Updated Sunday 3/1/20 at 12:49 PM EST On Feb 6, we shared an important $SPX chart with our readers and wrote : When $SPX price is 25% or more above its 200-week EMA level, it’s a reliable signal that stocks are very overbought, and are vulnerable to a serious sell-off. This type of sell-off qualifies as Down Trend because it typically takes $SPX price back to the 200-week EMA level, and it tends to last multiple weeks. From that date onward, we continued to recommend to our readers to consider gradually “selling high” the stock portion of their long-term portfolio. We did not anticipate though how low stocks would go and how fast it dropped. The magnitude and speed of last week’s drop certainly took everyone by surprise. The Wall Street Journal’s main headline this morning was “Stocks were soaring. What happened?” Stocks are certainly in a Down Trend now. The question is how long will this Down Trend last and how low will it go? For that we offer to you the following chart. This is $SPX weekly chart from 2015 until now. It shows some key resistance levels for $SPX to surpass during the upcoming bounce. It also shows the key support levels that $SPX will continue to retest on when the Down Trend resumes again. Take a look at $VIX weekly chart below. Between Feb 14 and now, $VIX jumped 369%. This week’s panic instantly shot $VIX up to a high of 49.5, comparable to the highs reached during Aug 2015 and Feb 2018 crash. When $VIX $VXN jump this high this fast, it throws all normal patterns out the window. What we are hoping for now is for $VIX $VXN to start forming a series of lower-high spires on their weekly charts. When $SPX $NDX $RUT drop to lower lows, while $VIX $VXN rise but only to make lower highs, it's a reliable sign that market is becoming more stable under the hood. Once a series of these lower high spires form on $VIX $VXN weekly chart, the Down Trend may then approach the end. Support & Resistance Levels The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Market Internal Indicators On Thu evening we wrote: Market internal indicators are actually starting to send out a message indicating that they are ready for a short-term bounce. This is not a guarantee, but these indicators are now showing signs typically associated with a short-term bounce. $SPX $NDX $RUT complied with the message from market internals on Fri 2/28/20. They all gapped down hard at open, but landed at key support levels and proceeded to bounce. The bounce was wavering in the afternoon, until Jerome Powell came out to murmur words of assurance. He didn’t offer anything more illuminating than a couple weeks ago, but market participants used that as the excuse to buy and raised price substantially before closing. This was positive for the bulls going into the weekend. There is now a higher probability that $SPX $NDX $RUT will bounce up to Resistance2 early this coming week. We are going to use some labels to clearly define the movements of this Down Trend so far.
It may take until Bounce2 is done for $SPX $NDX $RUT to get back up close to the highs of Feb 24. After that, we may see a series of big Drops and much smaller Bounces, as the Down Trend resumes, and possibly descends to a lower low (compared to Feb 28 low). Planning your trades Long-term portfolio For most of Feb, we’ve been advising you to consider “selling high” the stock portion of your long-term portfolio and “buying low” cheaper assets, or go to cash. At this point, you may want to wait for prices to bounce back up toward the highs of Feb 24 before attempting to “sell high” more positions. And now is not the time to “buy low” yet for long-term portfolio. It's best to adopt the Warren Buffet strategy: raise cash and wait. Short-term Trading Goal: Ride Bounce1 Up Below is a potential setup for trading a short-term long position to ride $SPX $NDX $RUT Bounce1 up. This is just a setup to look for. There is no guarantee that it will materialize, or that it will succeed. As we mentioned above, there is now a higher probability that $SPX $NDX $RUT will bounce up to Resistance2 early this coming week. But first, they are likely to test Support1. A successful test of Support1 on Mon will bring out more buyers looking for bargains. This can bring $SPX $NDX $RUT back up to Resistance1, possibly Resistance2 in a couple days. Trade setup: Long
Here are some potential pitfalls to watch out for. If $SPX $NDX $RUT don't retest Support1 on Mon and keep rising higher right away, it's potentially a bull trap. See short setup below. Keep in mind that this is still a market driven by headlines. This is just Bounce1 within a Down Trend. It's a counter-trend trade. So the position size should be smaller than a trending trade. Please note also that this is a “test the bounce” short-term trade. We are not recommending for you to “buy the dip” as part of building up a long-term portfolio just yet. Short-term Trading Goal: Ride Drop2 Down Below is a potential setup for trading a short-term short position to ride $SPX $NDX $RUT Drop2 down. This is just a setup to look for. There is no guarantee that it will materialize, or that it will succeed. There is a possibility that Bounce1 may be very short-lived. Drop2 of this Down Trend will materialize after Bounce1 is done. We may see $SPX $NDX $RUT rise up rapidly on Mon to test the highs of Feb 26. They are likely to run into very strong resistance here. This would trigger the start of Drop2 as a lot of selling can potentially resume at this level. Trade Setup: Short
