Click here for Signal Trades spreadsheet. Updates 12:22 PM ET - Tuesday According to WSJ: "Inflation Cooled Slightly as Underlying Pressures Remained Stubbornly High. Lower gasoline costs helped offset price increases for many services last month." (Read more here.) ES NQ RTY responded by spiking immediately post CPI, then proceeded to form intraday topping pattern as shown in NQ hourly chart below. S&P and Nasdaq net advance percents (Stockcharts.com $SPXADP $NDXADP) dropped slightly, continuing to fill out a topping pattern. We don't think NYSE McClellan Oscillator (Stockcharts.com $NYMO) will be negative quite yet at end of day today, but it will get closer to zero. Bulls are nervous ahead of FOMC tomorrow. The prudent thing to do is to protect by tightening stops or hedge existing bull positions, and not initiate new ones. VIX and breadth have not given us permission to initiate multi-day bear positions yet. Day trade small positions if you want to, but keep in mind that fireworks won't happen until post FOMC tomorrow. Updates 1:30 AM ET - Tuesday Upcoming key events CPI report comes pre-market today. Read more about what to watch for in CPI. Key S/R levels Pretty much all the levels have been raised to reflect the current bull strength. Bulls still in control; waiting for definitive signal from McClellan Oscillator A fairly effective market breadth oscillator that we recently started tracking is the McClellan Oscillator for NYSE with ratio adjusted (Stockcharts.com $NYMO). It tracks market breadth. In its daily chart below, when the oscillator turns negative, it's a reliable warning that bulls should tighten all their positions. Although this data is only updated at end of day, it still moves slightly ahead of VIX. We can use it to tighten stops on bull positions. As of end of day Monday, McClellan Oscillator has not turned negative yet. However, if the net Advance Percent (Stockcharts.com $SPXADP $NDXADP) drops sharply into negative zone during the day, the oscillator is likely to turn negative by end of day. That would be our signal to really tighten stops to protect bull positions. Then when VIX confirms the bearishness with a W bottom on its hourly chart, it will be a signal to look for bear position setups. Our personal trade plan Both bulls and bears should try to be patient at this point.
We have a plan to enter SVIX from this setup. See the spreadsheet for details. 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.
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