possibly dipping into their green support zones.  This will give us more favorable setups to enter long. 

If we observe the key bearish signals from $VIX $VXN, then very likely $SPX $NDX IWM up channels are done.  We may see the emergence of a new down channel.   This is a low-probability scenario.   But if it does show up, we will be prepared to enter in the bearish direction.

However, this would happen only if the key bearish signals from $VIX $VXN described above show up.   Otherwise, it is risky to attempt a quick bearish trade while $SPX $NDX IWM  up channels are still intact.  

​Signal Trades
The next trade is entirely dependent on the signals from $VIX $VXN.  We described above how to determine whether conditions are bearish or bullish from $VIX $VXN. 

• ​If bullish, we'll look to re-enter TQQQ and possibly TNA as well.
• If bearish, we'll look to enter UVXY and SQQQ or TZA.

We will post updates pre-market.

Before we go, let us caution you not to overtrade.   We've had successful trades and booked good profits between 10/8 and 10/13.   But not every move in the market can be traded.   And not every signal is reliable.

Our job is to help you identify the low-risk, high-reward, high-probability setups.   If we don't find them, we are going to wait.  And the wait may last more than one day.    This is better than jumping in and testing every move in the market.   That frequently will lead to losses.

Click here for current Signal Trades.

​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