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Updated Sunday 9/29/19 7:30 PM EST Winter is coming Before we dive into the weekly analysis, let’s review some pivot points.
When Surge7 was cut short on 9/24, it was a big psychological change in the market. Market participants (us included) were holding out for at least one last bullish surge to a new all-time high for $SPX. But a noxious combination of negative news lead to additional sell-offs. And the fate of the Up Trend is highly questionable at this point. So what is a Volatile Sideway Market? Below is a visual example of a Volatile Sideway Market that occurred in 2015, lasting 5.5 months before a major crash. This is $SPX hourly chart from March until mid-August 2015.  This is a rather extreme example. More typical is this type of pattern seen below. This is $SPX hourly chart from mid 2015 through the first quarter of 2016. Observe that between November and December 2015, $SPX went into a sideway market, which eventually rolled over into a steep drop that is the Down Trend at the start of 2016. This Down Trend lasted 6 weeks.  If the left side of the above chart looks familiar, it is because it greatly resembles the Major Pullback2 period of this past August. We are now at an inflection point similar to either (A) or (B). Stock market sometimes transition from an Up Trend to a Down Trend via a Volatile Sideway Market. This type of market simply reflects the fact that bulls and bears are fighting it out. The winner of this psychological battle will lead the market in the next period. As mentioned above, stocks are now at an inflection point similar to either (A) or (B). From here, there is a high probability that $SPX $NDX SPY QQQ TQQQ will swing upward one more time to test a couple resistance levels, just like how it played out in the above chart. There is also a high probability that $SPX $NDX SPY QQQ TQQQ won’t be able to break above the strong resistance formed on 9/24. How many more times will they traverse the range up and down? No one can say for sure. But there is a high probability that they will roll over into a Down Trend from the current Volatile Sideway Market some time in October. Winter is coming. Table of support and resistance levels  Updates from market internals In Volatile Market, the one signal that rules them all is the volatility signal. $VIX $VXN charts currently show a high possibility of an immediate minor decrease in volatility for a few days starting Monday. $VIX is likely to retest the low 14 range. $VXN is likely to retest the low 17 range. However, after this decrease, $VIX $VXN longer-term charts show that volatility is very likely going to start climbing again. $VIX $VXN are likely to surpass last week’s highs. It is, however, too early to tell how high $VIX $VXN will go this week. CBOE Equity Put/Call ratio is at 0.823, which is neither overbought or oversold. However, its charts show that traders are getting nervous. This indicator supports the Volatile Sideway Market scenario. NYSE Advance/Decline charts show market breadth is dropping. This drop is happening at a faster rate for Nasdaq A/D charts. This is consistent with $NDX QQQ TQQQ underperforming, relative to $SPX SPY. Finally NYSE and Nasdaq percentages of bullish stocks are dropping. However, these indicators are laggard. They merely confirm the inability of the stock market to climb higher. So overall, the main message from market internals is this:
Planning your trades Stay out of this market if possible Trading Volatile Sideway Market is very difficult - much more difficult than trading a Down Trend. As you can see from the very first chart at the start of this post, the sideway range does not stay within a strict range. Prices will edge above or below your perceived range, just enough to trigger the typical stop settings and shake out the weak hands. Don’t trade because you are anxious, bored, or frustrated with this stock market. No one controls the market. It will do what it wants to do. It will not necessarily do what we think it should do. There is no rational, no logic, no should, no must, no nothing. Market may respond to headlines, or it may not. You can argue on Stocktwits until you are blue in the face, but you are not going to convince the market to see things your way. Frequent trading a Volatile Sideway Market can result in a lot of losses. Each loss may not be big individually, but they will add up. Therefore we recommend that you practice great restraint. You can potentially save yourself a lot of frustration and money if you just stay out and wait until market internals tell us that the Down Trend is about to happen. Remember that you have total control over your decision to buy, sell, hold, or stay out. No matter what any guru recommends, you are the one pulling the trigger in the end. So if you choose to do it, you must be willing to accept the risk that comes with it. Exit current long positions We recommend that you start