Updates 9:26 AM EST -  Wednesday 9/1/21
​
Use 200 EMA line on 5-min chart as guide
Futures were steadily bought last night, resulting in this morning's gap up for $SPX $NDX IWM.   Use the 5-minute chart and look for price anchoring at the 200 EMA line on the 5-minute chart as the key support level.

If price holds here, the current bullish momentum is likely to keep going at least until Friday.

Updates 2:30 AM EST -  Wednesday 9/1/21
​
Key dates in September
The following dates may bring quite a bit of volatility, so keep them in mind.
9/15:   $VIX options expiration
9/17:   Quadruple witching day 
9/22:   FOMC announcement 

Volatility heading down for now
$VVIX (volatility of $VIX) is the indicator that is most sensitive to change in volatility.   So bulls should be glad that $VVIX chart below shows it trending down steadily for now.   This is quite bullish for $SPX, and in general, for IWM too.

Nasdaq volatility $VXN is trending down ever so slowly, but it is trending down, as shown on its 2-hour chart below.   This should continue to provide bullish tailwind for $NDX.

For the rest of this week, conditions are likely to remain bullish.   It is still a buy-the-dip market.   The key is to find the appropriate dip level to enter.  Read more about that below.

Short-term Support and Resistance Levels
We've decided to change the format of the S/R table a bit, expanding it to show you more levels.   Hopefully this will help you plan ahead a bit better.

• R2 represents fairly strong short-term resistance.   This is where sellers may come out in force due to profit taking or aggressive hedging.   
• S3 represents fairly strong short-term support.   If price drops down to S3, this is where new buyers may come in to help turn the momentum bullish again.  However, it S3 does not hold, then price may rapidly drop down to the low of 8/19.

However, the current market conditions are very bullish.   None of the indices came close to S1 today, and that's pretty high already.   

So you may have to use the 5-minute chart and look for price anchoring at the 200 EMA line on the 5-minute chart as the support level to enter.

Signal Trades
We have a few new members who are asking questions about position sizing and the art of setting stops.   This is a pretty relevant topic, so we've posted a separate blog article about this.   For today, we wrote about setting stops.  You may want to bookmark it for future reference.   We will add another post about position sizing hopefully tomorrow.

For Wednesday, we plan to hold TNA and let it run to its target profit level.   We prefer TNA for now because IWM TNA are still forming patterns with breakout potentials.

​Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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 suggestions.

Support & Resistance Zones
We've been emphasizing that despite bearish divergence under the hood, stocks still have enough bullish momentum to keep climbing.  It is not time to bet against this market yet.

We have raised both the support and resistance zones below to reflect this bullish momentum.  However, the updated resistance zones shown below may be pretty strong for the short term.   Once $SPX $NDX IWM reach these resistance zones, they may need to go through a bigger dip before they can bring in enough new buyers.​

​Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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 suggestions.

Updates 3:30 PM EST -  Sunday (for Monday 8/30/21)
​
Events this week
Here are some important reports coming out this week.   Click here for full economic calendar.

Tuesday:   Case-Shiller Home Price Index
Wednesday:   ISM Manufacturing Index
Thursday:  Jobless Claims, Factory Orders, Productivity & Costs
Friday:   Employment Situation,  ISM Services Index

On Monday 9/6, both stock and bond markets are closed for Labor Day.    

Wall of worry:  tapering and rate hikes
In his much anticipated speech on Friday, Powell confirmed that tapering would begin later this year.   Market responded by buying a lot more stocks and bonds.   $SPX $NDX IWM rose.   The entire bond spectrum rose:  30-yr (TLT), 10-yr (IEF), corporate (LQD), junk (JNK).   

Most likely, market participants are cheering the fact that there was not any mention of imminent rate hikes.  Powell said "there is much ground to cover", implying that the Fed is a long way from raising rates directly.   But he is keeping the options open for the Fed.   WSJ discussed the following timing scenario:  "if Delta begins to weaken, investors should be ready for the Fed to make that commitment when it next meets in early November, and for it to start paring back its purchases shortly thereafter."

