Click here for Signal Trades spreadsheet. Updates 12:15 AM ET - Tuesday 11/1/22 Summary
Market breadth is easing Market breadth is still positive, but NYSE Nasdaq A/D lines are forming short-term tops on their hourly charts. $VIX may be getting ready to rise $VIX 30-minute chart below shows how it's been dropping down sharply and steadily since Oct 13. But now that $VIX is sitting at the 200-day EMA line (at 26), it appears to be getting ready to rise. It may be forming a W bottom, but the path is unpredictable, especially ahead of FOMC. Key S/R levels There is a high probability that $VIX will end up rising some amount, possibly up to 29. When that happens, we may see ES NQ RTY retest support at S1. Trade Plan The path for $VIX to rise up and for ES NQ RTY to pull back is not all that predictable. So we don't want to trade any bear positions right now. Instead we are aiming to scale back into TNA runner and swing during the pullback. We don't know if the pullback will happen before or after FOMC, but we'll be monitoring for the target buy 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.
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Click here for Signal Trades spreadsheet. Updates 2:11 PM ET - Monday 10/31/22 Summary
Market breadth is still positive, but NYSE Nasdaq A/D lines are forming short-term tops on their hourly charts. $VIX gapped up and rose to 27 in the early morning hours today. It has since dropped but we expect to see $VIX stays above 25.7, and starts rising back up again towards 28-29. Conditions are consistent with a setup for a retracement before ES NQ RTY can resume their rally as we explained last night. There is a high probability that ES NQ RTY will retest S1. Updates 12:30 AM ET - Monday 10/31/22 Upcoming key events The biggest event this week is FOMC rate announcement on Wednesday. Job report on Friday will also be very exciting. Read here for more information on economic news this coming week. Earnings releases this week Chart courtesy of Earnings Whispers. What to expect from FOMC this week The Fed is likely to raise its benchmark rate by another 0.75% as it attempts to cool the economy and bring down high inflation. The Fed's job is extra complicated due to rising wage and cash-rich consumers. Read more here. Market breadth is still supportive of stocks The bear market rally that started on Oct 13 has been going strong. There have been lots of explanations offered for this rally. We don't really know for sure all the reasons behind the rally. But we have confidence that since our system was able to identify the seed of the rally on Oct 3, it can identify the end of the rally. For now, market breadth is still very supportive of stocks as shown in the charts below. $VIX is dropping and has room to drop more $VIX 20 EMA blue line in its 2-hour chart below has been dropping straight down since Oct 13. This has been very bullish for ES NQ RTY. We did mention on Friday that $VIX is at its pivot zone which is 25-26, right at its 200-day EMA line. There is a high probability that $VIX will rise a bit from here to tag its 200 EMA green line, which is around 28 - 29. Then it is likely to drop down from there, possibly to 20 eventually. Key S/R levels With $VIX having a lot of room to drop, ES NQ RTY can potentially rise up to R2 or higher before this rally ends. However, while $VIX spikes up to 28-29, we may see ES NQ RTY retest support at S1. Trade Plan Last week, we locked in 20% profit with TNA runner, and 6% profit with tna swing. Both positions did what they were supposed to do. Now we are aiming to scale back into TNA runner and swing during the pullback. We don't know if the pullback will happen before or after FOMC, but we'll be monitoring for the target entry level. Note that we won't be monitoring charts all day. In our experience, between 9 AM ET and 10:30 AM ET is when most actions happen. So we'll be monitoring closely at that point. 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 2:02 PM ET - Friday 10/28/22 $VIX is at pivot zone $VIX chart pattern from Thursday suggested it was possible for $VIX to bounce up a bit. But instead, $VIX spent today dropping down and as a result ES NQ RTY got squeezed up. Economic fundamentals are still very bearish and big tech earnings are declining overall. But Apple earnings is still looking moderately good. This bullish catalyst combined with end-of-week OpEx to result in a short squeeze. $VIX is now sitting right at its 200-day EMA, which as we can see from the chart below is typically a pivot zone. This pivot zone combined with FOMC on Wednesday raises red flags for us. So we are not chasing this rise, certainly not with a new runner position. But we'll look for setups to do day trade or quick swing early next week. Updates 12:45 PM ET - Friday 10/28/22 Summary Weak earnings from big tech companies are weighing heavily on ES and NQ. All three indices are likely to retrace back to support ahead of FOMC Nov 2 (see below). But market breadth and volatility are still supportive of the bear market rally resuming after the retracement. Volatility is likely to rise moderately $VVIX daily chart below shows it formed a hammer on Thursday at key support level. $VVIX is likely to rise up to retest 94 by Nov 2 - Nov 8. It most likely will drop down again from 94. This scenario is supportive of the bear market rally continuing. $VIX daily chart below shows it formed a hammer on Thursday. $VIX is likely to rise up to retest 30 by Nov 2 - Nov 8. It most likely will drop down again from 30, and may ultimately drop to 20. This scenario is supportive of the bear market rally continuing. Key S/R levels We are likely to see ES NQ RTY retest support.
