Updates for Monday 9/13/21

Click here for Signal Trades spreadsheet.

Updates 12 AM EST - Monday 9/13/21

This coming week
Here's the economic calendar for the full week.

Monday:   Treasury Budget
Tuesday:   CPI
Wednesday:  Industrial Production; $VIX Expiration
Thursday:   Retail Sales; Jobless Claims
Friday:   Consumer Sentiments; Quadruple Witching

Wall of worry
The big three worries below are part of the reasons behind the recent analyst warnings of a slow-down in the stock market this autumn.

• Fed tapering 
• Slowing growth due to Delta variant
• Inflation

In addition, market is nervous about the approaching debt ceiling.   Traders will be closely eyeing the Treasury Budget report on Monday.   It is eye-opening to look at the numbers.    

Now that Congress has missed the debt-ceiling deadline, Treasury will have to start emergency cash conservation steps on Monday to avoid busting the Federal borrowing limit.   (And you think you have a problem with overspending on your credit cards!)

To add to the doom-and-gloom mood, don't for get it's VIX expiration and Quad Witch this week.   To get an in-depth understanding of why expiration week can generate a spike in volatility, we recommend that you read this Twitter thread about the effects of the options market, gamma, vanna and charm on stocks.

Good News?

• ETF inflows continue to rise, adding to overall market liquidity
• Sometimes bad news is good news.   Market rarely crashes when a bunch of analysts come out to warn.

Volatility
The following charts track different aspects of volatility.   They are all showing similar theme though.   There is a high probability that $VIX $VXN $RVX will all spike higher some time this week.   

• $VIX can spike up to 26
• $VXN can spike up to 27.5
• $RVX can spike up to 31.75

$VVIX:  volatility of $VIX

$VIX: spot VIX

$VIX Futures Term Structure

Equity Put/Call Ratio

Short-term Support and Resistance Levels
The table has been fully updated.   The levels are key for this week.

$SPX $NDX IWM
While volatility spikes, $SPX $NDX IWM are likely to drop down to the new S2 levels.   If stocks follow the regular monthly playbook, then we should see all indices find strong support here and resume their bullish climb.   

However, if there are major bearish undercurrents, then we may see $SPX $NDX IWM bounce at S2, but then run into strong resistance at R1/R2 and descend into a bigger drop.

If this happens, the odds of an outright stock market crash like 2020 is still very low.   But we may experience a major pullback similar to October 2018.

Signal Trades
We are planning to trade 2 positions when we get a bit more confirmation that S2 is the bounce level.   

• Quick Bull to capture the bounce between S2 and R1.   
  
• Big Bull to capture the rise between S2 and R3.   

Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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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