Mixed signals from indicators
VIX has been basing between 12.4 and 13.2 for the last 6 sessions as shown on its daily chart below. VIX is saying clearly that it's unlikely to drop, and it's building up momentum to rise. Rising VIX means bearish headwind for stocks. But in this environment, it may not be enough to substantially slow down the momentum train.

Market breadth on the other hand is sending out bullish messages.  McClellan Oscillator have swung back into positive territory.  The percentages of stocks above 200-day MA have stabilized and are rising again for both S&P 500 and Nasdaq stocks.

Junk bonds are sending out bullish messages as well as they are rising from the consolidation zone that they have been in since late December.

Bitcoin is edging back up, trying hard to break out above its mid-March high of 73794.  This suggests the risk appetite has not disappeared as feared.

US 10-year yield is still basing in a tight zone between 4.0% and 4.354%.  This eventually will lead to a spike, but the basing process may take a long time before spiking.  So for this week, bulls can ignore yields temporarily.

Key S/R levels
NQ

• This is the least bullish of the three indices.
• Still struggling below R1 at 18691.
• S1 is at 18450, but a successful retest here may not be enough to propel NQ past R1 at 18691.
• Instead, NQ may need to retest S2 at 18300 to bring in enough buyers to climb up to R2 at 19000.

​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.

Monitor the retest of S1 support for the next big move
Yesterday we shared with you the current snapshots of the various indicators.  They have been sending out similar messages.  The appetite for risk may be done for the short term.

However, ES NQ RTY may not pay much attention to these messages.   Their hourly charts below show that if they find enough buyers in the crucial support zones shown below, they are likely to swing back into Strong Bull mode.

NQ

• Unlikely to rise above R1 resistance at 18691 this week.
• Likely to retest crucial support in the S1 zone 18200 - 18300, highlighted in yellow triangle on hourly chart below.
• If NQ stays within this triangle early next week, the Strong Bull will resume and it can climb to R2 at 19000.
• If NQ falls out of this triangle which is at the bottom of the channel, the Weak Bull will take over and NQ may dip to S2 at 17623 before the Strong Bull comes back.

​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.

This week:  Choppy Bull.   
Next week:  Start of Weak Bull?
ES NQ RTY are in Choppy Bull mode this week.  They are dipping, but just shallow dips.  But the indicators are firming up the bearish message, suggesting that a Weak Bull may be starting next week.   

What is a Weak Bull?  It means that ES NQ RTY are likely to drop into a bigger dip.  Levels are discussed further below.

VIX: basing to rise
VIX continues to form those threatening hammer candles on its daily chart.  These candles are in the zone from 12.4 - 13.4, filling out a basing pattern for VIX.  Typically after spending time in a compressed state, VIX will typically surge up from the base.   If it does, the first level is 14.2.   But once VIX bursts through this level, it can rise as high as 18 fairly quickly.

10-year yield:  basing to rise
US10Y is forming a basing pattern at its 50-week EMA red line as shown on its weekly chart below.  (See yellow highlights).   These basing patterns are typically followed a surge.  

If US10Y surges up towards 5.0% again, tech stocks are going to get sold off some amount.   So again, this is not a bullish setup for NQ.

Market breadth:  peaking and likely to head down.
McClellan Oscillators for both NYSE and Nasdaq (Stockcharts.com: $NYMO $NAMO) have been swinging repeatedly back into negative territory.  This is typically bearish for stocks.

S&P 500 and Nasdaq Percents of Stocks Above 200-day MA (Stockcharts.com: $SPXA200R $NDXA200R) are forming short-term topping patterns.   In fact, since the start of 2024, Nasdaq percents have been grinding downward from a peak while NQ has been climbing up steadily.  This is a bearish divergence for NQ.

Key S/R levels
We want to emphasize that we are not expecting a crash.  No crash on the horizon. No bear market on the horizon.  Not like 2018.  Not like 2022.  

The indicators above are simply suggesting a short-term top is being formed, likely to be followed by a big dip that constitutes Weak Bull mode.  Then the Strong Bull will very likely come back and stocks will climb higher.

