Click here for Signal Trades spreadsheet. Updates 11:58 AM ET - Friday Volatility is really ebbing, but NQ ES have not gotten the memo yet VIX is climbing up, but slowly. If VIX tops out in the zone 14.8 - 15, that would confirm that the current moderate dip is likely done. However, we have a syncing and timing problem. You may have observed that when VVIX started warning us about an upcoming dip back in mid May, the only index that heeded this warning was RTY. It started to form a top and then sell off. Meanwhile, ES and especially NQ kept going higher and higher, with NVDA bulls constantly taunting the bears. Now the opposite is true. VIX may be topping out soon, and RTY is reflecting this by not selling off with the same ferocity as ES and NQ. NQ (and SOXL by extension) seems to be paying back for the good times and for not heeding VVIX warnings sooner. ES NQ and SOXL are all selling hard. So now we are looking at the following levels as possible support zones. NQ
ES
RTY (unchanged)
We'll see if 0DTE options flow can change the tide later this afternoon. But for now, the best strategy is to just wait for VIX and UVXY to fill out their tops, and for the selling in ES NQ SOXL to climax. (Spreadsheet will be updated soon.) Updates 1:50 AM ET - Friday Upcoming key events Is the moderate dip about done? It is about done, but not 100% there yet. Here are the patterns that we want to see to confirm our thesis.
Is another dip coming soon? Unfortunately yes. The thing that bothers our inner bull is the fact that VIX and VVIX didn't get up very high. We want to see VVIX tag 96, but instead it seemed to have peaked at 86. VIX looks like it will peter out at 15 and not rise much above it. This is barely a moderate dip for ES and NQ. This means not enough fear has been squeezed out of the system yet. And that's actually not good news for the bulls. Keep an eye on VIX as it get back down into the zone 12-13. If it bases here along with VVIX and UVXY, it is likely to surge again, and surge higher this time. If that happens, we could be looking at ES NQ RTY recovering from the current moderate dip, rise back up to retest the high of May and then drop down into a big dip. Key support and resistance levels NQ NQ has dropped below S1 and is now very close to S2 support as we write this. We think S2 will provide strong support, but NQ may drop below this level briefly after PCE report just to trap the bears.
ES ES is sitting right at S1 support as we write this. Similar to NQ, ES may drop below this level briefly and get really close to S2 after PCE report before ES really pivot upward.
RTY RTY tagged S1 support during Thursday night and proceeded to rise up the whole day. But this pattern is likely to be a setup for probing S1 at least one more time after PCE report before RTY really pivot upward.
Our personal trade plan We are still waiting for all the indicators described above to fully confirm that the current moderate dip is done before scaling into SOXL for a tactical bull position. We plan to hold this SOXL position until VVIX VIX UVXY all start to base again. We are only trading one bull position. Since this is not a big dip, there's not enough of a drop to merit entering into an additional runner bull position. Click here for Signal Trades spreadsheet. The SOXL trade is outlined in the 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.
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How high can VIX go? The early bearish warning from VVIX, along with the follow-up confirmations from VIX UVXY, as well as market breadth indicators gave us advanced information about the dip that's happening. As anticipated, VIX is on the rise, and NQ ES RTY are in a moderate dip. In order to determine when this dip will end, we need to estimate how much volatility will rise. Take a look at VIX futures (VX1!) 4-hour chart below. (UVXY is actually based on VIX futures.) Observe how the latest W bottom has formed far below the 200 EMA green line. We don't think VX will rise above 15 because there just isn't enough fear in the system yet. More fear will come perhaps closer to August, but for now VX is simply not close enough to the 200 EMA green line to surge over it yet. So look for VX to form a top in the zone of 15 - 15.5 overnight or during Thursday market hours. Then after PCE report on Friday, we may see the bottom of the current dip. Key Support and Resistance Levels We think the moderate dip will end when NQ ES RTY reach into their support zones S1 - S2. They may drop as low as S2, but are unlikely to go below this support level. However, we don't recommend entering bull positions until:
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RTY
