Key support and resistance levels
ES NQ RTY are likely to retest the lows of 5/27 to work off some of the overbought conditions.   They are likely to find support at these levels and resume the climb.   

However, keep in mind the possibility that ES NQ RTY may not be able to rise above the high of 5/31.  In that case, they may have to retest the lows of 5/24. 

To monitor the key levels on the chart of your choice, use TradingView Fib tool to lay a Fib grid between the low of 5/20 and the high of 5/31.   The chart below shows what the key levels for ES.

For Wednesday, we'll be monitoring these levels for ES NQ RTY to see if they find short-term support there and resume the climb.

• ES: 4040
• NQ: 12230
• RTY: 1830

Click here for Signal Trades spreadsheet.

Updates 2:27 PM ET - Monday

Short-term volatility signal: "Fully Bullish"...but fading
So far today has been a choppy consolidation day for stock indices.

$VVIX is currently basing.   Given how far it has dropped since 5/20, $VVIX is likely to rise from this base.   

If $VVIX forms a W bottom on the intraday chart here, then volatility signal will become "Transition".  Until then we would say tread carefully with long positions.  If you initiate new positions, long or short, make them intraday trades only.

We got stopped out of our Multi-day Bull TQQQ.   Staying out for now to give $VVIX a chance to clarify its message.

Updates 11 AM ET - Monday

Upcoming key events
The key events coming up are actually mid-June, on 6/15 and 6/17.   That will be a fairly explosive week, followed by a 3-day weekend.   So mark your calendar not to go on vacation during that week.

Key support and resistance levels
The battle ground for this week will be between these key levels:

• ES:  support at 4040, resistance at 4300
• NQ: support at 12222, resistance at 13555
• RTY: support at 1830, resistance at 1951

​(Support is the low of 5/27.   Resistance is the high of 5/4.)

​The bulls have the advantage for now.  As long as ES NQ RTY stay above their support levels, they will try to clim up towards resistance.   

To track their upward progress, use their 15-minute charts to monitor the 200 EMA green line.  For example, ES 15-minute chart below, as long as ES 200 EMA green line is still rising, its bullish momentum is still intact. 

Once this green line starts to go sideway, pay close attention to the message by $VIX and $VVIX.  If one of them turns bearish, the volatility signal will become "Transition" at that point.

Do note that the resistance levels listed above are very strong.  They are where the bulls got trapped post FOMC on 5/4.   So a lot of sellers are likely to step in at this level.

NOTE: 
To track the SR levels on your own charts, use TradingView Fib tool to lay a Fib grid on your chart of choice.   
Note also that even though we trade ETF, we track these 3 futures ES NQ RTY because they contain a great deal of intraday data from trading for 22 hours per day.   Their intraday EMA patterns and levels are more accurate.
​
Trade plan
We are currently holding a TQQQ Multi-day Bull position that we entered on Friday. We will continue to trail the stop up for this position as long as volatility signal remains "Fully Bullish".

We will look for an early morning setup to enter an Intraday Bull position via TNA or SVIX if one shows up.  The goal of this position is to collect 5% profit for the day.  

(NOTE: We trade SVIX because it has better leverage than SVXY.   But we track SVXY chart because it has more data.)

​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.

Click here for Signal Trades spreadsheet.

Updates 9:26 AM - Thursday 5/26/22

GDP negative but...
GDP contracted at -1.5% according to latest report, but market reaction is muted.   This is a bullish sign, confirming our "Fully Bullish" volatility signal.

There are many other bullish confirmations popping up, which we will discuss in more details in the weekend report.

We will update the buy targets shortly.

Updates 1:30 AM - Thursday 5/26/22

Short-term volatility signal: "Fully Bullish"
...but as we explained yesterday, between now and 6/15, stock indices are likely to behave like they did between 2/24 and 3/15.   They are likely to bounce in a wide range.   For ES that range is likely to be between 3875 and 4100.

After the GDP report at 8:30 AM ET, we'll be monitoring ES for the possibility of it dipping back to 3875.   This is a strong support level, and if ES can find enough buyers there, ES can climb up towards 4100 next week.

