Updates 7:46 PM EST - Tuesday 3/31/20
At 12:28 PM today, we alerted you that the signal was reading -17, which is much more bearish relative to the reading at the start of the trading day. We mentioned that you could start partial entry of your short positions. Our system is projecting the following scenario:
Below is the updated S/R table. (Mostly we updated Resistance1 to be at today's highs.) There is a good chance that $SPX $NDX $RUT will test Support1 tomorrow Wednesday. Updates 6:32 PM EST - Tuesday 3/31/20
The current S/R table is still valid, but we will refine and update it soon after we get some more data from futures. Updates 3:25 PM EST - Tuesday 3/31/20
A reader had asked for some ETF recommendations for betting against $SPX $NDX $RUT. They are: SPXS, SQQQ, TZA. These are short-term ETFs designed to capture a down segment within a Down Trend. They are not buy-and-hold instruments for riding the remainder of this Down Trend. Please read more about them if you are not already familiar with them. Here are some articles to start: Using SQQQ to bet against $NDX Three ETFs that rise as small caps fall Using SPXS to bet against $SPX Remember: they are like fast cars. Capable of fast ride, but also big crash. Do your research and test small if you are new to this. Updates 12:28 PM EST - Tuesday 3/31/20
If you want to start entering short, keep your initial entries small with tight stops. Updates 11:49 AM EST - Tuesday 3/31/20 Our system signal is at -2, which is still practically neutral. The bulls and the bears are still battling it out. $SPX $NDX $RUT are hovering right at R1. Yes, they are technically green. No, we haven't had a major sell day since 3/23. But the reward:risk ratio is no longer favorable for initiating new long position for anything other than day trading. This same reward:risk ratio also tells the bulls to actively protect or lock in their profits if they still have open long positions based on $SPX $NDX $RUT. As for the bears, just relax. Your time will come. By the way, for some of you who are new to trading, we've been sharing with you the notion of a bounce (dead cat bounce, bear market bounce, etc.) that shows up in a Down Trend. Down Trend has major down segments, which we call "Dives". In between the major down segments, stocks typically experience bounces. These are referred to as dead cat bounce, or bear market bounce. We've been writing all through last week that the rise in stock prices is just part of the bearish bounce. It is not the start of a new Up Trend. The Down Trend is still intact. There are a lot of people who doubt our calls. But just to put things in perspective, here's some information Goldman just issued for their clients about bear market bounce. “Our US strategists have shown that bear market rallies are quite common, particularly during the bear market of 2008. For example, between September and December 2008, the S&P 500 experienced six distinct bounces of 9% or more, with some rallies as large as 19%, during the course of between one and six trading days. But the market low did not occur until March 2009, when the pace of economic contraction began to slow.” So don't confuse a bear market bounce with a new Up Trend. Don't start building up your long-term portfolio in a substantial way yet. And don't hold on to your current long positions, thinking that it will only go up from here. Updates 1:25 AM EST - Tuesday 3/31/20 We have been working on expanding and quantifying the signals from market internal indicators more. We now have proprietary filters for 50 different data elements that we feed through the analysis. These elements include volatility, market breadth, percentage of bullishness, as well as individual index charts, inverse charts, and futures for multiple time frames. Our new system quantifies all the important signals for consistency and completeness. It yields a reading every day on a scale from -50 to 50, where -50 is most bearish and 50 is most bullish.
So how do we make use of this data? First, let's put the events of this Down Trend in perspective.
"End soon" does not mean that Bounce1 has technically ended. However, the -35 bearish reading on 3/27 tells us that the reward:risk ratio no longer favors a long trade. Things were starting to turn bearish under the hood. The prudent strategy when you encounter a highly negative reading after a series of positive ones is to start taking profit from your long positions, or greatly tighten your stops as you trail it up. The current -1 reading is practically neutral. It tells us that $SPX $NDX $RUT are now going through a major decision point. Bulls and bears are battling for dominance. No winner has emerged yet. So bears should not jump the gun and place short bets just yet. The latest S/R table below tells us that the battle most likely will continue tomorrow in the zone between the new Resistance1 and Resistance2 levels. The signal will turn much more negative (bearish) if these things happen tomorrow:
That's the setup we are looking for to actually start to enter short. 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 Why 3x ETFs like TQQQ lose money over the long term
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Updates 2:36 PM EST - Monday 3/30/20
The market is futzing around.