Push Notifications of Our Intraday Updates We don't want to clog up your email Inbox with too many notifications. So if you are interested in getting push notifications of our intraday alerts, do: 1. Download Stocktwits app to your phone. 2. Follow us on Stocktwits. We are @TimingStockMarket. 3. Go to our profile page in Stocktwits app. 4. Select the option to "Notify me of new posts". We will post updates if the intraday events warrant an explanation. 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
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12:38 PM EST
There are 3 scenarios to monitor for by end of day today: Scenario 1: If $SPX $NDX $RUT can maintain a rising W bottoms above the lows of this Fri morning, then they are likely to have a more substantial bounce on Mon. They are still likely to retest these lows come Mon. Scenario 2: If $SPX $NDX $RUT end the day at about the lows of this Fri morning, then they are likely to gap down one more time come Mon. This will actually set the stage for the dramatic topping spires for $VIX $VXN. They will then fulfill the "1st set of spires" requirement. We need to see 3 sets of descending $VIX $VXN spires before we can entertain the possbility that this carnage will end. Scenario 3: If $SPX $NDX $RUT close the day lower than this morning low, it will be a scary weekend and another possible Black Monday. We will be mapping out the long-term S/R levels and where this current Down Trend will end in our weekend analysis. Updated Friday 2/28/20 at 2:15 AM EST We did not expect prices to hit Support3 today, but $SPX and $NDX closed within a few points of our projected Support3 levels from yesterday. We are thrilled at the accuracy. We are dismayed by the level of the drop. $SPX is now down below its 50-week EMA, below the high of July 2019. The current MP/DT is morphing into a full-blown Down Trend. According to Bloomberg: “Six days. That’s all the time it took for the S&P 500 to fall more than 10% from a record into a correction.” By the time we are done with this Down Trend, $SPX can end up at the price level of mid-Jan 2019. In other words, $SPX will have given up most of its gains from 2019. You can make money as a trader when the market is going down. But this is not good for the economy. Goldman is projecting zero earnings growth for US companies this year because of the coronavirus. That’s a pretty scary projection. And that potentially is going to have a huge negative impact on the job market. So it is not far fetched to say we are in a full-blown Down Trend, similar to the one that started in Oct 2018. The best we can hope for is that the Down Trend does not turn into a multi-year bear market, similar to what happened 2000-2003. The one bit of hopeful news is that the supply chains are starting to come back online in China. A couple weeks ago, when the bad news first came out about the disrupted global supply chains, the market discounted it while cheering for all time highs. Then the market woke up to the bad news. Now we may have a bit of the opposite scenario. The positive news is starting to come out that the supply chains are being revived slowly. The market is not paying much attention to this right now while everyone is in the grip of sell-at-all-costs. Maybe soon the market will wake up to the good news. We can only hope. Support & Resistance Levels You may notice that Support3 is now projected to be at the lows of August 2019 for $SPX. Market Internal Indicators $SPX $NDX $RUT are in a Down Trend. But market internal indicators are actually starting to send out a message indicating that they are ready for a short-term bounce. This makes sense as $SPX is approaching some important price levels established back in Aug 2019. This bounce is not a guarantee, but these indicators are now showing signs typically associated with a short-term bottom, which means a short-term bounce is possible. Planning your trades Long-term portfolio For most of Feb, we’ve been advising you to consider “selling high” the stock portion of your long-term portfolio and “buying low” cheaper assets, or go to cash. We hope you have taken advantage of this strategy. At this point, you may want to wait for prices to bounce back up toward the highs of Feb 24 before attempting to “sell high” more positions. And now is not the time to “buy low” yet for long-term portfolio. Short-term Trades These setups below may appear tomorrow. Please note that these are short-term trades. Trade small. Use tight stops. Take profits quickly. Long setup: If $NDX gaps down to get close to Support3, and if it forms clearly bullish hammers on the hourly or 30-min charts in this zone, then there is a chance that $NDX will attempt to bounce. The bounce may reach up to Support1. Short setup: The zone between Resistance1 and Resistance2 is a potential setup for entering a short position. Prices will most likely go from here down to Support1 again. $RUT is a good bearish candidate for this. Push Notifications of Our Intraday Updates We don't want to clog up your email Inbox with too many notifications. So if you are interested in getting push notifications of our intraday alerts, do: 1. Download Stocktwits app to your phone. 