(We trade SPXL but we prefer to track ES which is S&P futures since it trades 22 hours and provides more intraday data points on charts.)
​
Volatility is dropping
... and SVXY SVIX (short VIX ETFs) are rising as a result.  Post GDP report, look for a quick dip to test SVXY SVIX 5/24 low.  Strong support there can propel SVXY SVIX back up to 5/17 high next week.
(NOTE: We trade SVIX because it has better leverage than SVXY.   But we track SVXY chart because it has more data.)

(For more information on $VIX $VVIX $VXN $RVX, click here.)

Trade plan
We plan on trading a Multi-day Bull position with SVIX and an Intraday Bull position with SPXL.   

​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.

Click here for Signal Trades spreadsheet.

Updates 10:55 AM ET - Wednesday 5/25/22

Below are key ES support and resistance zones to monitor today into tomorrow.

Updates 1:30 AM ET - Wednesday 5/25/22

Week of June 13 will be the pivot point
During the week of June 13, we have:

• Wed 6/15:   FOMC; VixEx
• Fri 6/17:  OpEx (Quad Witch) 

According to SpotGamma, there are very large expirations for both VIX options (VixEx) and equity options (OpEx).  The release of such large expirations means that dealers will be buying to cover a large number of shorts (previously entered to keep their own books neutral).   The combination will produce a lot of fuel for a short-covering rally that can last more than two weeks.

(For more information on how options affect the underlying stock market, click here.)

Price actions now may be similar to late February early March
Given that FOMC is on 6/15, traders are unlikely to release their protective puts ahead of this key date.   So we may looking at a setup very similar to what happened between 2/24 and 3/15.  

If you go back and look at ES NQ RTY hourly charts during that period, you will notice that they formed fairly complicated sets of W bottoms, after the steep drop on 2/24.   

ES hourly chart below shows how we may be seeing similar price actions to that period.   The takeaway here is that it's not time to make big directional bets yet.  And be careful about aggressively shorting here, as market may be forming a series of W bottoms before launching into a bear market rally.

​FOMC Minutes Wednesday; GDP Thursday
Given that FOMC minutes will be released at 2 PM ET today, price actions may be choppy ahead of the release.

Afterwards, there will likely be a head fake followed by a big directional move.  This combined with GDP report at 8:30 AM ET on Thursday can really increase volatility.   

For Wednesday into Thursday:

• ES has strong support at 3855, then 3800.
• ES has strong resistance at 3980, then 4040.   

Regardless of which instrument you trade, keep an eye on ES key support and resistance as the S&P is the market leader right now.
​
(We trade SPXL but we prefer to track ES which is S&P futures since it trades 22 hours and provides more intraday data points on charts.)
​​
​$VVIX message:  volatility may rise
$VVIX (volatility of volatility) hourly chart below shows a cluster of small hammer candles forming on Tuesday.   This pattern usually precedes a spike in $VIX.  Bulls should heed this warning and tread carefully Wednesday and early Thursday.   

(For more information on $VIX $VVIX $VXN $RVX, click here.)

Trade plan
The short-term volatility signal is still "Fully Bullish", though we may have to endure price actions bouncing in a big range for a while, until the week of 6/13.   
Personally we are leaning bullish and will be looking for opportunities to re-enter SPXL and SVIX as they retest the lows again.   We won't be trading ahead of FOMC minutes as price actions may be very choppy.  We will monitor at 2 PM ET.

​Click here for Signal Trades spreadsheet.

(NOTE: We trade SVIX because it has better leverage than SVXY.   But we track SVXY chart because it has more data.)

​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.

Updates 12:30 AM ET - Tuesday 5/24/22

The struggle to rise
Although volatility signal has turned "Fully Bullish", all stock indices are going to have to endure another battle between the bulls and the bears.   

Some data to keep in mind:

• Market breadth is still improving, albeit by a tiny bit.
• Bonds are still building a base 
• Bond volatility has formed a top short term
• Oil has formed a top short term

The world is not falling apart entirely, but there is no doubt we are going to enter into a recession of some duration.   However, the stock market is a giant discounting mechanism.   So it may be that stock prices have already baked in all this bad news.

Short-term volatility signal : "Fully Bullish"
$VIX and $VVIX charts are still assuring us that the signal is "Fully Bullish".

All stock indices need to retest the low zone
In ES hourly chart below, we've shown the key support zone at 3855.   If ES retests this zone and successfully finds support, then ES along with the other indices can really climb up.   ES can climb up to 4100 in a few days.

