Click here for Signal Trades spreadsheet. Updates 1:14 PM - Friday Short-term outlook: Bull may be pausing to recharge briefly The hourly charts of S&P and Nasdaq percent of stocks above 200 MA (Stockcharts $SPXA200R $NDXA200R) show that they are running into resistance. Nasdaq may retest the low of 62% next week. S&P may retest the low of 50% before resuming the climb. This is a bullish setup. VIX and VIX futures are still dropping, but VVIX (volatility of VIX) iss climbing up slowly. VIX may climb back up to the zone 14.7 - 15 next week before resuming the drop. This is a bullish setup. ES and NQ both tagged R1 and then continued to form topping candles on its daily chart right at R1. RTY penetrated its R1, but is now pulling back. There is a good chance that ES NQ RTY will retest S1 next week before climbing higher. This is a bullish setup. We have already taken partial profit on our SVIX bull position, so we're ok with letting the remainder run. We'll be monitoring for the arrival of the bullish setup described above to add to our SVIX bull position. Have a great Labor Day weekend. Updates 12:20 AM - Friday Upcoming key events Keep in mind that stock market is closed on Monday for Labor Day weekend. Click here for economic analysis articles. Key S/R levels All levels are still the same from yesterday. Bull may be pausing to recharge briefly As we posted during the day on Thursday Aug 31, market breadth is running into resistance from expansion. The hourly chart of S&P percent of stocks above 200 MA (Stockcharts $SPXA200R $NDXA200R) show that it's running into strong resistance at the 200-hour EMA green line. We are likely to see breadth drops a bit from here to retest their recent lows. This means 50% for S&P and 62% for Nasdaq. A successful retest will result in a big W bottom pattern relative to their 200-EMA green line (see below). This is a very bullish pattern that can support multiple months of bull run. VIX and VIX futures are still dropping, but VVIX (volatility of VIX) has anchored to rise. ES NQ RTY all showed short-term topping patterns just below R1. There's a chance that they will pull back and retest S1 between Friday and Wednesday next week. Our personal trade plan We posted at 1:04 PM on Thursday that the bull may be pausing to recharge for a bit. We raised stops on 1/4 SVIX position and got stopped out for a small profit. We also lowered sell target on 1/4 position. This target was filled, and we locked in a small profit. Our goal was to take partial profit on 1/2 position, and let the other 1/2 ride. This goal has been achieved. We'll look to re-enter when market breadth resumes its rise again, which may not happen until next week. Click here for Signal Trades spreadsheet. Disclaimer The information presented here is our own personal opinion. Consider it as food for thought. We are not offering financial advice. We are not promoting any financial products. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. You are proceeding at your own risk if you follow our trades.
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Click here for Signal Trades spreadsheet. Updates 5:30 PM - Thursday Took partial profit on SVIX position Market breadth is easing, so we took some partial profit of our SVIX position here. We plan to re-enter when price pulls back a bit, and breadth starts rising again. You can review the original analysis, setup and entry into this trade here. Updates 1:04 PM - Thursday Bull may be pausing to recharge briefly Here are the key signals that indicate the bull may pull back a bit.
This is unlikely to be a big pullback. ES NQ RTY are unlikely to retest S1 again on this pullback. Monitor their 30-min charts. The 200 EMA line on this chart is where 1st level support lies. We did raise stops on 1/4 SVIX position and got stopped out for a small profit. We also lowered sell target on 1/4 position. The goal is to take partial profits on half position, and let the other half ride. We'll look to re-enter when market breadth resumes its rise again. Key S/R levels The table has been fully updated. Bull strength is increasing Market bullish price actions on Wednesday continue to confirm our thesis that we shared before market Monday. ES NQ RTY continue to climb and are approaching the new R1 levels. Here are the key signals that confirm the bull is currently in charge.
