Updates for Friday 8/19/22

Click here for Signal Trades spreadsheet.

Updates 1:15 PM ET - Friday 8/19/22 

Market is feeling the effect of expiring calls as dealers are selling their cache of long stock futures, previously purchased to hedge their books against sold calls.   The net effect is a pullback in price for ES NQ RTY.

Short-term signal has turned bearish
It is time to pay close attention to $VIX various 200 EMA lines.   On $VIX 15-minute chart below, $VIX 200 EMA green line is starting to go sideway.  $VIX is building a base to climb higher short term.   This turns the short-term signal to bearish.

Big-picture signal is still bullish
The big-picture signal is still bullish.   Here's the sequence we need to monitor.

• $VIX spikes to 22.
• $VIX then drops back to 19.2.
• $VIX then find support at 19.2 and rises again.   

This sequence would yield a big W bottom and make $VIX 200 EMA on its hourly chart go sideway. That would indicate $VIX is about to spike up substantially, possibly reaching 29-30.   That would turn the big-picture signal to bearish.   But until the above sequence is carried out, the big-picture signal is still bullish.

Trade plan
We got stopped out of our intraday bear SQQQ at breakeven.  We expect ES NQ RTY to undergo choppy sideway range trading while $VIX oscillates around 20.  Therefore we don't intend to trade any more today.  

​Updates 8 PM ET - Thursday
Brief early updates tonight due to a scheduling conflict.

Warning shots for short-term signal

• Since 8/15, NYSE and Nasdaq cumulative A/D lines have been declining sharply.   
• Since 8/11, risk assets have been down:  JNK, ARKK, BTC, XBI, SOX. 
• Meme stocks (GME, BBBY) appeared to have formed a top for now.

These are warnings that the short-term signal is very likely going  turn bearish very soon.   

Is the big-picture signal bearish yet?
No.  We can track this using SVXY (inverse ETF of $VIX).   It's a little easier to visualize than to stare at $VIX chart.   When SVXY 200-hour EMA goes sideway for multiple days, it will turn the big-picture signal bearish.

Key levels
When the short-term signal turns bearish, $VIX is likely to spike up to 23-24, and price is likely to bounce at these levels:

• ES:  4180
• NQ:  13173
• RTY:  1948

Trade plan
When NQ drops to the key support level above, we will initiate our big-picture bull TQQQ and short-term bull TQQQ.  We don't expect this to happen until early next week.

As for trading on Friday, it will be an intraday bull or bear position depending on the morning setup.

​Click here for Signal Trades spreadsheet. 

​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 trades.