If that test fails, then a retest of 3800 is likely.   If that fails, all indices will dive in another major leg down.

Trade plan
We are preparing to go long again with SPXL and SVIX, but at a lower entry price, and a tight stop in case we are wrong.

(NOTE: We trade SVIX because it has better leverage than SVXY.   But we track SVXY chart because it has more data.)

​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.

Click here for Signal Trades spreadsheet.

Updates 3:02 PM ET - Monday 5/23/22

Retest of ES 3855 likely
Last night we wrote:  While we don't think ES will retest 3800 again this week, we think bulls and bears are going to fight it out in ES support zone between 3855 and 3950 for a bit.  If ES can get down close to 3855 one more time and find enough buyers there to help it reverse sharply upward, then the bargain hunters are likely to step in to help with momentum.

We think this scenario is starting to unfold.   ES managed to reach up to 3980 today, thereby setting a bull trap.   Now it is likely to drop back down to 3855, thereby setting a bear trap.   Once everybody is trapped, ES along with all major stock indices are likely to launch into a bear market rally.   

Updates 12 AM ET - Monday 5/23/22

Upcoming key events
​FOMC minutes on Wednesday and GDP report on Thursday will no doubt move the market in some ways.  But given the disastrous earning reports of Walmart and Target last week, Friday's reports are going to be monitored closely to gauge whether or not consumers will continue to support this economy.

And speaking of earnings, the following earning reports will also be closely monitored on Thursday after hours: COST (Costco), NVDA (Nvidia).

Bear market is not done
In the big picture context, the bear market is not done yet.  The horrible combination of super hot inflation, supply chain disruption, unending pandemic, China shutdown, Ukraine war is not improving.   Not anytime soon. 

A recent WSJ article discussed how this could be the lost decade for stocks.  We are inclined to agree.    

But a bear market rally is imminent
Having said all that, we will now say that a bear market rally is imminent.  It is likely to start as early as Monday based on volatility signal (see more on that further below.)

Besides volatility signal, there are other important signs of market stabilizing for the short term.

• Bonds (TLT IEF LQD JNK) have formed short-term bottoms on their weekly charts.
• Bond market volatility (MOVE) has formed a double top on a weekly basis and has sharply dropped.
• Oil futures have formed a series of lower high top since early March. 
• Market breadth as seen via A/D lines are improving for NYSE, Nasdaq as well as small caps.
• Nasdaq percentage of stocks above 200-day MA is now at 12%.  It is approaching the range where it can bounce up a lot, possibly back to 50% again, as it did back in late March.
• S&P dipped into bear market territory on Friday by dropping just past 20% from its all-time high. It is just enough to trigger a lot of bear market headlines and bear memes.  This is usually a contrarian signal.
• S&P has had 7 consecutive bearish candles on its weekly chart.   That is a record, and it is extremely unlikely for it to close out this week with another bearish weekly candle.
• Nasdaq and small caps are behaving more bullishly than S&P.
• Bitcoin has formed multi-day short-term bottom.

Short-term volatility signal:  "Fully Bullish"
$VIX:  "Fully Bullish"

• $VIX daily chart shows that it has been forming a top since 5/2, and its 20-day EMA blue line is starting to go sideway.
• $VIX 30-minute chart below shows a clear lower high top formed on Friday 5/20, similar to the one formed on 3/15.

SVXY:  "Fully Bullish"
SVXY 15-minute chart below shows 2 sets of W bottoms formed since 5/2.   

ES:  "Fully Bullish"
Don't let ES $SPX dip towards 3800 on Friday fool you.  That was a bear trap.  Price dropped just enough towards this key level to trigger the criteria for the algos to go short.  Then price reversed hard.   And reversed across the board for S&P, Nasdaq and small caps.   All this happened in on a Friday afternoon.   That's a bullish turnaround.

However, we don't think ES, along with all the other indices, will just take off right away on Monday.   Below is ES hourly chart with key consolidation zones highlighted in yellow.

While we don't think ES will retest 3800 again this week, we think bulls and bears are going to fight it out in ES support zone between 3855 and 3950 for a bit.  If ES can get down close to 3855 one more time and find enough buyers there to help it reverse sharply upward, then the bargain hunters are likely to step in to help with momentum.

Once ES reverses upward, it can rise up to the top of the next consolidation zone at 4045.   Ultimately, ES may rise back up to 4300 before signal turns "Fully Bearish" again.