Our projection is that market will calm down between now and about mid-September. ES NQ RTY will likely reach R2. Then we may see a setup for a bearish volatility surge. We discussed this in yesterday's post. Thursday's PCE report and Friday job reports are likely to move the market some amount. So we may see some pullback from the current bullish climb. But ES NQ RTY are still capable of rising up to R2. Our personal trade plan Per our trade plan pre-market Monday, we scaled into SVIX Monday morning. We continue to trail the stops upward. The goal is to lock in some profits if there's a sharp pullback, but still keep partial positions in play. 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. Key S/R levels Even though ES NQ RTY have penetrated their R1, we are leaving that level in this table because they may revisit R1 this week. Bull strength is increasing Market bullish price actions on Tuesday continue to confirm our thesis that we shared before market Monday. ES NQ RTY have penetrated their R1 levels. Here are the key signals that confirm the bull is currently in charge.
Our projection is that market will calm down between now and about mid-September. ES NQ RTY will likely reach R2. Then we may see a setup for a bearish volatility surge. Here are the key signals that indicate the bear is coming back.
Once the bear comes back, we may see ES NQ RTY sell off and drop to S2 from R2. After that though, the bull is most likely fully recharged and will come back to run through March 2024. Our personal trade plan Per our trade plan pre-market Monday, we scaled into SVIX Monday morning. VIX peaked at 18.88 on Aug 18. It is unlikely to exceed this level between now and mid Sep. But VIX may retest the zone 15 - 15.5 this week. So we are tightening stops on 1/2 of our SVIX position and lowering stops on the other 1/2. If VIX rises a bit, we may get stopped out of 1/2 position, but we'll still have 1/2 position in play. If this happens, we'll monitor to re-enter 1/2 SVIX position at a lower price. 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. How long will the bull signals last? Market price actions on Monday confirmed our thesis that we shared before market Monday. Here are the key signals that we'll be monitoring to confirm that the bull is back in charge. They are currently true as shown.
Our projection is that market will calm down between now and about mid-September. Then we may see a setup for a bearish volatility surge. The key signal to look for by mid September is VIX basing in the 12.75 - 13 zone, and then forming a big W bottom relative to its 200 EMA on its 2-hour chart. That is very likely a setup for a surge in VIX. This surge can send VIX above 21, possibly as high as 25. After that though, the bull is most likely fully recharged and can run for another 6 months. Key S/R levels All levels remain the same for now.
Our personal trade plan Per our trade plan pre-market Monday, we scaled into SVIX Monday morning. See our current position in the spreadsheet. 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 5:15 PM ET - Monday Scaled into bull position SVIX Per our analysis last night, we scaled in when SVIX dipped in the morning. Our target for this trade is 10% gain. Updates 12:50 AM ET - Monday Upcoming key events This week is filled with economic data that is likely to move the market sharply. Read more economic analysis here. Earnings this week Chart courtesy of Earnings Whispers. Big picture outlook: Da bull is back? In preparation for Aug 21, we shared with you a big picture analysis. We were worried about VVIX (volatility of VIX) forming the dreaded "Coiling Towards Catastrophe" pattern on its weekly chart. Market breadth confirmed this bearishness by continuing to drop. By end of day Aug 25, a different picture emerged, one that is much more bullish. Let's take a look at the indicators. Market breadth charts formed W bottom >> bullish support By Friday, the 15-minute charts of S&P and Nasdaq percent of stocks above 200-day MA ((Stockcharts: $SPXA200R $NDXA200R) showed a clear W bottom. S&P grazed 50%, and Nasdaq grazed 62%. They both then stabilized and turned up. This suggests that stocks may be done with the big drop for now. "Coiling Towards Catastrophe" signal failed >> bullish support For last Monday, we wrote an in-depth explanation about the big bearish signal from VVIX which we dubbed "Coiling Towards Catastrophe". By end of week on Friday Aug 25, this signal failed to materialize. VVIX 20-week EMA blue line failed to cross over the 50-week EMA red line. A key failed signal is always significant. It is saying that there is not that much volatility in the system to push VIX into the stratosphere. Not anytime soon. And after a good size sell-off, a failed bear signal is a healthy bull signal. VIX may be forming a topping pattern >> bullish support VIX has formed a lower high pattern relative to Aug 18 peak. If VIX continues this pattern and its 20-day EMA blue line drops below its 50-day EMA red line, then VIX is on its way possibly to 13 or lower. How long will the bull signals last? Here are the key signals that we'll be monitoring to confirm that the bull is back in charge.