Our personal trade plan We tightened the stop on UVXY and got stopped out for a small profit on Wednesday. We don't have any plan to re-enter UVXY as VX is near the end of its surge. As for entering into bull position, we should heed our own advice more carefully. On Wednesday afternoon, we misread the intraday pattern formed by VIX and UVXY. They teased us with an intraday topping pattern. We let FOMO got the better of us and decided to test SOXL, without waiting for confirmation from SVXY and RTY charts. So we will wait for VX VIX UVXY to form their topping patterns and confirm that volatility is really done rising for now. We don't expect to enter bull positions until after PCE report on Friday. 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 7:10 PM ET - Wednesday Exited UVXY We raised the stop for our UVXY position and got stopped out for a small profit. We want to avoid being too aggressive with trading bear position to capture a moderate dip. Happy to take a small profit for now. See the setup for the entry. Updates 2:50 AM ET - Wednesday Upcoming key events Market breadth: equity dip warning Yesterday we shared how McClellan Oscillators for NYSE and Nasdaq (Stockcharts.com $NYMO $NAMO) dropped sharply into negative territory starting last Thursday. This pattern is continuing despite NQ continuing to try to climb higher, and ES still sitting at the top. Clearly things are not all that rosy and bullish under the hood. Yields: equity dip warning On Tuesday, 2-year, 10-year and 30-year Treasury yields all rose sharply. US10Y is now sitting at 4.56%, on a path to retest 4.7% or 5% eventually. If yields keep rising steadily, stocks will wake up to more selling, leading to at least a moderate dip for NQ ES RTY. VVIX is basing to rise VVIX 4-hour chart below shows how its 20 EMA blue line has crossed over the 50 EMA red line, and is on its way to cross over the 200 EMA green line. VVIX may rise as high as 96, which will result in a moderate dip for NQ ES RTY. VIX is basing to rise VIX 1-hour chart below shows how its 20 EMA blue line and 50 EMA red line have formed a very nice large W bottom. VIX may reach into the zone 14.5 - 15, which will result in a moderate dip for NQ ES RTY. Key Support and Resistance Levels We think the moderate dip will end when NQ ES RTY reach into their support zones S1 - S2. They may drop as low as S2, but are unlikely to go below this support level. However, we don't recommend entering bull positions until VVIX VIX UVXY give their blessings, indicating that they are forming tops and will stop rising. NQ
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Our personal trade plan We have finished scaling into UVXY for now. We'll continue to hold UVXY until sell target is reached or VVIX VIX UVXY form topping patterns. 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 6:10 PM ET - Tuesday Entered UVXY We wrote in our trading plan earlier today: UVXY is basing and in the process of forming a W bottom. As long as UVXY can stay above 24.43, a retest of the zone 24.5 - 24.95 will complete this W bottom. So we started to scale into this zone for a quick tactical bear trade. Earnings this week (charts courtesy of Earnings Whisper) Market breadth also warns of a substantial dip McClellan Oscillators for NYSE and Nasdaq (Stockcharts.com $NYMO $NAMO) dropped sharply into negative territory last Thursday. The NYSE oscillator dropped down to -47 from near neutral reading the day before. Meanwhile the Nasdaq oscillator dropped down to -27. All of this happened after the incredibly rosy earnings from NVDA the day before. Clearly things are not all that rosy and bullish under the hood. But VIX says the dip won't be big... yet VIX pattern on its daily chart suggests some basing is happening, but not enough for VIX to rise above 14.5 when it spikes. If VIX bases some more after that first spike, then a bigger dip will come. But for now, just a moderate dip is more likely. Key Support and Resistance Levels We have updated the support levels to reflect the more moderate dip. NQ
ES
RTY
Our personal trade plan UVXY is basing and in the process of forming a W bottom. As long as UVXY can stay above 24.43, a retest of the zone 24.5 - 24.95 will complete this W bottom. So we started to scale into this zone for a quick tactical bear trade. Holding a half position at this point. Will look to add more if UVXY continues to stay above 24.43. 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 2:26 PM ET - Thursday Upcoming key events Read more about NVDA earnings here. ES NQ RTY are starting a moderate dip As we wrote earlier on Thursday, despite the fact that NVDA gapped up hugely and reached a high of 1063, NQ ES RTY along with SOXL are all forming topping patterns on their daily charts. They are signaling that they are finally starting the dip that VVIX has been warning us about. How do we know for sure that the dip is happening? VIX gapped down to a low of 11.52 pre-market on Thursday, but promptly rose to 13.37 during Thursday. VIX will drop again and is likely to spend some time basing in the zone 11.8 - 12.4. As long as VIX stays above 11.5, it will climb up quite a bit higher next week, which means the dip is happening for NQ ES RTY. Key Support and Resistance Levels Monitor NQ ES RTY for retest of resistance in R1-R2 zone. A retest of this zone is a good place for scaling into bear positions. As long as NQ ES RTY stay below R2 and VIX stays above 11.5, the dip is still happening. Once NQ ES RTY reach support in S1-S2 zone, if both VIX and VVIX form topping patterns as well, then scale out of bear positions. VIX is likely to top out in the zone 14 - 15. That would also be the potential pivot point to monitor for bull reversal patterns. When these patterns show up for NQ ES RT as well as VIX and VVIX, we can scale into bull runner and tactical bull positions. NQ
ES
RTY
