Click here for Signal Trades spreadsheet. Updates 8:52 AM ET - Friday Cooler PCE >> calmer market, but... The PCE data came in cooler, showing that inflation is easing. VIX is dropping. (Market breadth data not available pre-market). US10Y (10-year yield) is dropping. However, it is unlikely that VIX would drop below 15.4 without a bounce up to retest the 17-18 zone first. It needs to form a 2nd top, either same high or lower high relative to Sep 27 (at 19.71). Updates 12:30 AM ET - Friday Key S/R levels The levels have not changed. Outlook: Conditions have turned short-term bullish Yesterday, we outlined the following scenario to monitor for. It is unfolding and we have adjusted it a bit.
Basically in this scenario, market doesn't freak out yet. The September selloff is likely done for now. However, since not enough fear has been squeezed out of the market yet, we most likely will have to pay as we get closer to late October. For now though, we cannot fight the direction of the market. Volatility appears to be in the process of forming a short-term top. Meanwhile market breadth is starting to stabilize. ES NQ RTY seemed to have found support and are ready to rise. The setup we want to see that would strengthen the bull case are shown below. Here is the bullish setup to watch for:
When this setup shows up, which it most likely will by Monday, the bull is ready to take off. Our personal trade plan We plan to scale into SVIX when VIX retests the zone around 19 - 19.7. See the spreadsheet for update buy orders. 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 1:30 AM ET - Thursday Read more economic analysis here. Key S/R levels Most levels have been updated. Indicators The indicators are still mostly bearish, but volatility is maybe calming down for a day or two. Projections VIX retested the high of Tuesday, and actually exceeded it a bit at 19.71. We now have 2 projections. Single big rise:
Two rises:
We can't tell yet which scenario will unfold, but these are the 2 possible paths to look for. Our personal trade plan We plan to scale into UVXY when VIX retests the zone around 17. See the spreadsheet for update buy orders. 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 1:10 AM ET - Wednesday Read more economic analysis here. Key S/R levels All ES levels have been lowered except for R2. The others remain the same. Indicators The indicators are fully bearish with no end insight yet. Projections VIX rose up on Tuesday to tag 19.5 as we projected. So now what? Here are our updated projections.
As VIX coils its way upward, ES NQ RTY are likely to follow suit and wind their ways down to S2. After this big sell-off, there's a good chance that ES NQ RTY will recover and rise back up to R2 or higher by year end. Our personal trade plan We plan to focus our trade only on UVXY. Trading bear market requires a lot of concentration because the swings are big and fast. We plan to scale into UVXY when VIX retests the zone around 17. See the spreadsheet for update buy orders. 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 12:50 PM ET - Tuesday Upcoming key events Selloff seems to intensify this morning as ES dropped below R1 (4336) and market breadth declined further. However, we are observing that:
While it's too early to turn bullish now, it is not a good setup to enter bear positions either. VIX is likely to still drop and retest support at 16 before climbing above 19, on its way to a possible climax at 22. Updates 12:40 AM ET - Tuesday Upcoming key events Read more economic analysis here. Key S/R levels This table is essentially unchanged, except for S1 level for ES. Indicators The indicators suggest a little bit of recovery for the bulls, mainly from VIX possibly topping out for the next couple days. Other than that, conditions are still quite bearish. Projections
Here are our projections from yesterday's post, the blue text is what actually happened. What we are likely to see is VIX coiling its way upward, perhaps in a path like this.