Wall of worry:  inflation
​Market participants are clearly nervous about inflation, evident by the huge demand for TIP ETF on Friday.   (TIP:  Treasury Inflation Protected Bonds)

• Consumer spending rose 0.3% in July.
• Consumer prices rose 4.2% from a year earlier, which is way higher than the Fed's goal of 2% inflation.
• Consumer sentiment was down sharply in August.

Inflation in itself does not lead to market crashes, but its trend will greatly affect the Fed's monetary policy.  

Under the hood:  growing bearishness
Volatility charts $VIX $VXN $RVX are still forming the pattern where the 20-day and 50-day EMA lines are bunching and going sideway.   In our experience, this kind of pattern is usually part of the anchoring process, from which volatility can coil upward, before it explodes in some fashion.

But while $VIX $VXN $RVX are anchoring and setting the stage for eventual eruption, we need to keep our inner bears under control.   Now is not the time to jump the gun and bet big against this stock market.   

Updates 12:45 AM EST -  Friday 8/27/21
​
Bearishness continues to grow under the hood
All the charts that we showed you on Monday 8/23 continue to show bearish patterns.   Here are a few key ones.

$VIX
All three volatility charts $VIX $VXN $RVX are showing similar rising W bottom pattern that are bearish for stocks.

Advance-Decline Net Issues
NYSE A/D cumulative chart is showing a clear lower high pattern.   Nasdaq (shown below) continues its sharp drop from massive multi tops.

Equity Put/Call Ratio
When this ratio rises, it means traders are buying more puts than calls.  For the last 6 weeks, the short-term average P/C ratio (as represented by the 20-day EMA blue line and the 50-day EMA red line) have been higher than the long-term average.   That means traders and hedge funds and money managers have been on edge.   

But price may pay no attention to technical signals for a while

We don't think that the market is going to crash on Friday, or in early September.  We don't think it will necessarily crash in the same way as it did in 2020 any time soon.   But we may see a major pullback later in September.

There is a good chance that after a dip into the green support zones Friday into Monday, we will see $SPX $NDX make an attempt to reach a new high.   If they succeed, we may see $SPX $NDX reach more new all time highs by the next FOMC announcement on 9/22.  At that point, the under-the-hood bearishness may exert their pull on price and we may have a major pullback for $SPX $NDX.

Table of Support & Resistance Zones
​The S/R table is still the same.   

The zones represent the possible boundaries of market emotions, after Powell speaks on Friday.

• If market feels really bullish from his speech, it can quickly surge up towards the orange resistance zone next week.
• If market feels nervous and bearish, we may see price dip into the green support zones next week to find more buyers before it can resume the climb.​

Signal Trades 
Here is our strategy:

• Enter one Big Bull TQQQ position in the green support zone
• Enter one Quick Bull TQQQ also at the same time.   
• Exit Quick Bull TQQQ when it reaches 8/25 high.   
• Let Big Bull TQQQ run up with trailing stop.
• Tighten stop starting mid September. 
  

​
Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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 suggestions.

Nasdaq Advance-Decline Net Issues
The massive top that's been forming on this chart since February this year is still intact, and that's not good for the bullish case.   A/D net issues rose sharply this week, but the A/D line has to rise over its 200-day EMA green line in order for conditions to really improve.

Signal Trades
Between now and Friday, we recommend focusing on quick trades only.   

• Use the 5-min charts.
  
• Trade the direction of the 200 EMA which should be up right now.
• Wait for price to tag the 200 EMA before entering.   
  
• Use a tight stop just below the 200 EMA line.

​Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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 suggestions.

Updates 1:45 AM EST -  Tuesday 8/24/21
​
Will they or won't they?
The Fed canceled the in-person Jackson Hole Summit, opting for virtual sessions instead due to Delta concern.   This of course makes market participants wonder "will the Fed delay tapering because they are taking Delta more seriously?"

We don't think so, but there is no point in front running the Fed.   We still plan to just trade Quick Bull/Bear positions for now and hold nothing ahead of Powell's speech at 10 AM EST on Friday.