Trade plan
We plan to enter into multi-day SPXL and multi-week SVIX.   Here's what we are looking for on both ES and SVXY 5-minute charts.

• The 20 EMA blue line drops below the 200 EMA green line.
• The 20 EMA blue line forms a W bottom while below the 200 EMA green line.

That's the place where we would enter SPXL and SVIX.   

• SVIX captures the drop in volatility, which we expects will happen as ES rises.
• SPXL captures the short-term rally for ES $SPX.

Alas we don't know exactly where or when this pattern will show up.   But we'll be monitoring Monday morning for it.

(NOTE: We trade SVIX because it has better leverage than SVXY.   But we track SVXY chart because it has more data.)

​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.

Click here for Signal Trades spreadsheet.

Updates 3:14 PM ET - Friday 5/20/22

Volatility signal failure >> "Fully Bearish", but...
We wrote at 9:20 this morning that key charts are showing for setups for retest of lows.   We've been saying that a successful retest means volatility signal will turn "Fully Bullish".

All the indices came very close to forming the pattern we've been hoping for.  But the pattern failed.   $SPX $NDX IWM all dropped below support from 5/17.  That failure turns the signal back to "Fully Bearish".

However, our SQQQ position got stopped out (at breakeven) after a strong directional move.   All indices reversed sharply upward.

At this point, there is a lot of conflicting data that requires further analysis.   How the market closes today will offer a lot of clues.   One important clue we've been tracking is that while $VIX rose up, it has not risen above the high of 5/12 yet.   And $VVIX 200-hour EMA is still trending down.

But we do not feel comfortable recommending either bullish or bearish entry at this point.  We'll be providing a full analysis this weekend, and hopefully the end-of-day and end-of-week charts and data will reveal where market is really heading next.

Updates 9:20 AM ET - Friday 5/20/22

Retest of lows likely
This morning the key charts are showing setups for a retest of lows. 

• SVXY may retest 46
• ES $SPX may retest 3900 

A successful retest of these zones may be our entry points to go long.   We don't plan any Quick Bear trade here.  We are getting ready for the Multi-day Bull positions only.

Updates 1:30 AM ET - Friday 5/20/22

Bear market is still here, but getting close to short-term "Fully Bullish"
To be clear, this bear market is still raging.   But in the short term, our volatility signal may be turning "Fully Bullish" by tomorrow.

What's the catalyst for stock indices to turn bullish?   OpEx.

Today is May options expiration for equity.   This market is heavily hedged with puts.   As these puts expire, dealers will buy to cover their shorts put in place previously to hedge their own books.   All these short covering actions will provide fuel for a bear market rally.

However, there may not be as much fuel this time as there was back in March.  This is because traders are not as heavily hedged with puts.   And some of these puts have already been unwound by Wednesday VixEx.   So the remaining fuel for a red hot rally is low.

Nevertheless, the key charts are showing very high possibility of signal turning "Fully Bullish", setting the stage for a bounce.   We may only have enough fuel for this bounce to rise up to the high of 5/17.  But we expect it to be a multi-day bounce.

Let's take a look at the key charts containing our signals.

$VIX: very close to "Fully Bullish"
All of $VIX EMA lines along with $VIX itself are forming a pattern very similar to 3/15.   

• $VIX reached 33 on Thursday, forming a lower high top.
• 20-hour EMA blue line and 50-hour EMA red line are anchored at 200-hour EMA green line.

We expect $VIX to drop from here, at least back to 5/17 low.   If it can drop lower than that, then this rally has longer to run.

​Trade plan
We plan to enter SPXL and SVIX for multi-day holding.

Why SVIX instead of TQQQ?  You may have noticed that $VIX $VXN are not spiking with the same magnitude as the sell-off in $SPX $NDX.   

Given this divergence, we prefer to put our bullish bet on the following thesis:  when signal turns "Fully Bullish", volatility will drop faster than stocks will rise, especially tech stocks. 

So we are going trade SVIX, which rises when volatility drops.  Read here for more about SVIX.   (Note that we prefer to trade SVIX, but track SVXY because it has a lot more data points right now.)

Also we are aiming for multi-day holding instead of multi-week. This is because there isn't that much fuel from the volume of expiring puts.  And there is no fundamental catalyst that can cheer this market up right now.  So expiring puts and perhaps some bargain hunters can combine to lift the market back up to 5/17 high.