The exact swings are very difficult to project. However, the odds are high that VIX will rise and reach the zone 21-22 by mid October. As VIX coils its way upward, ES NQ RTY are likely to follow suit and wind their ways from R1 down to S2. After this big sell-off, there's a good chance that ES NQ RTY will recover and rise back up to R2 or higher by year end. Our personal trade plan As discussed yesterday, while we plan to capture this selloff, we are waiting for VIX to retest support before entering. Ideally we want to see VIX 20-hour EMA blue line drops to tag its 200-hour EMA green line one more time before entering. This tagging is likely to happen in the VIX zone around 16. When this pattern shows up, we plan to scale into 2 bear positions: SQQQ and UVXY. See buy orders in 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 7:30 PM ET - Sunday Upcoming key events Read more economic analysis here. Earnings this week Chart courtesy of Earnings Whispers. Key S/R levels Conditions are getting more bearish. So all levels for RTY have been lowered. R1 levels for ES NQ have also been lowered. Indicators Despite ES NQ RTY attempt to bounce on Friday, the indicators remain firmly bearish. Projections As projected before market on Friday, ES NQ RTY made an attempt to bounce from the low of Thursday. Unfortunately for the bulls, this attempt failed by end of day Friday. However, while VIX, VIX futures, and VVIX (vol of VIX) are all poised to rise higher, we don't have the pattern setups showing a potential super surge in volatility. So the odds of a massive gap up in volatility early next week is very low. What we are likely to see is VIX coiling its way upward, perhaps in a path like this.
The exact swings are very difficult to project. However, the odds are high that VIX will rise and reach the zone 21-22 by mid October. As VIX coils its way upward, ES NQ RTY are likely to follow suit and wind their ways downward to S2. After this big sell-off, there's a good chance that ES NQ RTY will recover and rise back up to R2 or higher by year end. Our personal trade plan While we plan to capture this selloff, we are waiting for VIX to retest support before entering. Ideally we want to see VIX 20-hour EMA blue line drops to tag its 200-hour EMA green line one more time before entering. This tagging is likely to happen in the VIX zone around 16. When this pattern shows up, we plan to scale into 2 bear positions: SQQQ and UVXY. See buy orders in 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 1:30 AM ET - Friday Click here for more economic analysis articles. Key S/R Levels We have lowered R1 level for ES NQ RTY. Indicators The indicators have turned fully bearish on Thursday. Projections The selloff started on Wednesday after FOMC announcement. It accelerated on Thursday, and is likely to reach short-term climax on Friday.
This relief rally may last from this Friday until next Tuesday Sep 26. Then between Sep 26 and Oct 12, we are likely to see:
Oct 12-13 may be the end of this big selloff. After that, ES NQ RTY are likely to resume their bullish climb. They are likely to surpass R2 by end of year. Our personal trade plan We plan to capture this selloff with 2 bear positions: SQQQ and UVXY. See buy orders in 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. Key S/R Levels We have lowered all levels except R2 and S3. Indicators The indicators are now leaning more bearish, but they need to turn fully bearish for the selloff to take off. Bearish pressure on stocks We shared this after hours on Wednesday, but here it is again in case you missed it. Here are the key points from FOMC announcement today, per CNBC:
This announcement pushed yields higher and put a lot bearish pressure on stocks. This combined with the potential of a government shutdown made market quite unhappy. (You may want to also read the following articles.) We are not going to see the post FOMC bounce that we projected yesterday. Instead, all of this bearish pressure launched ES NQ RTY into the start of the big selloff that we also projected.
Our personal trade plan We want to capture the big selloff via SQQQ. We've started scaling into 1/4 position, and we'll be looking to add more on Thursday. Click here for Signal Trades spreadsheet. Disclaimer The information presented here is our own personal opinion. Consider it as food for thought. We are not offering financial advice. We are not promoting any financial products. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. You are proceeding at your own risk if you follow our trades. Click here for Signal Trades spreadsheet. Updates 6:52 PM ET - Wednesday Bearish pressure on stocks Key points from FOMC announcement today, per CNBC:
This announcement pushed yields higher and put a lot bearish pressure on stocks. This combined with the potential of a government shutdown made market quite unhappy. We are not going to see the post FOMC bounce that we projected earlier. Instead, all of this bearish pressure launched ES NQ RTY into the start of the big selloff that we also projected. Per our post at 1 AM today:
Began scaling into SQQQ We did not get the pretty W bottom pattern we were looking for, and we also did not get the retest of SQQQ low we were aiming for. But there is enough bearish information in the various patterns at this point for us to start scaling into SQQQ. Updates 1:00 AM ET - Wednesday Upcoming key events In preparation for FOMC meeting at 2 PM ET today, you may want to read these articles. Key S/R levels We have loosened the support levels for ES NQ RTY to show how low these indices may drop to during the Sep-Oct selloff. Indicators The indicators are marching towards a combination of setups that can potentially lead to a big rise in VIX and a substantial selloff for ES NQ RTY. However, they are not there yet. This is maddening for impatient bears. At the same time, bulls may lulled into thinking that ES NQ RTY are just basing to rise. One important thing to note is that US 10-year yield continues to grind higher. It reached a high of 4.371% on Tuesday before retreating a bit. This is going to create a lot of bearish pressure on tech stocks. Key pattern that bears should monitor for As we said above, there is no clear setup right now that tells us which way ES NQ RTY will go. But there is a key pattern that we are monitoring for to indicate the selloff is starting.