exiting your $SPX $NDX SPY QQQ TQQQ long positions as soon as you can, even if it means selling at break even. Don’t count on prices to rise above Resistance2. Be conservative with your capital. If you have an opportunity to exit, take it. We don’t recommend that you initiate new long positions in $SPX $NDX SPY QQQ TQQQ unless you are day trading. Small bearish setup When $VIX retests the low 14 range, and $VXN retests the low 17 range, $SPX $NDX SPY QQQ TQQQ could swing back up to Resistance2 or Resistance3. Once $VIX $VXN finish retesting their low ranges, there is a high possibility that they will surge from those levels. If that happens, then $SPX $NDX SPY QQQ TQQQ will drop correspondingly, from Resistance2 or Resistance3. If you feel the urge to trade, this is the setup to monitor for. Enter SQQQ when all those criteria are met. Trade small and collect your profits when $SPX $NDX SPY QQQ TQQQ reach Support1. We want to emphasize again that you should not feel compelled to do this trade. You are not missing out on a huge opportunity if you skip it. Market is not necessarily going to roll over into a Down Trend right away. Our current positions Below is our current Core positions which we are looking to unload. There was some confusion about how we entered and exited our Core positions. Here is what we did.
We are choosing to exit at TQQQ at Resistance1 and Resistance2. This is just our personal preference, not a recommendation that you should do exactly the same.  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 of 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.
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Updated Friday 9/27/19 2:10 AM EST Table of support and resistance levels These levels have not changed from yesterday’s projections, but here they are for your convenience.  Updates from market internals Market internals confirm today that we are transitioning into Volatile Market. In fact, the most likely scenario is that we will see choppy price actions into early October. In the very short term, $VIX $VXN volatility charts tell us that the re-test of Support1 is approaching the end. There is a good chance based on price actions of futures tonight that $SPX $NDX SPY QQQ TQQQ may start rising tomorrow. However, there is still a chance we will see a quick dip down to get near Support1 one more time early tomorrow Friday. The important point is that there is likely enough strong support at Support1 to enable prices to rise up from here. $SPX $NDX SPY QQQ TQQQ most likely will surpass Resistance1. They are likely to reach Resistance2, possibly Resistance3 next week. However, they are unlikely to surpass Resistance3 in the short term. Planning your trades Since this is a Volatile Market, don’t build up a big position in $SPX $NDX QQQ SPY TQQQ and hold them for multiple weeks. Instead, try to trade with ⅓ or ½ or your capital and look to trade very short-term swings, either long or short. Bullish setup As we explained above, you can start to do partial entries into $SPX $NDX QQQ SPY TQQQ tomorrow Friday, as long as prices are in the zone between Support1 and Resistance1. Take partial profits at Resistance2 and exit fully at Resistance3. Note that this is higher than yesterday’s projections. If you have any long positions from previous entries, do the same in terms of exiting, at Resistance2 and Resistance3. Bearish setup When prices reach Resistance3, that is a potentially low-risk place to enter short via SQQQ or UVXY. However, we personally will be waiting for confirmation from $VIX $VXN intraday charts before we enter short. We will share this confirmation on Stocktwits when it happens. Our current positions  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 of 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. Updated Wednesday 9/25/19 6:40 PM EST Coping with volatile market Yesterday when we sent out the intraday update of the S/R table, we noted that you should wait to exit your long positions at either Resistance1 and/or Resistance2. We did not suggest that you should sell immediately while prices were dropping rapidly intraday. We hope that this message was clear and did not cause any confusion for you. While it is frustrating to see our unrealized gains turn into unrealized losses, it is the nature of trading. We can cope with it by:
There is no trading system that is going to provide us with 100% reliability 100% of the time. It is therefore very important to develop a good risk management strategy for all market conditions. Protective stops are essentially your automated risk management strategy. Table of support and resistance levels We have updated the S/R levels substantially. You may want to take a careful look.  Updates from market internals Sometimes when information is in a state of flux, it’s helpful to look at the boundary conditions and ask ourselves how likely are those scenarios going to happen. The latest data from market internals tells us this.