Keep in mind that volatility did not drop substantially during the big bounce last week. As the man who invented $VIX said recently, volatility will not subside for real until the number of COVID-19 cases have peaked. The stage is set for disappointment and despair to start setting in, especially when the number of jobless claims potentially can look even more staggering this week. And that has the potential to make volatility surge back up again. We know that at the minimum, $VIX $VXN have to retest March 18 high before dropping for real. We are not being heartless. We sincerely hope we are wrong about the mood turning black again. But this is the reality of our world. And if you have placed a bet that $SPX $NDX $RUT will continue going up, you may want to protect your bet or take your profit. If you are waiting to enter short, look for one more intraday failure to rise above Resistance1 (or today's high) as confirmation to begin partial entry of short positions against $SPX $NDX $RUT. $RUT is now acting weak again, much more so than $SPX $NDX. That makes TZA potentially decent instrument to bet against $RUT. Here is a very useful article about TZA and other ETFs that bet against $RUT. Note that TZA is a 3x leveraged ETF. It is highly volatile. It can go up or down a lot. It is currently at 62.5. It can rise as high as 118 or as low as 36 medium term. It's like driving a fast car. Can be a thrill ride or a kill ride. Updates 10:02 AM EST - Monday 3/30/20 Here are some updates from market internal indicators.
Indicators are still a bit mixed, but have gone more bearish. Again, the definitive message will be "failure to rise" from $SPX $NDX. That's the confirmation to enter short. By the way, these comments by the man who invented $VIX should help you understand how to interpret $VIX right now. Basically he's saying that volatility will not subside for real until the number of COVID-19 cases have peaked. Updates 9:28 AM EST - Monday 3/30/20 $SPX $NDX $RUT are likely to retest Resistance1 or even Resistance2 today. Failure to surpass these highs will be the confirmation that we are looking for to enter short. This move is not atypical. Recall that our signal turned bullish on 3/19, but prices did not fully bottom until 3/23. Now, our signal turned bearish on 3/27, but prices most likely won't just rollover immediately. At this point, we are looking for as confirmations to enter short:
Here is the S/R table again for your convenience. We may post another later today depending on price movements. Updated Sunday 3/29/20 at 3:32 PM EST The Big Picture $SPX $NDX $RUT all experienced a dramatic bounce last week. This brought out all sorts of headlines declaring that the crash is over. However, our system indicates that there is still more selling to come. Let us examine the evidence more closely. $VIX monthly chart below shows that back during the crash of 2008, $VIX formed a total of 6 Spires before it ended.
Before the current crash can end, we need to see a total of 3 $VIX Spires on $VIX monthly chart at the minimum. One spire for each month. At this point, it looks like Spire1 has formed on March 18. $VIX 2008 chart shows that after each Spire formed, $VIX dropped a good distance before it rose up to form another Spire. While $VIX dropped, $SPX $NDX $RUT rose up in big bounces. This is exactly what happened last week during this crash of 2020.