NQ

• Currently in a topping process that started at 18691 R1 level.
• Likely to dip to S1 support at 18300 by Thursday or Monday.
• May rise back up to 18691 R1 level one more time, but likely to fail from there. 
• Failure to rise means dropping into a big dip, down to S2 support at 17623.  
• Successful breakout means a quick surge to R2 at 19000.

ES

• Currently in a topping process that started at 5320 R1 level.
• Likely to dip to S1 support at 5250 by Thursday or Monday.
• May rise back up to 5320 R1 level one more time, but likely to fail from there. 
• Failure to rise means dropping into a big dip, down to S2 support at 5040.  
• Successful breakout means a quick surge to R2 at 5400.

RTY

• Currently in a topping process that started at 2133 R1 level.
• Likely to dip to S1 support at 2060 by Thursday or Monday.
• May rise back up to 2133 R1 level one more time, but likely to fail from there. 
• Failure to rise means dropping into a big dip, down to S2 support at 1970.  
• Successful breakout means a quick surge to R2 at 2200.

​Our personal trade plan
In the spreadsheet, we had been showing a Tactical Bear UVXY trade.  That position would have been stopped out for a small 0.5% loss as VIX dipped intraday on Tuesday.  But note how VIX reversed from its dip and climb back up to form a hammer on its daily chart by end of Tuesday.   UVXY did the exact same thing.  

What this suggests is that UVXY is still intent on rising along with VIX.  But since UVXY suffers from contango, we have to be patient and wait for an early morning setup that suggests a VIX surge is coming.

UVXY 30-min chart below hightlights in yellow the EMA pattern that we want to see at start of day on a day when UVXY is likely to surge.  Note how the 20 EMA blue line and 50 EMA red line intertwine tightly as they go sideway.   That's the time to enter UVXY with a tight stop.

SOXS is another potential Tactical Bear trade.  But we are not seeing any good setup yet.  

Please note that for personal reason, we may not be able to monitor and execute the bear trades.  But you can monitor for the above pattern to enter if you wish.

In the spreadsheet, we have also shown 2 trade setups for Tactical Bull SOXL and Runner Bull SOXL.  These are trade setups that we'll be monitoring for once the Weak Bull mode is done.  We definitely plan to do these trades.
​
​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.

VIX continues to base
VIX spiked up to 13.76 overnight from its base built last week. The latest pattern suggests that VIX may get up to 14.2 next Monday, but is unlikely to surge more than that. 

Before it gets up to above 14, VIX is likely to spend the rest of this week basing between 12.4 and 13.2.  This means choppy price actions for stocks.

NQ

• NQ formed a double top clearly visible on its daily chart.  This suggests that NQ is likely to dip some amount.
• As VIX pops back up to retest 14.2, NQ is likely going to retest support at 18300.
• As long as NQ stays in the channel shown below, and VIX keeps dropping, NQ will try to climb up to reach the eventual resistance at 19000.
• However, if VIX bases to really rise from around 12, and NQ forms multi-tops at 18691 again, then NQ may drop out of its channel into a much bigger dip, possibly down to 17623.

​ES

• ES formed a gravestone top clearly visible on its daily chart.  This suggests that ES is likely to dip some amount.
• As VIX pops back up to retest 14.2, ES is likely going to retest support at 5250.
• As long as ES stays in the channel shown below, and VIX keeps dropping, ES will try to climb up to reach the eventual resistance in the zone 5374-5400.
• However, if VIX bases to really rise from around 12, and ES forms multi-tops at 5320 again, then ES may drop out of its channel into a much bigger dip, possibly down to 5040.

RTY

• RTY formed a double top clearly visible on its daily chart.  This suggests that RTY is likely to dip some amount.
• As VIX pops back up to retest 14.2, RTY is likely going to retest support at 2060.
• As long as RTY stays in the channel shown below, and VIX keeps dropping, RTY will try to climb up to reach the eventual resistance at 2200.
• However, if VIX bases to really rise from around 12, and RTY forms multi-tops at 2133 again, then RTY may drop out of its channel into a much bigger dip, possibly down to 1940.

Our personal trade plan
In the spreadsheet, we have shown 2 trade setups.

• Tactical Bear UVXY:  This trade captures VIX bounce from current level up to the zone 14 - 14.5.   We posted the setup for this trade pre-Monday, but did not execute as we were out of office. However, we will continue to monitor this trade in case some of you may have taken it.