2. Follow us on Stocktwits. We are @TimingStockMarket. 3. Go to our profile page in Stocktwits app. 4. Select the option to "Notify me of new posts". We will post updates if the intraday events warrant an explanation. 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 Updated Thursday 2/27/20 at 12:25 AM EST Support & Resistance Levels The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Market Internal Indicators Market internal indicators are still all red, sending out a very bearish message. Recall we said yesterday that $SPX $NDX $RUT are now in Major Pullback5/ Down Trend (MP/DT). Today we wrote in the intraday update: “$VIX $VXN appear to have finished forming the 1st set of spires on their daily charts.” This is still true by end of day today. $VIX $VXN did not rise above yesterday’s highs. Usually this indicates that stocks are ready to take a break from the drop, and have a quick but substantial bounce. However, futures are continuing to drop a lot after hours. So there are 2 possibilities:
Nothing goes up forever, and nothing goes down forever. This time is not different. The end of Major Pullback5 won’t come until after the 3rd set of spires show up, but it will show up. Between now and then, it is too risky to initiate any new long position meant for long or medium term. So the best strategy is to day trade or do very short term trades based on the specific mood of the day. Or simply take a vacation. Hammock in the backyard is the new kind of resort. Planning your trades Long-term portfolio For most of Feb, we’ve been advising you to consider “selling high” the stock portion of your long-term portfolio and “buying low” cheaper assets, or go to cash. At this point, you may want to wait until $SPX $NDX $RUT have recovered some amount from Major Pullback5 before “selling high” again. Note that stocks are still not cheap enough for “buying low” again. Wait until the end of Major Pullback5 to reassess. Medium-term Trades There isn't any good setup for medium term trades right now, long or short. Short-term Trades These setups below may appear tomorrow, and they may be suitable for day trading or very short-term trades. Long setup: Possible bounce that starts from Support3 and rises up to Support1. Short setup: There isn't any good setup for shorting right now, unless you are scalping. As always, trade small, protect tightly, and take profit quickly with this type of trades. Push Notifications of Our Intraday Updates We don't want to clog up your email Inbox with too many notifications. So if you are interested in getting push notifications of our intraday alerts, do: 1. Download Stocktwits app to your phone. 2. Follow us on Stocktwits. We are @TimingStockMarket. 3. Go to our profile page in Stocktwits app. 4. Select the option to "Notify me of new posts". We will post updates if the intraday events warrant an explanation. 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 2:35 PM EST
$VIX $VXN appear to have finished forming the 1st set of spires on their daily charts. There is now a high probability that $VIX $VXN will drop some amount, while $SPX $NDX $RUT rise some amount. There is a high probability that $SPX $NDX $RUT will run into resistance at Resistance2. That is likely where the selling will resume, and $VIX $VXN will begin a new cycle of rising up to form the 2nd set of spires. When we get to the 3rd set of spires is when Major Pullback5 is likely to end. Updated Tuesday 2/25/20 at 9:04 PM EST Just one week ago, everyone was marveling at $SPX $NDX all time highs. By end of day today, $SPX has given up all of its gain in 2020. $NDX is barely hanging on for a small 2020 gain. $RUT is now back at the high of Oct 2019. Interesting how things change in just one week. So given how fast things are deteriorating, is the Up Trend still intact? Technically, yes. However, given the severity and speed of the drop, and the potentially severe impact that the virus pandemic can bring to the global economy, we have to be prudent and say that the Up Trend is most likely ending. To that end, instead of referring to the current sell-off as Major Pullback5, we are going to call it MP/DT (Major Pullback/Down Trend). Yes, it's a mouthful! Support & Resistance Levels The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Market Internal Indicators Market internal indicators are all red, sending out a very bearish message. We posted multiple intraday updates today to discuss