In the very short term, market breadth and volatility charts tell us that $SPX $NDX SPY QQQ TQQQ are likely to do this:
We are not suggesting that the market will play out exactly according to this script. However, we are sharing this script with you as a high probability scenario. Use it as guideposts in planning your trades. Planning your trades Trade as if it’s a Volatile Market We still don’t have enough confirming data from market internals at this point in order to label this move as end of Surge7, start of Major Pullback3, or end of Up Trend, start of new Volatile Market. However, we strongly recommend that you trade this as if it’s a Volatile Market. In other words, don’t build up a big position in $SPX $NDX QQQ SPY TQQQ and hold them for multiple weeks. Instead, try to trade with ⅓ or ½ or your capital and look to trade very short-term swings, either long or short. Bullish setup As we explained above, when $SPX $NDX QQQ SPY TQQQ retest Support1 tomorrow Thursday, it is likely a low-risk setup to enter a small long. Take partial profits at Resistance1 and fully exit at Resistance2. If you have any long positions from previous entries, do the same in terms of exiting, partially at Resistance1 and fully at Resistance2. Bearish setup A failed retest of Resistance2 is a potentially low-risk place to enter short via SQQQ or UVXY. However, we personally will be waiting for confirmation from $VIX $VXN intraday charts before we enter short. We will share this confirmation on Stocktwits when it happens. 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 of 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. Updated Wednesday 9/25/19 2:08 AM EST Updates from market internals In the last couple of days, we have been warning you that the Up Trend that started on 12/26/18 is still intact, but it is getting weaker based on the weekly charts of market internals. In other words, Surge7 may end soon, along with the current Up Trend. Normally, we get a few weeks with this kind of early warning from the weekly charts of market internals. However, today’s price actions indicate that market internal weekly charts may be in a hurry to get their messages out, regardless of what their corresponding daily and hourly charts are saying. When there is a conflict in messages, it’s best to err on the conservative side. Take your money and run. You have to be willing to take what the market gives you. Table of support and resistance levels We posted this same table earlier today. Here it is again for completeness.  Planning your trades Trade as if it’s Volatile Market We don’t have enough confirming data from market internals at this point in order to label this move as end of Surge7, start of Major Pullback3, or end of the Up Trend, start of new Volatile Market. However, we strongly recommend that you trade this as if it’s a Volatile Market. In other words, don’t build up a big position in $SPX $NDX QQQ SPY TQQQ and hold them for multiple weeks. Instead, try to trade with ⅓ or ½ or your capital and look to trade very short-term swings, either long or short. Get out of long positions for now $SPX $NDX QQQ SPY TQQQ are all likely to bounce up tomorrow, but they are unlikely to rise above Resistance2 in the short term. Consider unwinding your long positions. Take partial profits at Resistance1, Resistance2 and in between. Bearish setup Resistance2 is a potentially low-risk place to enter short via SQQQ. Before you enter short, make sure that volatility $VIX $VXN are rising. 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 of 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. Updated 2:15 PM EST Here is the updated S/R table. We will post full analysis tonight as to why this big drop today. Stocks are likely to bounce at Support1. But you should probably exit your long positions at Resistance1 or Resistance2.  