• Tactical Bull SOXL:  This trade captures VIX dropping from the zone 14 - 14.5 to 11.8 - 12.  Not expecting this to happen until later next week.

​
​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.

VIX continues to warn about possible rise in volatility
​On Friday March 22, VIX sent out another loud and obvious warning with its hammer candle formed on its daily chart (red arrow).  Typically this means that VIX will rise.  The question is how high.  

We think that between now and Thursday (ahead of the 3-day weekend), VIX may climb back up to the zone 14 - 14.5.  This makes sense as traders are likely going to purchase puts to hedge against PCE and Powell.  

But VIX isn't likely to stay up high for long.  Not in the current pattern formation.  So it will drop from the zone 14 - 14.5 back down to around to the zone 11.8 - 12 during the first week of April.  

The time for bulls to worry is if VIX keeps basing in this low zone of 11.8 - 12.  Then it will have formed a pattern that can lead to a period of rising VIX, where it can return possibly to the zone 18 - 19.

However, without this basing pattern down in the zone 11.8 - 12, VIX will keep dropping and become supportive of equity.

​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.

VIX is back with a warning
VIX sent out a loud and obvious warning with its hammer candle formed on its daily chart (red arrow).  Typically this means that VIX will rise.  The question is how high.  

We think that between now and next Thursday (ahead of the 3-day weekend), VIX may climb back up to the zone 14 - 14.5.  This makes sense as traders are likely going to purchase puts to hedge against PCE.  This key report comes out next Friday March 29, when stock market is closed.   Traders will have to wait through the long weekend.  So naturally they will want to hedge.   This process typically raises VIX.

But VIX isn't likely to stay up high for long.  Not in the current pattern formation.  So it will drop from the zone 14 - 14.5 back down to around to the zone 11.8 - 12 during the first week of April.  

The time for bulls to worry is if VIX keeps basing in this low zone.  Then it will have formed a pattern that can lead to a period of rising VIX, where it can return possibly to the zone 18 - 19.

​Key S/R levels
Before Friday started, we wrote that "NQ ES RTY are likely to spend time building a choppy top."  This is still true.

• NQ ES RTY may quickly retest S1 support on Monday, then rise up to retest resistance by Wednesday ahead of FOMC.

• After FOMC, VIX is likely to surge.  Meanwhile ES NQ RTY will most likely dip from resistance to below S1 by Thursday.
• There may be a small bounce after that.
• Then ES NQ RTY are likely to drop down to S2 by April 1.  (Recall that this is the first day back from a three-day weekend with PCE report released on a holiday Mar 29.)

We don't have enough data yet to determine what may happen past April 1.

NQ

• Resistance:  18400
• S1 support:  18000
• S2 support:  17400 

Keep an eye on UVXY.   If it retests 6.6 and bases there again, it is very likely to rise.  And that's when VIX will be rising too.

Finally, McClellan Oscillators for both NYSE and Nasdaq (Stockcharts.com $NYMO $NAMO) have turned sharply negative on Thursday.  $NYMO is -16 and $NAMO is -32.  This reflects sharply declining market breadth, confirming the message from volatility.

Key S/R levels
Friday is OpEx and Quad Witch which are major events.  However, FOMC announcements next Wednesday March 20 is going to be more important for most traders.  This is due to the hotter than expected CPI reports since January.  It changes the bets on when the Fed will cut rate.  

Additionally, NVDA has a big AI conference starting this Sunday lasting until FOMC announcement also.  So traders are unlikely to make major commitments ahead of Wednesday.

• ​Between now and then NQ ES RTY are likely to spend time building a choppy top.  

• Look for NQ ES RTY to retest S1 support on Friday, then rise up to retest resistance by FOMC next Wed.
• After FOMC, they are likely going to dip.
• If they dip below S1 support, then they can dip as low as S2 before they can find enough new buyers to resume Strong Bull mode.

NQ

• Resistance:  18600
• S1 support:  18169
• S2 support:  17600 

​Our personal trade plan
Given the choppy environment between now and FOMC, we don't plan to trade until after FOMC.  We are positioned to enter into UVXY if the pattern discussed above forms.
​
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.​​​​​​