the spire patterns on $VIX $VXN charts. Please review them if you haven’t read them yet. At this point, $VIX $VXN are not yet done forming the 1st set of spires. $VIX $VXN can still rise higher than today’s high, based on the intraday momentum so far. Therefore whatever bounce we may encounter right now should be treated as a dead cat bounce. The end of Major Pullback5 won’t come until after the 3rd set of spires show up. Even then, Major Pullback5 may not go away for real. It may rollover quickly into a Down Trend, similar to what happened in early Dec 2018. This possibility is getting stronger, but it's not a guarantee. So let's just straddle this MP/DT and trade one phase at a time. Planning your trades Long-term portfolio: For most of Feb, we’ve been advising you to consider “selling high” the stock portion of your long-term portfolio, and “buying low” cheaper assets, or go to cash. At this point, stocks are still not cheap enough for “buying low” again. Wait until the end of Major Pullback5 at least. Medium-term Trades: There is no good setup for medium term trades right now, long or short. Short-term Trades These setups below may appear tomorrow, and they may be suitable for day trading or very short-term trades. Short setup: $SPX and $RUT bounce back up to Resistance1 and form inverted hammers on their 30-min charts. Enter short $SPX $RUT here and exit at Support1. Long setup: $NDX gaps down or drops down quickly early tomorrow. It gets down to the zone between Support2 and Support3, and starts forming hammers or doji patterns on the 30-min chart. Enter long $NDX here and exit at the low of today. As always, trade small, protect tightly, and take profit quickly with this type of trades. Push Notifications of Our Intraday Updates We don't want to clog up your email Inbox with too many notifications. So if you are interested in getting push notifications of our intraday alerts, do: 1. Download Stocktwits app to your phone. 2. Follow us on Stocktwits. We are @TimingStockMarket. 3. Go to our profile page in Stocktwits app. 4. Select the option to "Notify me of new posts". We will post updates if the intraday events warrant an explanation. 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 2:09 PM EST A reader pointed out that $VIX has risen higher than yesterday and would like an explanation. So here's some more clarification. $VIX and $VXN are still forming the 1st set of spires. They are not done forming yet, and they may still rise higher. However, they are not rising with the same rate or same magnitude as $SPX $NDX $RUT prices dropping. This tells us that volatility has not gotten to the true panic stage yet. If market was in a true panic, we would see both $VIX $VXN gap up big and immediately surge much higher right away this morning. However, we emphasized earlier that these are just early messages. The information gives us a glimpse of the potential scale of Major Pullback5. This information is not a signal of the end. And it's not complete information yet. The 1st set of spires is still being formed. It's not done forming yet. It can easily take a couple more days. You may have observed on $VIX daily charts that the 2nd set of spires is typically lower than the 1st set, and the 3rd is typically the lowest. This is volatility's key message. With each iteration of rising volatility, $VIX $VXN form lower highs. After 3 iterations, we can be reasonably confident that the Major Pullback is ending for real. Keep in mind that as $VIX $VXN form a series of lower high spires, $SPX $ND $RUT may form a W bottom (similar to Aug 2019), or drop lower and eventually form a sharp V reversal (similar to May 2019). We can't predict which path $SPX $NDX $RUT will take. That's why we rely on $VIX $VXN spire pattern for guidance. You may have also observed that it takes more than a week for the 3 sets of spires to form, not in 3 days. So have patience. Our job right now is to observe and take notes. We want to have an idea of how bad things might be, but not bet on the end of Major Pullback5 just yet. This is why we emphasize that you may not want to initiate medium term long position right now. 11:40 AM EST Current daily chart of $VIX shows 2 important things:
These are important early signs of bullish divergence. However, respect the spires! Let them fully form before you initiate any medium term long positions based on $SPX $NDX $RUT. For today, you can look for the opportunity to test a small long when $SPX $NDX $RUT get down to Support1 or lower. Look for technical confirmations such as hammer or doji candles forming at Support1 or lower before testing. Trade small. Use tight stop. Take profit quickly. Updated Tuesday 2/25/20 at 12:25 AM EST Support & Resistance Levels We posted this table earlier today in the intraday updates. The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Market Internal Indicators We posted this table earlier today in the intraday updates. Market internal indicators are now all fully red, sending out a very bearish message, at least for the short term.