Both $VIX and $VXN are now done with the drop between the spire formations. $VIX $VXN are very likely going to rise up this coming week to retest the highs of 3/18. This retest of the high is what will show up as Spire2 on the monthly chart. While $VIX $VXN rise up to retest the highs of 3/18, $SPX $NDX $RUT will drop down substantially. What is difficult to determine right now is the magnitude of the drop for $SPX $NDX $RUT. Will it be a substantial Dive2? Or just a drop where $SPX $NDX $RUT retest the lows of 3/23? It is simply too early to tell right now. Based on 2008 crash data, after each big bounce, $SPX $NDX $RUT typically dropped to a lower low. $SPX $NDX $RUT may follow this same pattern again, but still we shouldn't assume that just yet. The Long Term Portfolio The Down Trend that started on 2/20/20 is still intact. Continue to stay in cash for now. Nothing like a big cash cushion in time like this. This Down Trend has a long way to go. But at some point, market will approach bottom, and there will be some tremendous opportunities for bargain hunters. Now is the perfect time to compose a shopping list for your long term portfolio. At some point towards the end of this crash, FAANG stocks will be so cheap relatively speaking. There will also be many other attractive high growth tech stocks ready to resume their growth. There will be reliable recession-proof companies that steadily pay dividends. If they manage to survive the crash of 2020, they can be attractive candidates for your income portfolio. Stay patient. This crash will go on for a while yet. When it reaches a climax (still not here yet), it will look very scary. But this crash will also provide a bloody good opportunity to buy very low. Short Term Moves On Thursday 3/19, our system detected the end of Dive1 and the start of the big bounce. We posted an update at 7:02PM EST Thursday 3/19 to alert you. We wrote: "Our system has issued a "short-term significant bounce" signal, based on the market internal indicators." That signal captured the big bounce between 3/23 and 3/27. On this past Friday 3/27, just at closing we posted this update: "Our system has identified these bearish signals… The reward:risk ratio for entering short positions against $SPX $NDX $RUT has improved a lot now that the big bounce is fading. Conditions are favorable for at least partial entry of short positions." End-of-week market internal indicators confirm the short-term bearish signal issued by our system on Friday 3/27. They confirm the high probability that $VIX $VXN will rise again this week, while $SPX $NDX $RUT will most likely drop. For Monday, here are the very short term S/R projections from our system. Get Intraday Alerts To get alerts on your phone whenever we post anything at TimingStockMarket.com: 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". 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 Why 3x ETFs like TQQQ lose money over the long term Updates 5:00 PM - Friday 3/27/20 Our system has identified these are bearish signals: $SPX $NDX $RUT all formed bearish spires on their daily chart today. They ran into resistance near the highs of yesterday. $VIX $VXN have been finding support for multiple days around the 200 EMA on their 30-min charts. That's a reliable signal that they are going to rise next week. Not a guarantee, but a high probability. Market breadth dropped into very negative zone today. SQQQ (bearish inverse of TQQQ) and TZA (bearish inverse of TNA) have formed W bottom on their hourly charts. The reward:risk ratio for entering short positions against $SPX $NDX $RUT has improved a lot now that the Big Bounce is fading. Conditions are favorable for at partial entry of short positions. However, if you choose to enter short right now, you may need to be prepared for one last possible short squeeze on Monday. Updates 10:43 AM - Friday 3/27/20 $SPX $NDX $RUT are all very close to Support1 right now. We projected last night there is a 70% chance that $SPX $NDX $RUT will bounce at Support1. This is still true. How high will this bounce be?
If you are thinking of initiating new long swing positions based on $SPX $NDX $RUT, and you want to keep them over the weekend, keep this in mind. The reward:risk ratio for entering at Support1 is not great. If you have existing long positions based on $SPX $NDX $RUT, trail your stops upward and consider tightening them. If you are thinking of initiating new short positions based on $SPX $NDX $RUT, the reward:risk ratio for entering at Resistance1 is quite favorable. Look for confirmation via rising $VIX $VXN. We still expect $SPX $NDX $RUT to be going sideway in large swings over the next few days. Updates 2:20 AM - Friday 3/27/20 Probabilities:
The risk:reward ratio is no longer favorable to initiate new long positions based on $SPX $NDX $RUT. If you have existing long positions based on $SPX $NDX $RUT, trail your stops upward and consider tightening them. The signal to enter short has not arrived yet. We expect to see the signal showing up when $VIX drops down to around 47, and $VXN to near 45 or so. We still expect $SPX $NDX $RUT to be going sideway in large swings over the next few days. Updates 4:01 PM - Thursday 3/26/20 Apologies for lack of updates earlier today. As we mentioned in our email last night, we had to be out of the office today due to family medical matter. Now that we are back in the office, we can see that there's some concerns about the market ignoring our projections and marching up so bullishly. Recall we've been saying since the weekend analysis that $SPX $NDX $RUT are likely to have some major sideway swings. Dive1 has ended on 3/23, but Dive2 is not happening just yet. Stocks are moving sideway in some rather enormous swings. Bargain hunting hopeful bulls are back. So are some very deep pocket billionaires with time and money on their hand. But there are plenty of trapped bulls in need of cash. The trapped bulls are motivated to sell because they need to raise cash to simply survive. So there is now a battle between these two groups. As a result, $SPX $NDX $RUT need to go through some major sideway swings as the battle zone. One group will come out as winner. Based on all the information that we have at this point, our projection is that the bears will win this battle. But as we said, Dive2 of the Down Trend has not begun yet. It won't start for another week at least. $SPX $NDX $RUT are still in the Big Bounce. So use swing trading strategy for right now. Expect an updated S/R table soon. Meanwhile, let's try to answer some questions. Can $SPX $NDX $RUT rise up to Resistance2 from here? Yes, but the reward for new positions is low. And the risk is high. So this is not a favorable setup to enter new long positions. But if you are already long, simply trail your stop up. Where will $SPX $NDX $RUT revert and start dropping? Possibly at the current Resistance2. Where should we enter short positions against $SPX $NDX $RUT? We need a bit more data to find a favorable entry point for shorts. We will discuss this when we post new S/R table. How low will $SPX $NDX $RUT go when they drop? They will most likely find buyers at Support1. They will most likely bounce up again from there. Not guaranteed, but high probability. Updates 1:50 AM - Thursday 3/26/20 The messages from market internal indicators are mixed right now. Below are the updated short-term S/R levels. Signal: Short-term bearish until Support2 is tested. Probabilities:
What generated the bearish signal? The similarities in price patterns between October 2008 and right now. Take a look at the following $SPX daily chart from October 2008. Notice the pattern etched out by $SPX candles.
Observe the eerie resemblance formed by $SPX daily candles in the most recent 3 sessions.
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 Why 3x ETFs like TQQQ lose money over the long ter Updates 3:50 PM - Wednesday 3/25/20 We just want to put in perspective the current dramatic Big Bounce that's happening for $SPX $NDX $RUT. Let's compare this to the Big Bounce that happened after Dive1 ended on October 10 2008. $SPX had a dramatic Big Bounce back in early October 2008 too. In a very short period of time, $SPX rose sharply to gain 24% before reaching resistance and forming a dramatic top on the hourly chart below. On 3/23/20, $SPX had a low of 2192. A 24% gain from this level brings us to $SPX at 2718, pretty much our latest projected Resistance2 level. So:
Updates 1:27 PM - Wednesday 3/25/20 Updated S/R table with all levels moving higher. Next high-probability short-term move: $SPX $NDX $RUT rising up to test Resistance2. Consider: Tighten and trail your stops upward for long positions based on $SPX $NDX $RUT. Hold off testing any short entries for now. Hold off testing UVXY TVIX entries for now. Updates 12:31 PM - Wednesday 3/25/20 Next high-probability short-term move: $SPX $NDX $RUT rising up to test Resistance2. Consider: Tighten and trail your stops upward for long positions based on $SPX $NDX $RUT. Hold off testing any short entries for now. Hold off testing UVXY TVIX entries for now. Updates 11:21 AM Signal from our system: "bullishness is fading to bearishness". Indications:
Next high-probability short-term move: $VIX $VXN are building up their "anchors-to-rise pattern". They may not take off immediately, but they will most likely rise up to retest the highs of 3/18. As $VIX $VXN rise, $SPX $NDX $RUT will most likely drop. At the minimum, they will drop to retest Support1. Here is the S/R table from yesterday. It is still in effect for now. Updates 9:46 AM - Wednesday 3/25/20 Market breadth is still reading positive, but not as bullish as yesterday's open. $VIX $VXN are climbing up right now, which is not good backdrop for the bullish attitude in the market currently. However, these are simply early warning signs that the big bounce that started on 3/23 is fading. There's some room left for $SPX $NDX $RUT to rise up to Resistance2 based on our table posted yesterday. We will post a new table shortly after $SPX $NDX $RUT give us some more data to work with. 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 Why 3x ETFs like TQQQ lose money over the long term Updates 11:58 PM Today's very bullish rally was considered epic according to major news outlets. And indeed it was quite a comeback, as market participants eagerly awaited massive fiscal stimulus bills from Congress. However, as of this writing tonight, there is no deal yet. So futures are down somewhat. So is this the end of the Down Trend? Let's take a look at $VIX monthly chart from the crash of 2008. As you can see $VIX formed 4 very tall descending spires, one for each month starting at the beginning of the crash in October 2008. It took a total of 6 descending spires all together before the crash ended. So far for the crash of 2020, $VIX has only formed one spire. It is a very tall spire, but only one so far. Which means there is still quite a way to go, because remember this is the monthly chart. In the most optimistic scenario, we may see 3 very tall $VIX spires and a couple of lower spires. But that's being optimistic. We think it may take anywhere from 6 to 9 months before the Down Trend ends. In 2008 $SPX $NDX had some big bounces similar to today's big bounce. They brought out a lot of hopeful bulls, but hope was crushed after a while. We don't want to be a party pooper, but we traded through 2008, and it was painful. A more realistic scenario may be something like this projection below for the next few weeks into April. The Down Trend is still intact. Dive1 of the Down Trend started on 2/20 and ended yesterday 3/23. $SPX is not going to start Dive2 just yet. There is a high probability that $SPX will go through some large sideway swings between 2550 and 2109 before rolling over to start Dive2. Keep this in mind as you trade through the next few weeks. The challenge will be to temporarily get out of the trend-riding trade that has been so profitable for the bears since 2/20. Now we have to switch to the swing trade mindset. Updates 5:36 PM Below is the S/R table, updated to reflect how high Resistance2 can reach in the short term.
Updates 4:14 PM There is a high probability that $VIX $VXN are still going drop more. If you entered UVXY TVIX earlier today, you may want to collect profits on these and get out for now. Updates 11:25 AM EST We have diverging messages going from market internals. We think that $VIX $VXN are anchoring to rise, but they are likely to grind it out in the current zone formed this morning for a bit longer.
But if they continue to find support in this zone, the odds are high that they will rise back up to retest the highs of March 18. The best strategy right now may be:
Updates 9:53 AM EST Updated S/R table. You can consider using these levels to set stops or take partial profits on your long positions. Do not enter short $SPX $NDX $RUT position yet. No short setups right this moment. Updates 9:16 AM EST The S/R table from 6:57 PM Mon 3/23 still holds. We will update soon once market opens. Use the resistance levels as your guides for setting stops or taking partial profits on your long $SPX $NDX $RUT positions. Do not enter short $SPX $NDX $RUT position yet. No short setups right now. $VIX $VXN look ready to drop lower today. We will post these levels as well after market opens. 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 Updates 6:57 PM EST One of our members asked: Do you think it's good to buy TQQQ in incrementals as it goes down from this price point, seems to be quite beaten down with QQQ down almost 30% already. Let's break down how low TQQQ can go. $NDX is still in Down Trend. It may bounce some amount from here as Dive1 ends, but it is still in the Down Trend. Our system is projecting $NDX to go as low as 5550 when the Down Trend ends. This is the optimistic scenario. $NDX is currently at 7007. That means another 21% drop from current level. TQQQ is 3x leveraged of $NDX. This means that in a normal drop, TQQQ would drop 63% when $NDX drops 21%. However, due to backwardation, TQQQ will drop more. TQQQ can easily drop 70% relative to $NDX 21% drop, (See backwardation explanation below). This is just a very rough estimate. This means that TQQQ can drop from current price of $35.62 to about $10 per share. Personally, we plan to wait until TQQQ get down closer to $10 before considering building up TQQQ to capture a reversal to Up Trend. So that's medium term picture. For the very short term, $VIX $VXN are