Click here for current Signal Trade. See FAQ for more explanations on terms, labels and abbreviations that we use. Updates 11:23 AM EST - Friday 7/31/20 Short Term $VIX is likely to be done rising for today. However, it is unlikely to drop below 23.5. $VIX came close, reaching 23.6 pre-market. But like magic, $VIX immediately rose up from there. $VXN (Nasdaq volatility) gapped down big at open and immediately reversed upward. That's a highly bearish signal for $NDX. IWM dropped down hard this morning, indicating growing weakness in small caps. $VIX is likely to continue grinding towards the tip of its pennant. And $VIX is also likely to continue testing its support zone from 23.5 to 25. And as we've been saying, as long as $VIX stays above 23.5, it is building up its bearish headwinds for stocks. So when $VIX reaches the tip of its pennant next week, there is a good chance that it may break out from there. Next week is the start of August. August is the worst month for the S&P 500 since 1987, according to the Stock Trader’s Almanac. Keep all this in mind, but we do not recommend holding UVXY right now. This is due to contango. Contango is running close to 10% right now, so UVXY will drop in value each day you hold it. The current condition is not conducive for holding long or short. Market is undergoing some changes under the hood. Best strategy right now is TMAR (Take Money And Run). Take whatever the market gives you and be happy walking away with it. Updates 9:42 AM EST - Friday 7/31/20 Short Term
However, $VIX is unlikely to break out from its pennant pattern just yet. It may only reach up into the zone between 27 and 28 today. Updates 9:17 AM EST - Friday 7/31/20 Short Term $VIX signal is unclear right now. It is forming the kind of pattern that precedes an upward reversal. But it is not done forming this pattern yet. So we have to allow for it to fully form. $SPX $NDX appear to be stuck at the highs form after hours on Thursday. During the night, ES and NQ hardly moved after the post-earnings pop. This indicates a lack of buyers as well as sellers. IWM has gapped down, so we should pay close attention to TZA. Updates 1:55 AM EST - Friday 7/31/20 Breakout? Maybe not AMZN and AAPL earnings announcements after hours resulted in a big surge for $NDX $SPX. $NDX reached to the top of the previous orange zone. However there wasn't follow-through buying in futures Thursday night. Additionally, UVXY dropped down sharply after hours but anchored in an important support zone. Between 7/21 and 7/30, UVXY has anchored 5 times in this support zone. This is happening despite UVXY high contango value, and the sharp surge in $NDX $SPX. So there is a good chance that $VIX will not drop below 23.5 on Friday. $VIX 2-hour chart below shows $VIX is getting to the end of a pennant pattern. It shows that $VIX has formed 4 anchors at this point in $VIX support zone between 23.5 and 24.8. This kind of “anchor to rise” $VIX pattern tends to precede a breakout from the pennant. So we should keep this possibility in mind. The breakout in $VIX isn't a guarantee, but is a high probability. For tonight we would also like to share Nasdaq 100 E-mini futures NQ hourly chart. Observe how NQ 200-hour green EMA line has been rising at a nice angle, parallel to the channel, between April and mid July. However, observe that since 7/13, NQ 200-hour green EMA line has been flattening and going sideway. This indicates a lack of upward momentum, stuck in neutral so to speak. NQ $NDX may still find enough buyers to surpass 7/13 high. However, rising volatility is going to create bearish headwinds to push against NQ $NDX and the general market progress. Short-term Trade Setups We will be monitoring $VIX pre-market to see if it still stays above 23.5. If $VIX gaps down to near this level and reverses sharply, it will be a fairly reliable signal indicating that $VIX is likely to rise on Friday. Other $VIX patterns will have to be analyzed in context of the overnight $VIX actions. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation
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Click here for current Signal Trade. See FAQ for more explanations on terms, labels and abbreviations that we use. Updates 12:49 PM EST - Thursday 7/30/20 Short term Despite dropping down from morning highs, $VIX $VXN are still anchoring to rise. This condition is true as long as $VIX stays above 23.5. But keep in mind that "anchoring to rise" is a complex process for $VIX $VXN. They will most likely oscillate while gradually forming higher lows. What this means is that bearish headwinds are building up for stocks. $NDX has risen sharply because AMZN AAPL have spiked up a bit. Pre-earnings times tend to bring out this kind of swings. However, we don't trust the rise in $NDX. Day trade $NDX QQQ TQQQ by all means, but there is no plan to enter $NDX QQQ TQQQ via our Signal Trade. We have updated the S/R table below. Updates 10:35 AM EST - Thursday 7/30/20 Short term