Updated Monday 9/23/19 11:56 PM EST Brief updates tonight because instead of just one, we have two parents in the emergency room at the same time. (Sigh!) Table of support and resistance levels  Updates from market internals As we mentioned the messages from market internals are getting complex. The following messages from market internals are important, so we want to repeat them here today. The Up Trend that started on 12/26/18 is still intact, but it is getting weaker. In other words, this Up Trend may end after Surge7. This is just an early warning from market internals though. Do not bet against the Up Trend yet. Early bears can suffer some really bad losses. Since 9/12, stocks have been in Minor Dip2 of Surge7 of the Up Trend. The low of this Monday morning is likely the end of Minor Dip2. We most likely will see Surge7 resumes tomorrow Tuesday when prices are likely to gap up at open. At this point, we don’t have enough data from market internals to pinpoint when Surge7 is likely to be done. However, by next Friday 10/4, Surge7 will have been in play for exactly one month. And it would not be surprising if Surge7 wraps up at that point. This is pure speculation on our part by the way. Don’t go placing bets against the market with that information. Just keep it in the back of your mind. This party will not last forever, you can be sure of that. But enjoy it and collect some profits while it lasts. Planning your trades Bullish Setup Yesterday, we wrote: If $SPX $NDX SPY QQQ TQQQ gap down at open tomorrow, that is most likely a low-risk partial entry point to enter Surge7 and ride it up until it ends. You can initiate or add to your long positions here. Keep in mind that the gap down can take us to Support1, Support2 or the zone in between these two support levels. If you want to jump in and ride Surge7 up, you may have to be flexible in your entries and enter partial positions at each of those levels. We hope you took advantage of the retests of Support1 today to enter or add to your long positions $SPX $NDX SPY QQQ TQQQ. We recommend that you hold on to these long positions. Again, until the daily and hourly charts of market internals tell us collectively that Surge7 is done, do not bet against this market. Our Core positions have not changed from last week. However, we have lowered our sell target because we are not convinced at this point that Surge7 can surpass Resistance3.  We don’t plan to wiggle in/out of our Core positions. We find that is too difficult in an Up Trend, and we can end up missing out on the ride. So our goal is to continue riding Surge7 up for as long as possible with our Core Positions. Bearish Setup We don’t recommend that you bet against the market at this point, unless you are a skillful day trader. Setting protective stops How you set your protective stops depends on how you want to trade your individual positions. This is why we don’t want to issue universal rules for stops. But we will give you some examples that may help your thinking. For our own Core positions:
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 of 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. Updated Sunday 9/22/19 11:14 PM EST Market context At the end of this article, we added a discussion on setting stops and where to get access to market internal data. On Thursday evening 9/19/19, we wrote in our analysis: Market internals are all sending out the same message. And the message consists of 2 parts:
And that is pretty much what happened during the day on Friday 9/20. TQQQ dropped down to 62.74 as the intraday low. And if you consult the S/R table from that same post, it says Support1 for TQQQ is at 62.75. So once again, the messages from market internals came true. But why did this happen? In order for stocks to continue marching up, there has to be fresh waves of buyers. These waves of buyers typically will jump in when one of these 2 things happen:
Since Surge7 has started on 9/4, prices have not dropped enough yet to entice more buyers to jump it. Without the V reversal, stocks have to prove that they have found support at some strong level before more buyers will actively buy again. Successfully testing Support1/Support2 is what buyers want to see. And that is the condition we need to monitor for. Table of support and resistance levels The S/R table has not changed because prices have been stuck in a tight range.  Updates from market internals The messages from market internals are getting complex. And different time frames come into play now. So here they are. You will want to pay close attention to them.