$SPX $NDX $RUT are going to start the process of bottoming, most likely tomorrow Tue. Don’t assume that this is a super bullish event yet. The bottom of a Major Pullback is complex, unlike the bottom of a Big Dip. The first couple attempts are likely to be a dead cat bounce. The bottom may end up being a W bottom (as in Aug 2019), or $SPX $NDX $RUT may drop some more, and end up with a sharp V bottom instead (as in May 2019). How do we reliably monitor this bottoming process then? Not with price charts alone. We need to rely on $VIX $VXN patterns for additional guidance. $VIX daily chart below shows some tall "spires" that must form first before $VIX will start to drop for real. Once $VIX $VXN surge up in a big way in a Major Pullback, they typically need to form 3 sets of spires before volatility will drop for real, and stocks will rise for real. Today we had what is likely to be the first attempt to form the 1st set of spires. What this means is that tomorrow Tue, $SPX $NDX $RUT are likely to start rising from today’s low. Treat this as a dead cat bounce, and trade accordingly. When $VIX $VXN form the 2nd set of spires, $SPX $NDX $RUT will most likely have a bigger bounce. It still won’t necessarily be the bottom of Major Pullback5, but $SPX $NDX $RUT will likely bounce higher than the 1st attempt. This process will repeat until we get the 3rd set of $VIX $VXN spires. That’s when Major Pullback5 may put in a true bottom. Our proprietary filters will be monitoring for the formation of all $VIX $VXN spires. Planning your trades Long-term portfolio We’ve been warning you about locking in profits in your long-term portfolio. Now you have a taste of what the rush to exit feels like. Please read the weekend analysis for more strategy discussion. Trade Goal: Capture a bit of the dead cat bounce As we discussed above, it’s too early to initiate any long position to capture the start of Surge12 right now. $SPX $NDX $RUT are technically still in Major Pullback5. And this has not bottomed yet. Long positions initiated at this level will not rise up very far. Nevertheless, if you really want to day trade and capture a small bounce, a good place to look for this bounce is the zone between today’s low and Support1. Trade small. Protect tightly. Take profit when $SPX $NDX $RUT get up to Resistance1. Trade Goal: Short $SPX $NDX $RUT some more It is not a good idea to enter short at the current price level, given the imminent bounce. However, $SPX $NDX $RUT may gap up tomorrow. They may test Resistance1 again. They are unlikely to rise above Resistance1 right away. So this is a setup that you can use to test a small short position. Trade small. Protect tightly. Take profit in the zone between today's low and Support1. Push Notifications of Our Intraday Updates We don't want to clog up your email Inbox with too many notifications. So if you are interested in getting push notifications of our intraday alerts, do: 1. Download Stocktwits app to your phone. 2. Follow us on Stocktwits. We are @TimingStockMarket. 3. Go to our profile page in Stocktwits app. 4. Select the option to "Notify me of new posts". We will post updates if the intraday events warrant an explanation. 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 Updated Sunday 2/23/20 at 5:26 PM EST $SPX $NDX $RUT continued to drop on Fri 2/21. This stirred up talks of rate cuts. The Fed is murmuring soothing noises, and they are still pumping money into the system, but the scary part is they may be out ammunition when the economy really falls apart. From Bloomberg: "Federal Reserve policy makers sound cautiously confident they’ve got interest rates about right as they assess the fallout from the spreading coronavirus. What worries them though is their ability to rescue the U.S. economy should things go horribly wrong.” This certainly does not instill long term confidence, but market participants are likely to be satisfied with more short term rate cuts, and more easy money for now. What this means is that in the short term, we most likely won’t see an end to the current Up Trend just yet. However, the market and the economy are increasingly vulnerable to events with big bearish consequences. And when things fall apart in a big way, the Fed may not be able to come to the rescue effectively. Support & Resistance Levels The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Market Internal Indicators Market internal indicators changed their messages on Friday to be more bearish. However, the top 4 rows of the above table have not turned competely red yet. What these indicators are telling us is that stocks have the potential to become a whole lot more bearish. But keep in mind that “potential” is not the same as “guarantee”.