Market has turned bearish, but the indices are not ready to drop big just yet. UVXY has take off, while SQQQ TZA are still anchoring at support. Please check the Signal Trade for updates frequently as we are in/out of positions fast today. Updates 9:55 AM EST - Thursday 7/30/20 Short term Signal Trade has exited TQQQ and initiated a position in UVXY. Click here for current Signal Trade. Updates 9:23 AM EST - Thursday 7/30/20 Short term
$VIX primary message to the bulls (us included) is this. It's time to unwind and exit long. Look for $VIX to retest its zone between 24.5 and 25.5. It is likely to anchor in this zone and then rise up from there. It may not surge in a big way immediately, but $VIX has enough data points now to reveal a large W bottom on its hourly chart. This is a major "anchor to rise". Updates 12:40 AM EST - Thursday 7/30/20 Short term There was some nervousness from market participants late Tuesday and prior to FOMC on Wednesday. This resulted in $VIX $VXN rising slightly and $SPX $NDX IWM dropping slightly. But after FOMC announcement on Wednesday, $VIX $VXN both started dropping, not by huge amount, but enough to provide bullish tailwinds for stocks. As a result, $SPX $NDX IWM started rising. Below is the updated S/R table, showing higher orange resistance zones for $SPX $NDX IWM. These indices will rise as long as $VIX $VXN continue to provide bullish tailwinds for stocks. We expect $VIX $VXN to grind downward some more on Friday. However, if $VIX gaps down big and then reverses sharply at open on Friday, then $VIX $VXN will be pushing stocks down with bearish headwinds. We will provide $VIX updates pre-market. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. Click here for current Signal Trade. Updates 1:24 PM EST - Wednesday 7/29/20 Short term There is a high probability that $SPX $NDX IWM will attempt to rise into the lower part of their orange resistance zones after FOMC today. And $VIX $VXN may do a sharp drop before they anchor themselves again. $VIX may drop below 23.5. So monitor for this bullish opportunity to exit long $SPX $NDX IWM. Do not enter short yet. We need $VIX $VXN to demonstrate they are ready to rise first. Updates 9:16 AM EST - Wednesday 7/29/20 Short term We have mixed signals right now. $VIX dropped into key zone between 23.5 and 24.5 and promptly started rising. It formed yet another "anchor to rise". This means bearish headwinds are building up for $SPX $NDX IWM. $SPX $NDX IWM are all forming bullish patterns pre-market, indicating they too are ready to rise, most likely at least to the highs of Monday 7/27. So it appears that $SPX $NDX IWM are ready to rise despite the bearish headwinds building up. Do not initiate new positions. Our Signal Trade is targeting to exit long in the orange resistance zone. No low-risk high-reward setup to enter short yet. Updates 1:30 AM EST - Wednesday 7/29/20 Not enough buyers Recall in our weekend analysis, we refer to the forces of volatility ($VIX $VXN) as bullish tailwinds or bearish headwinds for stocks. On Friday 7/24, $VIX $VXN went from being bearish headwinds to bullish tailwinds for stocks. And this favorable condition persisted until late Tuesday. Yet during this entire time with supportive bullish tailwinds in effect, $SPX $NDX IWM didn't manage to climb up very far. If this was back in April or May, $NDX would be surging up like a rocket with all the bullish tailwinds. But so far, $NDX keeps forming lower highs. Furthermore this is the week of earnings from tech titans AAPL and AMZN. It's the week when the new stimulus package is being finalized and announced. It's the week when there are more hopeful vaccine news. It's the week when Jerome Powell gets up to murmur words of assurance from the Fed. Yet it is clear that there are not enough buyers out there to push $SPX $NDX IWM upward by a substantial amount. Retesting the highs of July 13 seems so difficult. So while we allow for the possibility of $SPX $NDX IWM rising and possibly surpassing July 13 highs, we think the primary signal from $VIX is "rising bearish headwinds for stocks". There is a high probability that $VIX $VXN will form one more "anchor-to-rise" on Wednesday. Then $VIX $VXN are likely to climb up higher, thereby pushing $SPX $NDX IWM downward. We may not see a steep drop to start Dive2. We may instead see a complex top forming for a while before the steep drop. Short-term Trade Setups Our Signal Trade went into effect on Monday to capture the ride up from the green support zone to the previous orange resistance zone. $VIX changing to bearish headwinds late on Tuesday is the warning for us to be mentally ready to exit long. Notice that in the updated S/R table above, we have lowered the orange resistance zones. We are waiting for $VIX to drop one more time on Wednesday, most likely back to $VIX zone between 23.5 and 24.5. While $VIX drops one more time, $SPX $NDX IWM will most likely retest the lower edge of their orange resistance zones, which happen to be the highs of 7/27. If $VIX reverses sharply from $VIX zone between 23.5 and 24.5, it will be the signal to exit long and enter short. This may be a very short-term bearish trade. $SPX $NDX IWM green support zones are strong so they may still provide yet one more mini-bounce. If support fails here, then the drop can be big, possibly getting down close to the lower blue support zones in a few days. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. Click here for current Signal Trade. Updates 3:30 PM EST - Tuesday 7/28/20 Short Term $VIX dropped down into its key anchor zone between 23.5 and 24.5. It rose up sharply, making all the bulls (us included) highly nervous. However, $VIX has reached its 200 EMA (5-min chart). It is now getting ready to drop down again. We are projecting that $VIX will gap down tomorrow into the key anchor zone between 23.5 and 24.5. $VIX will then most likely reverse upward sharply. This means $SPX $NDX IWM will survive today's drop. Tomorrow they may even gap up from the current consolidation price zones. But chances are they won't go up much further pre-FOMC announcement. Immediately after FOMC announcement at 2 PM EST, we may see wild price swings briefly. But there is now a high probability that $SPX $NDX IWM will drop from their highs tomorrow back towards their green support zones. This is the latest message from $VIX. Updates 9:04 AM EST - Tuesday 7/28/20 Short Term
$SPX $NDX IWM are likely to gap down at open. Monitor them on the 5-minute charts. They are trying to anchor themselves at support around the 200 EMA (5-min chart). $VIX "bullish for stocks" signal should help $SPX $NDX IWM find enough buyers at this support to continue the up swing that started since 7/24. We expect $SPX $NDX IWM up swing to last until they penetrate their orange resistance zones, possibly tomorrow Wednesday. Updates 9:57 PM EST - Monday (for Tuesday 7/28/20) Short Term Support & Resistance Zones The S/R table has not changed since Sunday. Track $VIX $VIX pre-market signal was spot on today. We wrote at 9:12 AM EST:
And right on cue $SPX $NDX IWM took off after the minor morning pullback. We will report on $VIX pre-market signal on Tuesday. We expect it to show continued bullishness, but one has to be prepared for sudden bearishness as well. Track FOMC Between Tuesday and FOMC announcement on Wednesday (2 PM EST), $SPX $NDX IWM are going to make an attempt to penetrate their respective orange resistance zones. So they are likely to continue a steady march upward. However, their current up swing does not count as Bounce9 because they don't fit into the patterns of the previous bounces. Beware also that there is likely a down swing after FOMC announcement. The last 2 announcements on 4/29 and 6/10 have resulted in sharp sell-offs afterwards, ending Bounce3 and Bounce6 respectively. There is a high probability that a down swing will follow this week's announcement as well. Track $NDX Even if you don't trade $NDX, keep an eye on it because tech has been leading the market this whole year. When it falters, the entire market can become bearish quickly. $NDX 2-hour chart below shows $NDX orange resistance zone butting right up against the upper edge of the downward channel. This confluence of resistance is going to be the key level for $NDX to surpass. If $NDX can surpass this level, the bear market rally may have more legs. Otherwise, we may be looking at a complex top formation where $NDX starts to wind its way down the channel. This test of the orange resistance zone will most likely happen on Wednesday after FOMC announcement. Hint of the future If $NDX winds its way down the channel, $NDX reaching 10000 is going to be the edge of the abyss. If $NDX is weak at that point, it may fall into the abyss, otherwise known as Dive2. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. Click here for current Signal Trade. Updates 3:28 PM EST - Monday 7/27/20 Short Term You may have noticed that the pre-market signal from $VIX has been quite accurate. Here's the end of day signal.
This signal remains true until $VIX issues the pre-market reading tomorrow. Based on the price actions today, $SPX $NDX IWM are likely to continue their rise tomorrow. There may be a minor dip at the start of the day, but the bullish momentum is quite strong right now. $SPX $NDX IWM short term goal is to rise up and penetrate the orange resistance zone. They may not succeed, but they are pushing hard right now. Updates 9:45 AM EST - Monday 7/27/20 Short Term $VIX is not testing its Friday high. It is dropping. This means we can start long entries based on $SPX $NDX IWM. Updates 9:12 AM EST - Monday 7/27/20 Short Term
But don't jump in to long positions just yet. Here is the bullish setup we are looking for.