If these signals start to fail, then the bull may be in trouble again. But we suspect that market will calm down between now and about mid-September. Then we may see a setup for a bearish volatility surge. However, at this point we are not sure if this September surge will send VIX above 19. If VVIX keeps grinding downward, then conditions will still lean bullish. But if VVIX anchors and starts to rise, then the bear is likely back and may come back with a vengeance. Key S/R levels All R1 and R2 lelvels have been updated. Support levels remain the same. If ES NQ RTY retest or get close to S1, that may be a decent setup to enter bull positions. They are likely to reach R1 if bullish conditions persist. They may even rise all the way to R2 by mid September. Our personal trade plan We will be looking for a bullish setup to enter SVIX on Monday. See our buy orders in the spreadsheet. 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 12 AM ET - Friday 8/25/23 Upcoming key events Read more economic analysis here. RTY levels have been updated. All others remain the same. VIX key pivot levels In VIX 4-hour chart below, we've highlighted the key levels where VIX is likely to pivot and its implication for ES NQ RTY.
We think that Friday's move is for VIX to rise from current level 17.21 to retest the zone 18.5 - 19. This will cause ES NQ RTY to drop to retest S1 again. This then becomes a setup for ES NQ RTY SVIX possible multi-day bullish moves. This bullish move may take ES NQ RTY from S1 up to R1 and last until the window of weakness during Sep 15 - 21. If VIX spends the first half of September basing at 15.5 or lower, then VIX fear spike will most likely show up. This fear spike can take VIX as high as 25. The good news is that ought to recharge the bull enough for it to run through the 1st quarter of 2024. Our personal trade plan We are glad we scaled out of 3/5 of our TQQQ position ahead of Thursday sell-off. We should have tightened the stop before hand, but sometimes our inner FOMO keeps us from doing the smart thing (sigh!) In any case, we got a decent small profit from this trade. We now will wait for VIX to reach one of the key levels described above before entering bull or bear position. In the spreadsheet, we have listed the trades that we will likely take. 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 4 PM ET - Thursday 8/24/23 Close full TQQQ positions The remainder of our TQQQ position (1/2) got stopped out. NQ and RTY levels have been updated. ES remain the same. Big picture analysis and projection Review the in-depth analysis here as it has not changed. Short-term projection and strategy to consider Our short-term projection has been for ES NQ RTY to rally from S1 up to R1. So far they are on this trajectory as projected.
Based on VIX VVIX VIX futures as well as breadth charts (Stockcharts: $SPXA200R $NDXA200R), we are projecting that VIX is likely to drop down to the zone 14 - 15. Meanwhile ES NQ RTY will reach R1. NQ may reach up to R2. After that, we may see VIX base in the zone 14 - 15 for a while until mid September. We don't know yet what ES NQ RTY will do while VIX bases. The period from Sep 13 to Sep 21 is a major window of weakness, full of events that can move the market substantially (see schedule above). Unless market breadth substantially improves between now and then, be prepared for the possibility of a big VIX fear spike that may take VIX up to 25. ES NQ RTY may drop to S3 during this big VIX fear spike. After the big VIX fear spike, be prepared to enter new multi-month bull positions, unless VVIX suggests that a bigger catastrophe spike is coming. Our personal trade plan We've take partial profit on our TQQQ position and are currently holding ½ position TQQQ. We will wait for NQ to reach R1 to sell the rest. 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 1:45 AM ET - Wednesday 8/23/23 Read more economic analysis here. Key S/R levels The levels below have not changed. Big picture analysis and projection Review the in-depth analysis here as it has not changed. Short-term projection and strategy to consider Our short-term projection is for ES NQ RTY to rally from S1 up to R1. And so far they have done that. However, Nvidia earnings is right after closing today. Nvida is currently priced for perfection, with a trailing PE of 226. Anything less than spectacular from Nvidia and traders are likely to sell. This selling can take NQ down to S1, possibly dip a bit below S1 to trap in the bears before it reverts. In other words, we may be looking at a really big price swing.