Planning your trades While we understand that there are clouds building up on the horizon, and the Up Trend may end some time in October, we need to focus on trading the short-term signals from market internal daily and hourly charts. Market internals are not telling us yet when Surge7 will be done. Until the daily and hourly charts of market internals tell us collectively that Surge7 is done, do not bet against this market. Bullish Setup If $SPX $NDX SPY QQQ TQQQ gap down at open tomorrow, that is most likely a low-risk partial entry point to enter Surge7 and ride it up until it ends. You can initiate or add to your long positions here. Keep in mind that the gap down can take us to Support1, Support2 or the zone in between these two support levels. If you want to jump in and ride Surge7 up, you may have to be flexible in your entries and enter partial positions at each of those levels. Our Core positions have not changed from last week. We want to show you additionally for today the position management table that show how we personally allocate our trading capital in different market conditions.   We don’t plan to wiggle in/out of our Core positions. We find that is too difficult in an Up Trend, and we can end up missing out on the ride. So our goal is to continue riding Surge7 up for as long as possible with our Core Positions. Bearish Setup We don’t recommend that you bet against the market at this point, unless you are a skillful day trader. Setting protective stops How you set your protective stops depends on how you want to trade your individual positions. This is why we don’t want to issue universal rules for stops. But we will give you some examples that may help your thinking. For our own Core positions:
Accessing market internal data We use the following services for stock charts and market internal data. The symbols for the data are listed below. StockCharts.com:
TradingView.com:
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 of 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. Updated Thursday 9/19/19 11:48 PM EST Market context The repo story may have been downgraded a bit, but it is not going away. According to Bloomberg: This week’s actions have helped calm the funding market, with repo rates declining to more normal levels after soaring to 10% Tuesday, four times last week’s levels. However, swap spreads tumbled to record lows Thursday amid concern that Fed policy makers… didn’t announce more aggressive steps to keep rates from spiking. Swaps are signaling less appetite for Treasuries, driven by concern traders won’t be able to fund purchases of U.S. debt through the repo market. Keep an eye on this story as it may have the potential to alter the Fed’s current course of actions. It may also have the potential to derail the current Up Trend. However, it’s too soon to guess at the outcome. We must trade the signals in front of us, right now, as presented by market internals. Unfortunately for us bulls, market internals are saying that Minor Dip2 is still not fully done yet. Table of support and resistance levels We have fine tuned the S/R table to reflect the latest important price levels.  Updates from market internals Market internals are all sending out the same message. And the message consists of 2 parts:
We are likely to see volatility spike up a bit more during the day tomorrow Friday. We are also likely to see market breadth and the percentage of bullish stocks drop a bit more. The CBOE equity put/call ratio is still not at the oversold level yet. Planning your trades Bullish Setup Based on the message from market internals, we may see one more attempt for stocks to test Support1, or even drop down to Support2 tomorrow Friday, before Surge7 resumes for real. Again, if you have been waiting for an opportunity to enter Surge7 on a dip, this bottoming process by Minor Dip2 is a good place to do partial entries, or add to your long stock positions. Here are our current positions.  We don’t plan to wiggle in/out of our Core positions. We find that is too difficult in an Up Trend, and we can end up missing out on the ride. So our goal is to continue riding Surge7 up for as long as possible with our Core Positions. Bearish Setup We don’t recommend that you bet against the market at this point, unless you are day trading. 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 of 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. Updated Wednesday 09/18/19 11:55 PM EST Market context The Fed cut rates by 0.25% today, as widely expected. However, Fed officials are struggling to agree on future rate cuts. According to WSJ: “Seven of 10 Fed officials voted in favor of lowering the benchmark federal-funds rate to a range between 1.75% and 2%, with two reserve bank presidents preferring to hold rates steady and one favoring a larger, half-point cut.” Still, the door has been left open for possibly one more rate cut this year. Additionally: “The Fed also on Wednesday injected money into the banking system for the second day in a row to ease a crunch in overnight funding markets, and said it would do so again on Thursday. The operations are aimed at keeping the fed-funds rate in the central bank’s target range.” Stocks responded by rising, after an initial quickie sell-off. However, as we write this, futures are showing that stocks may gap down at open tomorrow still. Updates from market internals We have very similar reading today for market breadth and its message. Market breadth, as measured by the Advance/Decline lines, continued to drop some amount for NYSE and Nasdaq stocks. The percentage of bullish NYSE and Nasdaq stocks also continued to drop today. Their