This is a low-risk setup to test long entries. The goal is to capture the ride up into $SPX $NDX IWM orange resistance zones. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. Click here for current Signal Trade. Updates 4:54 PM EST - Sunday 7/26/20 The Big Picture This coming week is full of news and announcements. Click here for a summary of this information. Out of all the news last week, we consider this information to be the most revealing for medium-term market direction. According to Bloomberg: Corporate insiders, whose buying correctly signaled the bottom in March, are now mostly sellers. Almost 1,000 corporate executives and officers have unloaded shares of their own companies this month, outpacing insider buyers by a ratio of 5-to-1, data compiled by the Washington Service showed. Only twice in the past three decades has the sell-buy ratio been higher than now. Corporate insiders are the ones who truly know where their companies are likely to head to next. And if they are selling en masse, it's worth paying close attention to. Additionally, corporate insiders are selling ahead of the stimulus and FOMC and major earnings announcements. To us, that's a big bearish sign no matter how you look at it. We will discuss the technical setups below that would herald the arrival of Dive2. However, we urge you not to make any medium-term or long-term commitment to a position right now. You can focus on the short-term trades, collect whatever profits you can from there while waiting for the $SPX $NDX IWM to resolve their longer-term directions. Market Internals Market breadth: Market breadth for both NYSE and Nasdaq stocks are forming lower high patterns, typically seen before major drops. Percentage of stocks above their 200-day MA: The charts that show the percentage of NYSE and Nasdaq stocks that are above their 200-day MA have been forming a bearish divergence to $SPX $NDX price actions since 6/8. Equity put/call ratio: This ratio spent all of last week forming a pattern indicating it is getting ready to seriously rise into selling territory in the next 2 weeks. Volume:
What this tells us is there are not enough buyers stepping up to push prices to new highs. Instead there are now more sellers looking to take profit from the high-flying $NDX. Volatility We want to welcome new members and explain a bit more about our system heavy reliance on $VIX $VXN. A member asked how to best interpret $VIX $VXN relative to $SPX $NDX IWM price actions. You can think about volatility as bearish headwinds or bullish tailwinds for stocks. If volatility rises, it means that the bearish headwinds for stocks is getting stronger, pushing back and making it hard for stocks to keep rising. And at some point, volatility in the form of this bearish headwinds is so great that it will push stocks down hard. $VIX daily chart below is an update of $VIX chart we shared with you last Sunday. The orange zone between 23.5 and 25 is the pivot zone for $VIX. Since early June every time $VIX dips into this zone it rises up immediately. So $VIX is unlikely to drop below this orange zone. In the next 2 weeks, $VIX is most likely going to stay above the orange zone, and make an attempt to test the zone between 33.5 and 37.
$NDX Observe $NDX daily chart below. For the first time since almost 4 months ago, $NDX dropped below its 20-day blue EMA line on Friday 7/24. This is a highly bearish sign. $NDX is now sitting at the edge of the abyss, the bottom of its rising channel, just below its 20-day EMA, anchored in its green support zone. There is a high probability that $NDX is going to rise back up in the channel, making one last attempt to reach up to the orange resistance zone. Failure to surpass this zone will open the door for $NDX to drop lower, out of the channel, possibly to the blue deeper support zone. All of this could possibly then become part of a top formation that ends the bear market rally, and ushers in Dive2. IWM IWM daily chart below shows IWM failed to penetrate orange resistance zone last week, and is forming a head & shoulder pattern instead. This is a bearish setup. $SPX $SPX is now the lone bullish chart. In this coming week, $SPX is very likely going to rise up into the orange resistance zone, possibly surpass it trying to get back up to its February high of 3394. $SPX may very well succeed in this goal, despite the bearish headwind from volatility, bearish divergence in market breadth, bullish percentage, and equity put/call ratio. And of course $SPX may successfully reach 3394 while $NDX IWM form lower highs. But in our experience, all of this is likely part of a complex top formation of the bear market rally. Short-term Trade Setups For Monday 7/27, here are the setups we are monitoring for. Bearish setup:
This short-term bearish setup is the pivot point to exit long positions, and enter bearish bets against $SPX $NDX IWM. (You can buy into SQQQ, TZA or UVXY if you want to trade just ETF, not options.) Bullish setup:
This short-term bullish setup is the pivot point to exit short positions, and enter bullish bets on $SPX $NDX IWM. We will post pre-market updates Monday morning to confirm the setup observed. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. Click here for current Signal Trades. Updates 3:33 PM EST - Friday 7/24/20 Short-term $SPX $NDX IWM demonstrated that they have found support from today's drop, but they haven't found enough buyers to propel prices upward rapidly. In other words, not enough buyers are willing to risk it before the weekend. This is consistent with the growing nervousness / fear / bearishness, reflected in $VIX patterns since 7/21. We will be monitoring prior to open on Monday for the following bullish setup to enter long $SPX $NDX IWM:
Updates 1:20 PM EST - Friday 7/24/20 Short-term We have updated the current Signal Trade buy limit order to really lower the entry price. There is a chance that $NDX TQQQ QQQ will revert upward again today before our entry price is hit. But this is ok. This is in fact done with intent. We find that setups that meet the entry rules at the very start of the day, with multiple confirmations, tend to yield the best trades. You can review the sell-offs from Friday 6/12 to Monday 6/15 to see what we mean. There is no need to rush in to any position right now. Updates 12:10 PM EST - Friday 7/24/20 Short-term We have updated the current Signal Trade buy limit order. There is a potential short-term bullish setup for $NDX TQQQ QQQ if they retest near the bottom of their blue support zones. Keep in mind that this is a short-term trade to capture the likely small bounce that will happen prior to FOMC. This is not a Bounce9 trade since Bounce9 is broken at this point. $NDX TQQQ QQQ are unlikely to go back to the highs of 7/13 any time soon. Updates 9:59 AM EST - Friday 7/24/20 Short-term $NDX has gapped down into its blue support zone. This is a crucial level because $NDX is sitting right at its 200-hour EMA. Since 4/6, $NDX has not dropped below its 200-hour EMA. Therefore if $NDX drops below this crucial level, it is very bearish for $NDX. In fact it may be the setup for Dive2 to launch. However, we need to proceed with caution here because there is a good chance that $NDX will find enough buyers to get back up at least to its green zone. What this tells us is that there is a fundamental change in market mood happening, one that may soon turn the bear market rally into Dive2. But proceed with caution here because sharp reversals abound. There is no reliable signal right now for our system to initiate a new Signal Trade. Updates 9:23 AM EST - Friday 7/24/20 Short-term At 1:55 AM, we wrote: For Friday, we are monitoring for this bullish setup.
Here's what we are observing pre-market:
The top 2 conditions are not bullish. The bottom 2 conditions are mildly bullish. In fact, we are likely to see $VIX rise up some more to start the day. Therefore:
We need to wait for $VIX to form a short-term topping spire. And with $NDX the usual leading index being so bearish, we need to be careful. Updates 1:55 AM EST - Friday 7/24/20 Short-term: $VIX Recall we wrote in the weekend analysis that if $VIX drops down into the zone between 23.5 and 24, it is likely to rise up substantially. $VIX did exactly that on Tuesday 7/21 and on Thursday 7/23. What this tells us is that volatility is unlikely to drop down below its crucial level at 23.5. In fact, the pronounced W-bottom pattern, formed by $VIX on Thursday, tells us that $VIX is now likely to coil its way upward. There is a high probability that $VIX will start to form a series of rising "coils" with higher lows that continue into next week. After FOMC, we may see $VIX rise all the way to 30-31. As volatility rises, $SPX $NDX IWM will drop. They won't do it in straightforward fashion. But chances are good that by end of next week, we may see $VIX reaching up to 30-31, while $SPX $NDX IWM drop below their green support zones, possibly reaching the blue support zones. Short-term: $SPX $NDX IWM For Friday, $SPX $NDX IWM will most likely try to find more buyers in their green support zones. $SPX $NDX IWM will most likely find enough short term support to rise up to retest their orange resistance zones. Note that $SPX $NDX did not succeed in forming Thrust3 of Bounce9 on Thursday. They may still form Thrust3 on Friday, but there is a chance they may not find enough buyers to form Thrust4 next week. Short-term Support and Resistance Zones Short-term Trade Setup For Friday, we are monitoring for this bullish setup.