Trade Plan On Thursday afternoon, we wrote: We feel that it's prudent at this point to tighten the stop on TNA runner position, ahead of events that may swing price sharply: PCE Friday, FOMC Wednesday, and mid-term elections Nov 8. Both our TNA runner and new swing positions got stopped out. We are happy to lock in 20% profit with TNA runner. We are waiting until at least after FOMC before scaling back in, as we expect market conditions to be choppy between now and then. 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 1:49 PM ET - Thursday 10/27/22 Summary
We feel that it's prudent at this point to tighten the stop on TNA runner position, ahead of events that may swing price sharply: PCE Friday, FOMC Wednesday, and mid-term elections Nov 8. Updates 12:45 AM ET - Thursday 10/27/22 Summary Macro economic conditions are very bearish, especially with the decline in tech earnings. However, in the short-term ES NQ RTY are still capable of rising up a bit more. The path to get there is complicated. Upcoming key dates Before we explain more, refresh your memory with these key dates coming up. Market breadth is still good, but volatility may rise a bit While market breadth is still very supportive of stocks, $VIX hourly chart below shows how $VIX could rise back up to 30 by FOMC next Wednesday Nov 2. There's a good chance that this will happen as traders take profit from the run-up in price since Oct 21, and load up on protective puts ahead of the rate announcement. Alternatively, given that the potential rate increase of 0.75% is already priced into ES NQ RTY, traders may actually load up on puts to protect against the unpredictable outcome of US election on Nov 8. After that, we may see $VIX drops and possibly gets down to 25 before the next key event which is OpEx on Nov 18. Key S/R levels While $VIX rises up to tag 30 again possibly by FOMC, we may see ES NQ RTY drop back into the zone between S1 and S2 to find support. When $VIX starts to march down again from 30 heading to 25, we may see ES NQ RTY climb up to reach R1 and eventually R2 by Nov 18 OpEx. Trade Plan We plan on continuing to hold TNA runner position as is, with the stops at breakeven. We plan on re-entering TNA swing position during the pullback to S1-S2 zone. 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. Updates 3:20 PM ET - Wednesday 10/26/22 Bear market rally is still intact
Price actions this morning set up a bull trap, and we are likely to see sharp selling. We are still projecting ES NQ RTY to drop and tag S1 as $VIX rises and tags 30. This type of swing is to be expected in this market. But again, volatility and breadth support the bear market rally continuing. We continue to hold TNA runner position as is, and wait for RTY to retest S1 to scale back into TNA swing position. Updates 11:40 PM ET - Tuesday Summary
Against this bullish backdrop, Microsoft and Alphabet earnings resulted in sharp drops after hours. S/R levels So expect some pullback on Wednesday, or at least choppy market conditions. Below are updated S/R levels. We may see ES NQ RTY1 tag S1 before resuming the bullish rise. Is the rally over? Not according to volatility and market breadth.