Our personal trade plan UVXY is basing and in the process of forming a W bottom. As long as UVXY can stay above 24.43, a retest of the zone 24.5 - 24.95 will complete this W bottom. So we want to scale into this zone for a quick tactical bear trade. 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 2:26 PM ET - Thursday A nervous market Despite the fact that NVDA gapped up hugely and reached a high of 1063 today, SOXL is not reflecting this. NQ ES RTY along with SOXL are all forming topping patterns on their daily charts. VIX gapped down to a low of 11.52 overnight, but promptly rose to 13.18 currently. UVXY is forming a lovely W bottom pattern on its 15-minute chart. The market is nervous ahead of the long weekend, despite NVDA stellar earnings and all the adulation surrounding it. In order for UVXY to really rise, it needs to base a bit more and fills out its W bottom pattern a bit more. So we've placed buy orders to enter in the price zone where UVXY is most likely to retest to finish forming the W bottom pattern. We don't expect UVXY to really rise that high so this is just a quick tactical bear trade. Note that it is risky to chase UVXY up if it rises very sharply with no further basing. That typically is a spike-and-die pattern (see UVXY hourly chart on July 6 and September 7 2023). Updates 2:40 AM ET - Thursday Upcoming key events Watch UVXY NVDA earnings provided a big spike for SOXL and NQ after hour. However, VVIX continues to rise and VIX is starting to base. So this tells us we should monitor UVXY for signs of it basing as well. It's not basing just yet, but we need to keep a close eye on it. Key Support and Resistance Levels As long as UVXY keeps dropping and not basing sideway, then we can use ES NQ RTY S/R levels below to capture part of this bull rise. But if UVXY starts to base and then rise from the current low of 24.43, then ES NQ RTY are likely to drop in a moderate dip. NQ
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Our personal trade plan We plan to trade SOXL as long as UVXY continues to drop.
Note that if UVXY starts basing at 24.45, then we want to enter UVXY for a quick tactical bear trade. 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 2:45 PM ET - Wednesday VIX UVXY waking up ahead post FOMC ahead of NVDA VIX and UVXY based earlier today forming the foundation of a possible W or U bottom. The hawkish tone of FOMC minutes fueled their rise a little more. VVIX continue to confirm this rise. This does not feel like a fake volatility rise. It feels like the choppy conditions of VIX forming a W bottom, which typically precedes a real volatility spike. We don't think VIX will spike above 14.5 this week, but there is a likely rise between VIX current level 12.78 up to 14.5. With that setup, we are not going to attempt to enter a tactical bull position, and definitely not a Bull Runner position just yet. To enter those positions, we need to see VVIX forming a top at or above 87. The ideal setup is for VVIX to form a top at 96, but we are not sure there's enough fire in the bear to do so. (VVIX is current at close to 80.) What about a tactical bear setup? We will enter when UVXY retests the low of today. This would complete the W bottom formation for UVXY, boosting its chance of surging enough for a reasonable tactical profit. We have placed buy order for half position UVXY. Why not SOXS or SQQQ? Even if VIX and UVXY rise, there's no guarantee that NQ or SOXL will drop in a timely manner, and drop enough to warrant a bear position. Click here for Signal Trades spreadsheet. Updates 2:50 AM ET - Wednesday Upcoming key events Key Support and Resistance Levels The signals from VVIX VIX UVXY are still the same as yesterday. At this point, without VIX and UVXY basing enough to launch a big bearish dip, we think that NQ ES RTY will ultimately have a moderate dip before the Strong Bull resumes. The path of the dip is a little tricky, so we'll explain further below. NQ
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Our personal trade plan SOXL
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. Market breadth warning McClellan Oscillators for both NYSE and Nasdaq stocks (Stockcharts $NYMO $NAMO) are forming topping patterns on their daily charts. This does not mean the stock market is about to crash or sell off violently. But with NQ ES both reaching for new all-time high, a topping pattern with the corresponding McClellan Oscillator suggest that a bull trap may be happening. VVIX is still warning of moderate dip The 30-minute chart of VVIX (volatility of VIX) below shows its 20 EMA blue line and 50 EMA red line forming a clear W bottom pattern. This is a warning from VVIX that a moderate dip is likely to come soon. VIX now suggests a drop to S2 is possible VIX is finally chiming in, telling us that a drop to S2 is quite possible for NQ ES RTY. In VIX daily chart below, observe its basing pattern starting to form in the zone 11.8 - 12.65. As a comparison, after this pattern showed up back on December 20 last year, NQ rose a bit more and then dropped 4.77%. If NQ follows in similar footsteps after VIX basing is done, NQ can easily drop to S2 if not lower. But UVXY says not yet On UVXY 30-minute chart below, its 20 EMA blue line is just starting to turn up. It has not formed the W pattern similar to the ones highlighted below in yellow. So bears should still wait a bit. Key Support and Resistance Levels What this means is this:
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Our personal trade plan Here are SOXL S/R levels based on our personal projection. We are expecting NVDA earnings to give SOXL a major price boost so that SOXL can reach up to R1 resistance before SOXL forms a short-term topping pattern.