heading down. At this point, $VIX can drop as low as 54, and $VXN as low as 51 before resuming their rise to retest March 18 highs. While $VIX $VXN drop, $SPX $NDX $RUT are very likely going to rise. Below is the updated S/R table to reflect how high $SPX $NDX $RUT can go. NOTE: Think of backwardation as sailing into headwind. It is the additional force that pushes 3x leveraged ETFs down more than 3x in a very bearish market. It is the opposite of contango, which can push 3x leveraged ETFs up more than 3x in a very bullish market. If you are not familiar with contango and backwardation, read more about them here: http://seekingalpha.com/article/3969152-contango-uvxy-explained-one-time sixfigureinvesting.com/2016/09/the-cost-of-contango-its-not-the-daily-roll/ You can also monitor the current contango/backwardation level at VixCentral.com. If the number is positive, it’s contango. If it’s negative, it’s backwardation. Updates 12:55 PM EST Looks like $VIX $VXN will go lower than Friday 3/20 low. They most likely will retest the zone around 47. $SPX bounced from Support2, while $NDX $RUT bounced from Support1. They are all forming bullish W intraday pattern. Decent setup to test long positions here. Can hold long until $VIX $VXN retest the zone around 47. Updates 10:43 AM EST Wait for $VIX $VXN to retest the lows of Friday 3/20. Wait for confirmation that they find support there. Then you can consider re-entering short, as $VIX $VXN climb back up . However, keep your short positions small here. The potential sell-off for $SPX $NDX $RUT may not be that big relatively speaking. The potential bullish reversal may be quite strong and become a big short squeeze. Be very careful with TVIX UVXY. Collect your profits and get out when $VIX $VXN retest March 18 highs and fail to surpass. Updates 10:16 AM EST Futures hit limit down last night, recovered, inched up and popped this morning when Fed announced QE Infinity (sounds like a car name). $SPX gapped down at open, but $NDX and interestingly $RUT did not gap down at open. They are all now marching upward. $VIX $VXN are dropping right now. They are likely to retest the lows of Friday 3/20 first. Then we may see them start marching upward to test the highs of 3/18. When $VIX $VXN get down to the lows of Friday 3/20 is when we are likely to see a reversal in morning's price for $SPX $NDX $RUT. 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 Updates 7:17 PM EST
We want to clarify the short term market moves. On Thursday March 19, we posted an update at 7:02PM EST to alert you that our system issued a signal for a short term bounce. This was because $VIX $VXN were forming short-term tops. On Friday March 20, we posted an update at 11:17 AM EST to alert you to exit your long positions because $VIX $VXN were rising again. We wrote in our weekend analysis that $VIX $VXN will continue to rise, and $SPX $NDX $RUT will continue to drop short term. This statement is coming true based on futures actions right now. This remains remains in effect, until $VIX $VXN retest their March 18 highs again. Updated Sunday 3/22/20 at 12:45 PM EST The Big Picture and The Long Term Portfolio We received a lot of questions this week from our members. There was a common theme in the question: Is this Down Trend done yet? Are we about to start an Up Trend given the price actions at the end of the week? The answers are:
So where are we in this Down Trend? To reliably answer that, we turn to $VIX $VXN charts. In our experience, $VIX $VXN tend to follow certain recurring patterns during Down Trend or Major Pullbacks. And $SPX $NDX $RUT tend to follow these patterns too, but analyzing them is harder. So we go back and use $VIX $VXN patterns from the crash of 2008 to help guide us through this current crash. Last week, we introduced a new term “Dive”. “Dive” refers to the big down segments that constitute the core of the trend. A major Dive in a Down Trend is equivalent to a major Surge in an Up Trend. This Down Trend most likely will have 4 to 5 Dives. $SPX $NDX $RUT are likely finishing up Dive1 right now. To help you visualize the Dives better, we have been sharing with you $SPX hourly chart from September 2008 to March 2009. Here it is again in case you missed it. $SPX hourly chart above from 2008 showed 4 major Dives spanning a period of 6 months that comprised the entire Down Trend. (We use the hourly chart because the show the Dives better.) The current Down Trend that started on Feb 20 is likely to experience 4 major Dives also, and may span anywhere from 6 to 8 months. Here is a projection of how the 4 Dives can unfold, and how low $SPX is likely to go during this Down Trend. We hope you have managed to cash out the profits in your long-term portfolio, per our discussion throughout February. Continue to stay in cash for now. Nothing like a big cash