Outlook from now until end of year Yesterday we wrote: Before FOMC announcement on Wed: ES NQ RTY all grind higher. Well that did not happen on Tuesday. But it is important to note that ES NQ RTY survived the drop on Tuesday and recovered by end of day mostly. This is not an indication that market is turning bullish. It's more that there are some complex setups forming right now before a clear direction emerges. Here is what we are our updated projections Between FOMC announcement and Friday:
Between Sep 25 and Oct 20:
Between Oct 20 and year end:
Our personal trade plan We want to capture the big selloff via SQQQ once we observe the key pattern. In the spreadsheet, we showed the support level where we think SQQQ may retest in order to rise again. This is where we plan to scale in. 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 The table below has not changed. Indicators The indicators are back to bullish today (green). However, bulls should treat this information as potentially the calm before the storm. Bears should stay patient. Your turn will come soon. Multi-week and multi-month outlook Here is what we are projecting. Before FOMC announcement on Wed: ES NQ RTY all grind higher. Right after FOMC announcement:
Between Sep 21 and Oct 20:
Between Oct 20 and year end:
Our personal trade plan We entered into 1/2 SVIX position on Friday. This small trade aims to capture calming volatility between now and Wednesday FOMC. We plan to exit it before FOMC. No plan to get into any other positions head of FOMC. 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 - Monday Upcoming key events The big event this week is FOMC announcement on Wednesday. Read more economic analysis here. Earnings this week Chart courtesy of Earnings Whispers. Key S/R levels The table below has been mostly updated. Support levels have been mostly lowered. Between now and mid-October: ES NQ RTY choppy then likely a sell-off to S2 From a seasonality standpoint, we are entering a typically bearish and turbulent period for stocks. Friday gave a taste of it, and bears are probably excited at the possibility of an immediate big sell-off. But bears should be careful here as both VIX and market breadth are saying "...not quite yet". VIX 4-hour chart below shows that all of its EMAs are still dropping. Same is true with VIX daily chart. Until we observe a W bottom like the ones highlighted in yellow, bears should not assume that ES NQ RTY are ready to drop yet. However, bulls should also be careful here because VIX may quickly dip to 12 and then start its own W bottom formation. This would lead to a big VIX spike. Market breadth in the form of percent of stocks above 200-day MA (Stockcharts: $SPXA200R $NDXA200R) is showing a bottoming process. The hourly chart of Nasdaq breadth below shows a W bottom. The same is true for comparable S&P chart. Until this W bottom fails, NQ and ES are going to be choppy or rising slightly. Bears should not bet against this W bottom pattern yet. We are monitoring for the possibility of a choppy top formation between now and FOMC announcement on Wednesday. Once VIX finishes forming its W bottom pattern, and market breadth starts to form a top, then we may see the beginning of a more serious sell-off that can bring ES NQ RTY down to S2. By year end: ES NQ RTY likely recover and rise above R2 In the big picture context, if we see the following setup, it is a good buy for the bulls.
There is a good chance that this scenario will unfold after FOMC announcement this Wednesday. It won't happen all at once. The sell-off will most likely drag out and peak at mid October, or by OpEx on October 20. After that though, ES NQ RTY will likely rise and may reach or exceed R2 by end of year. Our personal trade plan We entered into 1/2 SVIX position on Friday. This small trade aims to capture calming volatility between now and Wednesday FOMC. We plan to exit before FOMC. 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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