$VIX $VXN $RVX 
Keep an eye on $VIX $VXN $RVX 200-hour EMA green line.   If it continues to go sideway, or rises gradually, it usually sets the stage for a major spike.

Updates 1:00 AM EST -  Monday 8/23/21
​
Key events this week
This week's key reports focus on the strength of the economy this week.   Click here for the full economic calendar.

Monday:   Existing Home Sales
Tuesday:   New Home Sales
Wednesday:  Durable Good Orders
Thursday:   GDP; Jobless Claims
Friday:  Personal Income & Outlays; Consumer Sentiments

All eyes will be on the Fed this week as they gather at Jackson Hole Summit starting Thursday.   Powell is scheduled to speak on Friday at 10 AM EST.

​In the big picture context, the same questions are being asked.   

• How healthy is the economy?
• When will the Fed start to taper and when might they raise rates?

No one knows the precise answers, and the answers are likely to change over time.   However, there are now a growing number of technical signals that indicate the stock market is getting much more nervous, more volatile, and primed for a major drop.

$VVIX Warnings: Rising volatility 
The chart of $VVIX, which measures the volatility of $VIX, is showing a disturbing pattern.   See explanations below.

If $VVIX 20-day EMA blue line and 50-day EMA red line don't start to cross below the 200-EMA green line soon, the stage is set for a possible very big spike in $VIX. 

Equity Put/Call Ratio Warning:  Rising volatility 
A rising equity put/call ratio means that there are more put buyers than call buyers.   It means that traders are getting nervous and wanting to buy protection.   

Similar to $VVIX chart, if the 20-day EMA blue line and 50-day EMA red line don't cross below the 200-day EMA green line soon, it means traders have turned really bearish.

VIX future term structure reveals growing fear
Conditions certainly are changing rapidly.   We had been sharing with you that volatility was likely to rise this week due to VIXperation (8/18) and OPEX (8/20).  Now it appears that market participants are getting seriously nervous about Fed tapering their bond purchases.   

There is speculation that at Jackson Hole summit next week (8/26 - 8/28), Powell may begin to lay a path for tapering.   The Fed may then formally announce it on 9/22 at their September meeting.   Actual tapering may begin in January.  

Market participants are getting nervous about this timeline, and it is reflected in VIX futures term structure below.  Observe that VIX futures rise more sharply between September and October, and between December and January.

$VIX may surge in September
Our job at this point is to monitor $VIX $VXN $RVX to see if they stay elevated.  $VIX is likely to drop down in the short term, but it may not drop down as low as it has been.   

Watch for the possibility where $VIX oscillates between now and mid-September in the yellow zone below (17.5 to 20.5).   If this happens, the key dates to watch for possible major surges are around 9/17 (OPEX) and 9/22 (FOMC).

Nasdaq A/D chart looks scary
We must confess the following Nasdaq Advance-Decline cumulative chart now makes us very nervous.   This week's steep drop is reminiscent of October 2018 and late February 2020.

$SPX $NDX IWM
From Friday into Monday, we may see prices drop more, approaching the green zones.  The green zones above should provide strong short-term support for the indices.   

But until $VIX $VXN $RVX form tops, stick with trading quick positions.   We will be posting quick trade setups as we find them.

​Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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 suggestions.

​Click here for Signal Trades spreadsheet.
​
Updates 12:07 PM EST -  Thursday 8/19/21
​
​Big Bull setup coming up
The bullish scenario we outlined at 1:30 AM today came true this morning.  

1. $VIX spiked up at open and came close to 25 as projected.
2. $VIX then dropped rapidly down to the 200 EMA level.   It is now anchoring around 21.
3. Look for $VIX to spike up one more time to form a same high or lower high between 24 and 24.74.   
   1. ​If true, this would be the bullish setup to enter Big Bull positions.
   2. If $VIX continues to rise above 24.74, then it is not done rising yet.   More stock selling will follow.​

Big Bull trade setup:
We are monitoring for the Big Bull setup condition above.   There is actually not that much fear right now, so this setup should come true.   But if it fails, the signal to sell will strengthen.   We will update Signal Trades spreadsheet shortly with Big Bull orders.