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.

Click here for Signal Trades spreadsheet.

Updates 1:15 AM ET - Thursday 5/19/22

A fearful mood
After recovering from 5/12 low, stock indices had been marching up as volatility dropped.   We wrote this about the rally:

Going into this week, we were hoping for $VIX to retest at least 30 or higher before dropping down again towards 20.  This would mean a retest of the lows for $SPX $NDX IWM.   If successful, it would set the stage for a sustained rally all the way up to $SPX at 4300 or higher.

Well today the market delivered what we were hoping for, although it's rather painful to receive it.  Judging from the vibes on Twitter, market participants are feeling very nervous and fearful.   

Our volatility signal is actually still reading "Transition".  

There are 2 sets of chart patterns that we are monitoring for.  One will turn the signal to "Full Bullish".   The other will turn the signal to "Fully Bearish".  Let's take a look below.

$VVIX
Below is $VVIX hourly chart.   There are 3 scenarios to look for.

1. $VVIX surges over its 200-hour EMA green line, tops out at 130 (or lower), and starts to earnestly drop >> signal turns “Fully Bullish”.
2. $VVIX gaps up above 130, it's a sign that traders are panicking >> signal turns “Fully Bearish”​.
3. $VVIX drops back to anchor at 108-109, then rises again, resulting in a W bottom >> signal turns “Fully Bearish”​.

SVXY
SVXY can help us confirm the "Fully Bullish" scenario.  We need to see:

• SVXY 20-hour EMA blue line drops below 50-hr EMA red line.
• Blue line then needs to go sideway for at least one session.
  
• While this happens, SVXY retests the low zone below the blue line and finds support.

If this pattern forms, then signal becomes “Fully Bullish”.

Click here for Signal Trades spreadsheet.

Updates 11:09 AM ET - Wednesday 5/18/22

New bets on fear
As May VIX options expire this morning (VixEx), it appears that there is renewed fear on the part of traders. They are buying VIX calls, placing fresh bets on rising volatility.   

These bets may override the bullish effect of expiring equity options (Friday OpEx).   

We think the odds are high here that $VIX will retest at least 30, possibly rising as high as 35 if the fears persist.   This means that $SPX $NDX IWM will most likely be testing the low price zones formed between 5/12-5/13.

For today, we are sticking with a Quick Bear trade via UVXY to capture this rise in $VIX.   Keep in mind that this is a tough environment to trade in because VixEx and OpEx are producing opposite effects.

Updates 1:45 AM ET - Wednesday 5/18/22

Short-covering rally is likely to continue...but weak

The current rally is happening because of VixEx and OpEx. $VIX options are expiring today, while equity options are expiring this Friday.  Equity options are mostly puts purchased for hedging.  As these puts are unwound, dealers buy to cover their own shorts which were set up originally to protect their books.  All this short-covering activity reduces volatility and boosts equity prices.  

Going into this week, we were hoping for $VIX to retest at least 30 or higher before dropping down again towards 20.  This would mean a retest of the lows for $SPX $NDX IWM.   If successful, it would set the stage for a sustained rally all the way up to $SPX at 4300 or higher.

​However, we haven't gotten this retest yet.  And at this point, as we approach Friday, there's no reason for volatility to rise.   Not while these bearish bets are getting unwound.

So we have to assume that the current short-covering rally will continue up, at least until Friday.  

However, unlike March OpEx where there was a huge volume of puts, this put volume this time is not as high.   So there may not be as much fuel to help push the rally past Friday.

And there are very few calls, and not a whole lot of demands for equity from non-options buyers.   So we have our doubts about the longevity of this rally.

Finally, NQ $NDX are not rallying as strongly as ES $SPX are.   We want to see the weakest sector have a super rally as proof of strong short covering activities.

Key levels for $SPX ES
Still, even if this rally isn't going to last that long, it is likely to last until Friday, or into early next week even.   

​Regardless of what you trade, keep an eye on ES and $SPX levels. For Wednesday, ES $SPX are likely to be traverse between 4040 and 4110. In order for this rally to continue, ES $SPX need to stay above 4040.  If that support level is maintained, the short-covering activities can push ES $SPX all the way to 4110, and then 4155.