drops are natural, and are actually a healthy part of a bullish Surge in an Up Trend. The A/D line charts are not forming the kind of patterns that indicate the end of Surge7 is imminent. This is important and is quite bullish for stocks, as the A/D pattern is very reliable in its message. CBOE equity put/call ratio continued its rise into selling territory today. However, chances are good that this ratio is going to top out and reverse from sell to buy mode soon. The most important charts, $VIX and $VXN, showed volatility being done with their mini spikes. They may still have some more minor intraday spikes, but they are not forming the kind of patterns that indicate Surge7 is ending. So in the big picture context, Surge7 is still intact and still has more room to rise up. Table of support and resistance levels  Planning your trades Bullish Setup We may see one more attempt for stocks to test Support1 tomorrow Thursday, before Surge7 resumes for real. Again, if you have been waiting for an opportunity to enter Surge7 on a dip, this intraday pullback is a good place to do partial entries, or add to your long stock positions. Here are our current positions.  We don’t plan to do short-term trades, to wiggle in/out of our Core positions too much. Our goal is to continue riding Surge7 up for as long as possible with our Core Positions, while trailing our protective stops loosely upward. Bearish Setup We don’t recommend that you bet against the market at this point, unless you are day trading. 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 of 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. Updated Tuesday 9/17/19 11:35 PM EST Market context The big event this week was going to be FOMC announcement, which is scheduled for 2:00 PM EST tomorrow Wednesday 9/18. However, an important mini crisis happened today that you may want to pay more attention to because it has a direct effect on market liquidity. According to Bloomberg: “The Federal Reserve took action <today> to calm money markets...Money markets saw funding shortages Monday and Tuesday, driving the rate on one-day loans backed by Treasury bonds -- known as repos -- as high as 10%, about four times greater than last week’s levels, according to ICAP data. More importantly, the turmoil in the repo market caused a key benchmark for policy makers -- known as the effective fed funds rate -- to jump to 2.25%, an increase that, if left unchecked, could have started impacting broader borrowing costs in the economy…. ...the central bank...resorted to a money-market operation it hasn’t deployed in a decade. The New York Fed bought $53.2 billion of securities on Tuesday, hoping to quell the liquidity squeeze. It appeared to help... Late Tuesday, the New York Fed said it would conduct another overnight repo operation of up to $75 billion Wednesday morning.” Here is a lengthy and highly informative explanation on repos. This stuff is complex, but is worth paying attention to. This is the type of liquidity problem that can spill over into other markets in a hurry. It was the lack of liquidity that caused the crash of 2008. So while headlines like Saudi oil or Hong Kong turmoil can sound dramatic, pay close attention to anything that pops up on the horizon that can suck the liquidity out of the market. That’s when really bad crashes tend to happen. Updates from market internals CBOE equity put/call ratio has surged up enough yesterday and today to ease the overbought condition. This allows stocks to possibly go up higher. Market breadth, as measured by the Advance/Decline lines, cooled off a bit today for NYSE and Nasdaq stocks. The percentage of bullish NYSE and Nasdaq stocks also eased up today. Both of these sets of numbers can go down some more, which means there is a chance that Minor Dip2 can still go down further. However, $VIX $VXN charts showed volatility being done with their intraday spikes. This is a healthy development. And $VIX $VXN are now ready to drop again. This is bullish for stocks. Since $VIX $VXN are leading indicators, whenever there is a conflict with other market internal indicators, we give more weight to $VIX $VXN messages. So while Minor Dip2 isn’t fully done yet, in the big picture context, Surge7 is still intact and still has more room to rise up. Table of support and resistance levels  Planning your trades Bullish Setup We may see one more attempt for stocks to test Support2 after FOMC tomorrow, before Surge7 resumes for real. As we wrote a few nights ago, it is actually difficult to trade minor dips because it is hard to predict how far they will drop. There is hardly any indicator that can detect such minor changes in market mood. This is why we chose not to wiggle out of our Core2 and Core3 positions. And this is also why we don’t recommend very short-term swing trades that bet against a Surge in an Up Trend. If you have been waiting for an opportunity to enter Surge7 on a dip, monitor closely after FOMC announcement tomorrow. Any sharp pullback after this event is probably a reasonable place to start scaling into long positions, provided that you are planning to ride most of Surge7, and not trade in and out too much. Here are our positions.  Our stop-loss is set at break even because we want to allow for crazy price swings after FOMC announcement. We want to continue riding Surge7 up for as long as possible with our Core Positions. Bearish Setup We don’t recommend that you bet against the market at this point, unless you are day trading. 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 of 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. |
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