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.

1. VIX dips to the zone around 17 quickly.  (VIX dipped to 17.07 on Thursday.)
2. VIX then rises up to retest the zone 19 - 19.7 again. 
3. VIX begins to drop as the stock selloff ends.
4. VIX drops down to the zone around 13 fairly quickly.
5. VIX bases and then starts to rise again, launching a new selloff possibly between CPI on Oct 12 and OpEx on Oct 20.  This selloff may last into until after FOMC on  Nov 1.
6. This sell-off can take VIX up to the zone 21 -22.

​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:

• VIX forms 2nd top near 19.7 (30-min chart)
• $SPXA200R forms W bottom (15-min chart)

When this setup shows up, which it most likely will by Monday, the bull is ready to take off.

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.  

​Key S/R levels
This table is essentially unchanged, except for S1 level for ES.

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. 

1. VIX rises to test resistance at19.
2. VIX then drops to support at 16.
3. VIX then rises again, reaching 20 possibly.
4. VIX gets a shallow dip back to the zone 18-19.
5. VIX surges up to 22 by October 13 possibly (day after CPI report).

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.

Projections
The selloff started on Wednesday after FOMC announcement. It accelerated on Thursday, and is likely to reach short-term climax on Friday. 

• ES NQ RTY are approaching S1.  They are likely to get a relief rally and bounce from S1 back up to the new R1.
• VIX is approaching its high from Aug 18 (18.88).  It is likely to drop from there to retest the zone 15 - 15.7.​

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:

• ES NQ RTY resume their drop, from R1 eventually down to S2 by Oct 12.
• VIX resumes its climb, from the zone 15 - 15.7 to the zone 21 - 22.

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.​​​​​​​​​​​​​​ ​​​

Click here for Signal Trades spreadsheet.
​
​Updates 1:45 AM ET - Thursday

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.​

Click here for Signal Trades spreadsheet.
​
Updates 6:52 PM ET - Wednesday
​
​Bearish pressure on stocks
Key points from FOMC announcement today, per CNBC:

• The Federal Reserve held interest rates steady, while also indicating it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.
• Along with the rate projections, the Fed also sharply revised up its economic growth expectations for this year, with gross domestic product now expected to rise 2.1% this year.
• In addition to holding rates at relatively high levels, the Fed is continuing to reduce its bond holdings, a process that has cut the central bank balance sheet by some $815 billion since June 2022

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:

• ES NQ RTY may sell off and may drop as low as the new S2.
• VIX may rise substantially and reach as high as 22.

​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.   

​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.   

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.

• VIX 20 and 50 EMA form a W bottom below VIX 200 EMA (4-hour chart).
• $SPXA200R and $NDXA200R:  W bottoms current formed on hourly chart fail.
• US10Y continues to rise above 4.37%.

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:   

• ES NQ RTY may rise up to reach the new R1.
• VIX may drop as low as 12.7

Between Sep 25 and Oct 20:  

• ES NQ RTY may sell off and may drop as low as the new S2.
• VIX may rise substantially and reach as high as 22.

NOTE:  we must observe the key pattern described above before we can be sure that the big selloff is really happening.

Between Oct 20 and year end:

• ES NQ RTY likely will recover and rise above R2.
• VIX will likely drops back down to below 13.​

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.

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:    

• ES NQ RTY may rise up to reach R1.
• VIX may drop as low as 12.7

Between Sep 21 and Oct 20: 

• ES NQ RTY may sell off and may drop as low as S2.
• VIX may rise substantially and reach as high as 22.

Between Oct 20 and year end:

• ES NQ RTY recover and rise above R2.
• VIX grinds back down to below 13.

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.​​​​​​​​​​​​​​ ​​

​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.

• VIX spikes up to 22.
• $SPXA200R drops to 50; $NDXA200R drops to 60.
• ES NQ RTY drop to S2.

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.​​​​​​​​​​​​​​ ​