Updates for Tuesday 12/27/22

Click here for Signal Trades spreadsheet.

​Updates 9:45 PM ET - Monday
​
Upcoming key events
This week is very light in news.   In fact it is a good week to take a vacation from trading because there is no real catalyst to swing the market in a major way.  The fireworks will likely come next Friday January 6 when the all-important job report is released.   

Key S/R levels
​The key S/R levels for ES NQ RTY have not changed since Friday pre-Christmas.  

ES NQ RTY daily charts are looking very similar to each other right now.   They are starting to base and that's a hopeful sign for the bulls.  This week is likely to be a transition week.  There are 2 possible paths.

1. Bullish:  ES NQ RTY spend time basing this week between S1 and R1. If they can defend S1, it's a bullish setup for a new rally possibly starting January 6 (post job report).
2. Bearish:  ES NQ RTY spend time trying to rise above R1 into the R1-R2 zone. This scenario is likely bearish setup for the sell-off to resume starting January 6 (post job report).

Market breadth
S&P A/D chart below offers a bullish message.   Its 20-day EMA blue line is forming a rising W bottom.   Nasdaq A/D chart has the same pattern.  

S&P and Nasdaq charts of stocks above 200-day MA are not quite as clear however.   Their messages are still muddled right now.

Still overall we would say that market breadth is becoming supportive of stocks rising.

Volatility
$VIX daily chart also offers a bullish message.   All of its daily EMA lines are heading down, which implies that $VIX is trending down.   Declining volatility provides bullish tailwind for stocks.

Similar to $VIX, the daily chart $VVIX (volatility of $VIX) shows a descending pattern also.   This is additional bullish confirmation.

However, the daily chart of VIX futures (VX) is bearish.  All of its EMA lines are rising.   So the overall message from $VIX is a bit unclear.  

Our Personal Trade Plan
On Friday early afternoon, we wrote: 
We have to allow for the possibility that $VIX is building a base for possibly dropping a lot more. This would mean another bear market rally is in the making. Market breadth charts support this possibility. ES NQ RTY price actions also support this possibility. So we have tightened the stop on our TZA positions.

We got stopped out of our TZA positions for more than 22% gain. 

We are not planning on entering into any position this week since trading volume and liquidity will be low.   Furthermore, price actions are likely to be choppy this week due to lack of catalysts.   
​
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.