Our personal trade plan Given the potentially big price swing for NQ from Nvidia, we are not comfortable holding TQQQ ahead of Nvidia earnings (after hours on Wed). So we plan to scale out ½ position and hold just ½ TQQQ. 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 7:38 PM ET - Tuesday 8/22/23 Our Personal Trade Plan Monday trade notes: Nasdaq breadth stabilized at 66%, and VIX has formed short-term top so we scaled into TQQQ. However after hours VIX futures were rising again. So we sold 1/4 position from Mon entries. Planned to enter 3/4 positionTQQQ when it re-tests Mon low zone again possibly on Tue Tue trade notes: Nasdaq breadth is at 66% still, and VIX solidified its top. We re-entered TQQQ, but we have lowered our sell target because this bounce doesn't look strong. Updates 1:00 AM ET - Tuesday 8/22/23 We wrote an extensive analysis in preparation for this week. Please re-read for the big picture analysis as that has not changed. Key S/R levels Support levels have been updated in the S/R table below. Projection and strategy to consider Yesterday we wrote:
On Monday, ES NQ RTY began to rally from close to support at S1 as projected. However, because VIX is likely to retest 18 on Tuesday, ES NQ RTY may retest their lows from Monday before climbing up.
Our personal trade plan
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 4 PM ET - Monday 8/21/23 Closed full SVIX position The remaining 1/2 of our SVIX position got stopped out today. Updates 12 AM ET - Monday 8/21/23 Upcoming key events Most of this week will be quiet until Friday when Jerome Powell is schedule to speak at 10 AM ET at Jackson Hole Symposium. Read more economic analysis here. Earnings this week Chart courtesy of Earnings Whispers. The biggest earnings news this week is Nvidia. You can read more about it here. Big picture outlook: Early bearish warnings from VVIX By the end of last week August 18, VVIX (volatility of VIX) has formed a rather disturbing pattern on its weekly chart. It's a pattern we personally call "Coiling Towards Catastrophe" (CTC). When this pattern shows up, a few months later, VIX gets a catastrophe spike. You can see in VVIX weekly chart below the instances where VVIX formed this coiling pattern: Oct '14, Aug '15, Feb '18, Feb '20. These were all instances where VIX skyrocketed. VVIX 20-week EMA blue line and 50-week EMA red line have been coiling sideway since April. At this point, VVIX 20-week EMA blue line is about to cross above the 50-week EMA red line. That is bearish, but it does not mean a crash is going to happen this week. This is a high level signal that shows up way in advance. It's not for precision timing. But this pattern does say that VIX and VVIX are no longer supportive of multi-month bull positions. It says now is not the time to initiate new multi-month bull positions. Instead traders should find ways to lock in profits. What about the message from market breadth? The contradictory part is that market breadth (based on percent of stocks above 200-day MA) is still strong overall.
The contradiction stops us from declaring right now that it's all bullish or all bearish. It's telling us that there will be some big swings before market establishes a new direction. Short term support In preparation for Friday, we wrote: VIX forms another top in the zone of 18 - 18.5 ... This is where VIX 200-day EMA sits, and it is strong resistance level. VIX is likely to top out for the short term here. VIX reached up to 18.8 and then starting dropping sharply on Friday. It is likely to retest 18.5 on Monday before continuing to drop, but VIX may not drop below 15 in the short term. As VIX formed a top on Friday, ES NQ RTY found short-term support at close to S1 and managed to rise for the rest of the day. As VIX continues to drop this week, we should see ES NQ RTY rise up to R1. The S/R table has not changed. Projection and strategy to consider
Our personal trade plan In preparation for Friday, we wrote: We will be looking for intraday confirmation, but we are aiming to start scaling into SVIX when it retests the low of August 8. We got our wish on Friday and were able to scale into SVIX. If the low of Friday holds, we'll add another 1/2 SVIX position. This is a short-term trade. The goal of this trade is to capture VIX dropping from its high of 18.88 down to the zone 15 - 15.5. 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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