When you monitor price actions on Mon, here are a couple of crucial scenarios to monitor. Bearish scenario that most likely will lead to Major Pullback5:
This is a bearish scenario. $SPX $NDX $RUT getting stuck at Resistance1, and $VIX $VXN staying up above their 200-day EMA can potentially bring out a lot of sellers. This will drive prices downward sharply. $SPX $NDX $RUT can end up at the lows of Jan 31, or the highs of Nov 2019, when Major Pullback5 ends. Bullish scenario that most likely will finish current big dip:
This is a bullish scenario. $SPX $NDX $RUT may end up forming a V or W bottom in the zone between Support2 and Support3. This bottom will be the end of the current big dip. Keep in mind that any other scenario can unfold tomorrow Mon. However, these are the two scenarios with the messages that are clear and high probability. Tread very carefully with all other scenarios. Planning your trades Long-term portfolio We shared this discussion with you last weekend. We want to share it again today because it is important for your long-term portfolio strategy. It is very difficult to pinpoint the start of a Down Trend because most Down Trends don’t start out as such. They start out as a Major Pullback. Then an external event happens that’s not foreseen that drives prices downward rapidly as market participants rush to exit. For example, in the recent Down Trend from Oct through Dec 2018, the downward spiral started out as Major Pullback on Oct 4. And it was recovering in late Nov into early Dec. But then the Fed announced another rate raise, and stocks dropped hard. The stampede to exit turned the Major Pullback into a Down Trend that lasted until Dec 25 2018. How do we know ahead of time if a Major Pullback will turn into a Down Trend? We don’t. But we do know that when stocks are in Major Pullback mode, that’s when they are most primed to descend into a real Down Trend. This happened in 2008, 2015-2016, and 2018. So what’s an investor to do? The old saying “buy low, sell high” still applies. This is the basic concept behind asset allocation strategy for long-term investors. You periodically take profits from high-flying assets and deploy them into cheaper assets. When you do so in a systematic way, you are effectively buying low and selling high always. Last week the 5-year weekly $SPX chart below show prices at 27% above the long-term average (the 200-week EMA green line). And historically, once $SPX gets stretched to 25% or higher above its long-term average, it has a high probability of crashing back down soon after to the long term average again. When $SPX descends into a new Down Trend (it may be happening already), $SPX can go as low as the low of November 2018. This means potentially giving up on most of your profit accumulated during this last year 2019 and YTD 2020. So keep this in mind as you plan your long-term portfolio strategy. Trade Goal: Hold long $SPX $NDX $RUT until Surge11 is done
Trade Goal: Buy the dip for short term trades
Trade Goal: Short $SPX $NDX $RUT if bearish scenario unfolds
Push Notifications of Our Intraday Updates We don't want to clog up your email Inbox with too many notifications. So if you are interested in getting push notifications of our intraday alerts, do: 1. Download Stocktwits app to your phone. 2. Follow us on Stocktwits. We are @TimingStockMarket. 3. Go to our profile page in Stocktwits app. 4. Select the option to "Notify me of new posts". We will post updates if the intraday events warrant an explanation. 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 |
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