Quick Bear trade setup:
After $VIX has shown signs that it is done anchoring between 20 and 21, look for signs of upward reversal.   UVXY may be at 26 at that point.   It's a potential setup to enter UVXY at 26 and ride back up to 28 or even 28.7.   Use a tight stop here as UVXY may still drop lower than 26.​

Updates 1:30 AM EST -  Thursday 8/18/21

FOMC Minutes:  Tapering coming possibly by end of year
From WSJ today:
The Fed’s next meeting will be Sept. 21-22, and several Fed officials have said they would argue in favor of beginning to taper bond purchases shortly after that meeting if the recent run of strong hiring continues. But the minutes don’t reveal a consensus for such a step, and that, analysts said Wednesday, suggests a reduction is more likely come after the Fed’s Nov. 2-3 meeting.

Officials stressed however that there is no link between tapering and potential interest rate hikes.   They are two separate tools.

Immediate market reactions following the release of FOMC minutes:

• $VIX $VXN $RVX:  up
• $SPX $NDX IWM: down
• TLT  IEF  TIP:  up
• $SRVIX (bond volatility): up

​Stock participants are clearly unsettled by this news, even though we all know it's a matter of when and how, not if.  

$VIX $VXN $RVX
It is a matter of "pay now" or "pay later" with volatility.   Bulls should hope for "pay now" because some more immediate spiking in volatility will reduce the selling pressure.   This will clear the air so to speak, and lure in more traders buying the dip.   

Given the reactions post FOMC minutes, we may see $VIX $VXN $RVX spike up some more on Thursday and Friday.   Don't forget that Friday is OPEX (options expiration), which can bring more volatility as well.   

$SPX $NDX IWM
If $VIX $VXN $RVX spike up as shown above on Thursday, we are likely to see $SPX $NDX IWM drop down to their green support zones.  They should find more buyers here, but still this is not a guarantee.

Signal Trades
We will be watching for setups to eventually enter Big Bull positions, but for Thursday we'll just be trading quick positions, in either direction.

Click here for Signal Trades spreadsheet.

To Read
We urge you to read this article about risk management and position sizing.  
1% Risk Rule
If you are new to trading 3x leveraged ETFs like TQQQ TNA SOXL FNGU, read:
Why 3x ETFs like TQQQ lose money over the long term
If you are new to trading inverse ETFs like SQQQ TZA SOXS FNGD, read:
​The risks of investing in inverse ETFs

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 suggestions.

Click here for Signal Trades spreadsheet.
​
Updates 12:17 PM EST -  Wednesday 8/17/2

Volatility:  no big spike this week; likely big spike early Sep
$VIX $VXN $RVX are starting the contracted and sideway patterns we discussed.   We'll be showing these charts later tonight.

$VIX $VXN $RVX contracted sideway pattern is the equivalent of a baseball pitcher coiling his body and winding up his arm before releasing into an explosive pitch.   A much bigger volatility spike is potentially coming.   The question is when.

Price actions going into OPEX on Friday have already been baked in.   Jackson Hole Fed Summit will be starting next Thursday 8/26.   It is unlikely that volatility will really surge before that.   So early September is when we may see a much bigger spike in volatility and a much bigger drop for stocks.

In the meantime, price actions may be choppy.   We most certainly don't recommend buying and holding UVXY or any inverse ETF for multiple days.  Trade Quick Bear positions with these.   And trade Quick Bull with long ETFs.

Updates 2:30 AM EST -  Wednesday 8/17/2

Table of Support & Resistance Zones
The S/R table has been mostly updated. 

$VIX
Today's actions open the door for more bearish setups, i.e. much higher volatility.   However, that is not a guarantee.   And certain patterns have to show up first to support and confirm the potential scenario of volatility eruption.

For now, it is best to focus on two opposing scenarios that can show up for the rest of this week.   See details below.

Signal Trade:

• Quick Bear UVXY:  a potential pullback in $VIX at open Wednesday could be a low-risk setup to test a Quick Bear UVXY position.  This is the scenario where $VIX spikes up quickly to 21 possibly.