This is the bullish combination of signals that will enable $SPX $NDX IWM to rise out of the green support zone, and climb up to reach the orange resistance zones. Note that if $SPX $NDX IWM rise from this bullish setup, they are unlikely to surpass their orange resistance zones. And they may start dropping again on Monday. So this is a short-term and short-distance trade. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. Click here for current Signal Trades. Updates 4:00 PM EST - Thursday 7/23/20 Short-term: $VIX $SPX $NDX IWM Our latest analysis shows this:
The current support levels for $SPX $NDX IWM may not hold. So don't build up large positions here. And be sure to trail your stops upward. More analysis and updated S/R zones later tonight. Updates 2:33 PM EST - Thursday 7/23/20 Short-term: $VIX $SPX $NDX IWM
Updates 2:16 PM EST - Thursday 7/23/20 Short-term: $VIX $SPX $NDX TNA
Congratulations to members who entered UVXY early this morning and hung in there (unlike us). UVXY can go quite far as $VIX rises up towards 29. But be sure to trail your stops upward as reversals can happen quickly in this market. Updates 1:01 PM EST - Thursday 7/23/20 Short-term: $VIX $SPX $NDX TNA Our tight stop got us out of TNA at breakeven as it reversed downward. Our tight stop also got us out of UVXY at breakeven earlier this morning. To us those are free tests. At this point:
We are choosing not to test UVXY again because it most likely will not rise higher than 27-28. We could be missing out on this opportunity, but right now the charts still favor the scenario of small rise in $VIX resulting in shallow $SPX $NDX drop. NOTE: please check the current Signal Trade link frequently if you choose to follow this trade. (We post the link at the top of the blog). We do update the stops and the buy limit orders a lot. But it's too much to post alert every time we update as it clogs up the Stocktwits stream. Updates 11:41 AM EST - Thursday 7/23/20 Short-term: $VIX UVXY TNA
Updates 11:22 AM EST - Thursday 7/23/20 Short-term: $VIX UVXY TNA Click here for current setup to enter TNA Signal Trade. Note that we also tightened stop for UVXY. Updates 11:01 AM EST - Thursday 7/23/20 Short-term: IWM TNA $VIX is grinding upward as $SPX $NDX are grinding downward to get down to their green support zones. Events are still unfolding according to our earlier projections. It is interesting to note that IWM TNA appear to be breaking out of their recent range. TNA may retest 30-31, and it may surge from there to 33-34. Updates 9:37 AM EST - Thursday 7/23/20 Short-term: $SPX $NDX We wrote at 1:05 AM "there most likely will be a pullback to support for $SPX $NDX". That is happening. We think it will be a shallow drop to the green support zones for $SPX $NDX. So here again are the conditions to monitor for. Small rise in $VIX results in shallow $SPX $NDX drop:
Our target exit for UVXY is 27.5, but be sure to use a trailing stop. $VIX forming an intraday top is the signal to exit UVXY. $VIX forming an intraday top and $SPX $NDX finding support is the combined signal to enter $SPX $NDX. In this scenario, $SPX $NDX can rise up to the top of their orange resistance zones or even surpass it by early next week. Updates 9:16 AM EST - Thursday 7/23/20 Short-term: UVXY
Updates 1:05 AM EST - Thursday 7/23/20 Short-term: IWM We have to temporarily suspend our projections for IWM (small caps). It is swinging in a tight range, making it difficult to decipher the direction. We will continue to monitor IWM as a leading indicator for confirmation of major market moves, but for now we simply cannot issue reliable projections for IWM. Short-term: $VIX $VXN The current message from $VIX $VXN is this. There is no Dive2 coming just yet. However, there most likely will be a pullback to support for $SPX $NDX. The question is how low will they go? There are 2 possible scenarios. Small rise in $VIX results in shallow $SPX $NDX drop:
Large rise in $VIX results in bigger $SPX $NDX drop:
Short-term: $SPX $NDX Below are $SPX $NDX 5-minute charts. They did not succeed in forming Thrust3 today. They are likely to retest their green support zones before they can form Thrust3 of Bounce9. Short-term: UVXY We will monitor pre-market for a good setup with $VIX to enter UVXY. This is entirely dependent on the pattern that $VIX forms overnight and pre-market. There is no projection right now. Short-term Support & Resistance Zones Please note that we took out IWM TNA TZA temporarily per our explanation above. We added SPXL because our Signal Trade may enter SPXL. 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 The risks of investing in inverse ETFs Simple explanations of contango and backwardation See FAQ for more explanations on terms, labels and abbreviations that we use. |
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