cushion in time like this. This Down Trend has a long way to go. But at some point, market will approach bottom, and there will be some tremendous opportunities for bargain hunting. As Warren Buffet wrote: “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it is imperative that we rush outdoors carrying wash tubs, not teaspoons.” Medium Term Move: Sideway $VIX hourly charts from September to December 2008 shows some key moves that we should monitor for soon in the current $VIX chart. We introduced this chart below from 2008 to you last week, showing the 4 spires formed by $VIX, and the dates that they correspond to on $SPX chart. $VIX spires are significant to monitor for because they form the top resistance level for $VIX. When $VIX spires are done forming, there is a high probability that the Down Trend is about 50% done. There needs to be a minimum of 3 top resistance spires. There can be as many as 5 top resistance spires. When the spires are done forming, volatility will descend in earnest. But stock prices are likely to ignore the bullish message from $VIX spires for a while. This is referred to as a bullish divergence. The way it will unfold is something like this. While $VIX $VXN march downward, $SPX $NDX $RUT will continue to drop for a while longer. Then they capitulate and start to reverse to launch a new Up Trend. This is why it’s important to monitor $VIX spires. They mark the halfway point for the Down Trend usually. $VIX Spire1 is significant because it marks the end of $SPX Dive1. Dive1 is usually the biggest and scariest downward move. In October 2008, after Dive1 finished, $SPX went sideway for about 3 weeks before starting Dive2. We may see a very similar pattern for $SPX $NDX in the current Down Trend. We are likely to see the end of Dive1 $SPX $NDX this week. What follows may be a series of big sideway swings for $SPX $NDX for a couple weeks, before Dive2 starts for real. Short Term Move: $VIX $VXN Rising Up to Retest The key in all this is to monitor first for the formation of the first 2 $VIX $VXN spires. March 18 may turn out to be the date of $VIX $VXN Spire1. Unfortunately, there is no way to say that it is truly Spire1, until Spire2 forms. Basically, Spire2 has to be at the same high or lower high than Spire1. When we see that formation, we can declare with some certainty that Spire1 and Spire2 have formed. On Thursday March 19, we posted an update at 7:02PM EST to alert you. We wrote: Our system has issued a "short-term significant bounce" signal, based on the market internal indicators.” This signal was triggered partly from $VIX $VXN forming tops on Thursday. This signal was also triggered from rising market breadth on Thursday. On Friday March 20, market saw the collapse of another Chicago clearing firm trading in $VIX. This added to $VIX dropping even more intraday. We should not discount $VIX $VXN Friday drop as outlier data though. They have already started forming short term tops on Thursday. And their descend was confirmed by rising market breadth. However, by end of day Friday, $VIX $VXN have resumed their rise back up. This rise will most likely continue on Monday 3/23. $VIX $VXN are yearning to retest March 18 highs again. But if they don’t exceed March 18 highs, then by definition Spire2 will form. That will make March 18 the definitive date of $VIX $VXN Spire1. This is significant because Spire1 typically marks the top level of volatility for $VIX $VXN in this Down Trend. While $VIX $VXN climb back up to retest March 18 highs and possibly form Spire2, $SPX $NDX will most likely drop some more. However, when Spire2 forms, $SPX $NDX will likely start a good size bounce that can bring $SPX back up to Long Term Resistance1 at 2563, $NDX at 7850. It is important to keep these scenarios in mind For Monday, here are the very short term projections from our system. On Monday and Tuesday, we will be monitoring for:
Those are signals confirming a bullish setup to enter long $SPX $NDX $RUT. Finally, the projection that $SPX $NDX $RUT are likely to experience a significant bounce after VIX $VXN fail to surpass March 18 highs is confirmed by early bullish signals from market internals. How We Notify You On weekdays, we will post multiple updates at TimingStockMarket.com for members throughout the day and into the evening. On Sunday, we will post a more in-depth weekend analysis. We will send out nightly emails with updated passwords to access TimingStockMarket.com for members. We will alert you on Stocktwits every time we post anything at TimingStockMarket.com, whether it's weekday updates, or weekend analysis. You can get alerts sent to your phone when we do this. Here is how: 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". 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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