When UVXY gives its W-bottom signal, and VIX VVIX continue to climb up in a bearish pattern, we will enter SOXS. We'll take partial profit at 10% gain and final profit at 20% gain. We expect the end of SOXL dip to come at S2 support level. But we'll wait for VIX VVIX UVXY to give the signals before entering Bull Runner and Bull Tactical positions. 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 2:10 AM ET - Monday Upcoming key events There are plenty of market moving events this week all jammed into Wednesday. Note that next Monday is a holiday and the stock market will be closed. Read more headline news here. Earnings this week (charts courtesy of Earnings Whisper) The earnings announcement that everyone has been breathlessly waiting for is NVDA on Wednesday after close. Where is the market going? In the big picture context, this is still a very healthy bull market. There is no setup for a crash right now, not even signal for a Weak Bull period yet. But VVIX (volatility of VIX) has been persistent in its warning that at least a moderate dip is coming up. VVIX 4-hour chart below continues to build out a W bottom, highlighted in yellow. But is a dip really possible given how bullish the market has been? Yes. Take a look at SOXL weekly chart below. This is one of the strongest sector in tech. Yet its weekly chart shows the formation of a lower high top. So caution is warranted. However, VVIX is only suggesting a moderate dip. In order for us to see a big dip, VIX has to chime in with a bearish message by forming some sort of a W bottom. That pattern hasn't shown up yet, so assume a moderate dip for now. Assume also that the dip has not really started yet. This is because UVXY has not formed a W bottom on its 30-minute chart yet. So bears should not make their move until UVXY forms a W bottom. By the way, market breadth charts (Stockcharts: $SPXA200R $NDXA200R $NYMO $NAMO) are all showing short term tops. And 10-year yield (US10Y) has been rising again since Thursday May 16. Key Support and Resistance Levels What this means is this.
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Our personal trade plan Here are SOXL S/R levels.
When UVXY gives its W-bottom signal, we will enter SOXS. We'll exit when SOXL reaches S1 support. If VIX joins in with its own bearish W bottom signal, then we'll exit when SOXL reaches S2 support. 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. VVIX and UVXY are warning bulls Despite VIX sharp drop to 12.33 after CPI, VVIX continues to persist in its warning message. Observe the continued formation of its W bottom highlighted in yellow below. And as of Thursday, VVIX has another confirmation in its warning for bulls: UVXY. After failing to rise above its 200 EMA on May 14, UVXY is now basing again to rise again (15-minute chart). The fact that it is attempting again just two days after the first failure means UVXY is now serious about rising. If UVXY manages to get above 26.7 and stays above this level, we will see UVXY 200 EMA green line rise up steadily. That will bring out a steady drop for NQ ES RTY. Key Support and Resistance Levels We were feeling much more bullish earlier on Thursday, until we see the end-of-day pattern in VVIX and UVXY. They are definitely sending out warnings for the bulls. Their message is that we should expect to see at least a moderate dip for NQ ES RTY. Initially, we expect to see NQ ES RTY retest support at S1 and then rise back up to retest resistance at R1 between now and NVDA earnings on Wednesday May 22. Failure to rise above R1 will cause NQ ES RTY to seek support at a lower level, which means a drop to retest the new S2 level. If they find enough buyers here, this will be the end of the moderate dip for NQ ES RTY. If they don't, then there may be a sharp and rapid drop down to retest very strong support at April 19 lows. NQ
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Our personal trade plan The setup we are waiting for is this:
As this setup forms, we'll be monitoring SOXS and LABD for appearance of 20 EMA W bottom on their 30-minute chart. We will then trade one of these instruments depending on how reliable their patterns appear. 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. |
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