Trade plan The TNA runner position is still intact and we will continue to leave the stops at breakeven for now. We will be monitoring for pullback overnight and at open to re-enter TNA swing position. 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 1:36 PM ET - Tuesday 10/25/22 Summary
Conditions are overall very bullish. As we mentioned at 12:30 AM, we may see a rapid rise to R2 now that ES and RTY have surpassed R1. This means ES has the potential to rise up to 4100. Our TNA runner position is going strong and we're keeping stops at breakeven for now. TNA may still dip one more time back to 33-34 zone, so we'll look to re-enter TNA swing there. Updates 12:30 AM ET - Tuesday 10/25/22 Summary Macro economic conditions are bearish, but the short-term technical signals are bullish. ES NQ RTY continue to build out their W bottoms, setting the stage for a bear market rally. Volatility of $VIX may rise some amount $VVIX daily chart below shows a hammer pattern similar to the one formed on 6/8. $VVIX may be setting up to rise some amount. This may be an early warning, which we want to monitor for now. $VIX patterns to monitor
Key S/R levels The S/R levels shown yesterday still hold for now. If ES NQ RTY can rise above R1, we may see a quick surge up to R2. Stay flexible Market breadth is still very supportive of stocks rising right now. However, stay flexible as market will do what its internal forces set it up to do. Our inner bull may be yearning for a nice rally like the one back in the summer, but it may not come right away. There may be some big swings up and then sharp drops down, similar to the period between mid-May and mid-June. Trade plan We tightened the stops at open on Monday and got stopped out of our TNA swing position. This is fine as this position is designed to lock in some partial profit in case market conditions turn choppy. The TNA runner position is still intact and we will continue to leave the stops at breakeven for now. Our plan is:
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 2:12 PM ET - Monday 10/24/22 Bullish but $VIX needs to stay below 31 Conditions are still bullish in the short term, but $VIX needs to stay below 31 an start to head down below 29 soon. If $VIX starts to base between 29 and 30 and inches up from there, then it may make a serious attempt to climb up to 33 - 34. This climb would trigger bigger drops in ES NQ RTY, where we may see ES tests 3600 again. In that bearish scenario, TNA would drop back down to 28 or lower. Therefore, we will aggressively tighten stop on our TNA runner position if $VIX starts to base in the 29 - 30 zone. There is no low-risk bullish setup right now to re-enter TNA swing position, so we're holding that capital in cash for now. Updates 12:30 AM ET - Monday 10/24/22 Upcoming key events Thursday GDP and Friday PCE reports will add fresh data to the state of inflation and economic growth, ahead of FOMC rate announcement next Wednesday 11/2. Earnings releases this week Chart courtesy of Earnings Whispers. This is a big week for tech earnings: Microsoft and Alphabet on Tuesday, Meta on Wednesday, Amazon and Intel on Thursday. Why did stocks rise on Friday? Global macro economic conditions are still very bleak, yet ES NQ RTY sharply rose last week. Why? One theory says the bullish rise was due to dovish comments by a couple Fed officials, and a WSJ article that many traders are guessing to be trial balloon by the Fed: One possible solution would be for Fed officials to approve a half-point increase in December, while using their new economic projections to show they might lift rates somewhat higher in 2023 than they projected last month. Another theory is that it's just the result of large number of puts expiring on OpEx Friday. As the previously sold puts expire, dealers who hedged these sold puts by shorting stock futures had to cover their shorts as price started to rise. All of this happened at a very large scale, and resulted in a massive short squeeze. We suspect that both of these events functioned as catalysts. They were the match that lit the pile of dried wood on Friday. But this bullish pile of dried wood has been building for some time if you recall. The evidence has been showing up in the rising market breadth (since 9/30) and declining volatility (since 10/12). So by tracking breadth and volatility in addition to price actions, we were able to anticipate the growing bullish setup that took off on Friday. And now we need to examine them again. Market breadth is still very supportive of stocks
Volatility is still declining $VIX 200-hour EMA green line in the hourly chart below has been going sideway all of last week. Meanwhile, $VIX 20-hour blue line and 50-hour red line have been steadily marching down. They are now both below the green line. As long as this condition remains true, $VIX is very supportive of stocks. Keep in mind though that $VIX may pop back up quickly to retest the zone 31- 32 one more time before it continues the march downward. $VIX may get down to 25 before this rally is over. RTY has formed W bottom similar to mid June Key S/R levels On Monday, we may see ES NQ RTY dip back into the zone between S1 and S2 while $VIX pops up possibly to retest 31-32. Trade plan Right after open on Friday, we sent out a series of alert as soon as we noticed that $VIX was continuing to drop and ES NQ RTY were turning bullish at opening. We manually scaled into TNA runner and swing positions. When ES NQ RTY opened on Sunday (6 PM ET), they all rose straight up. ES tagged 3813 before dropping rather sharply. We suspect that ES NQ RTY are going to tag these price levels again near open on Monday (9:30 AM ET).
Then we may see an intraday pullback before the climb resumes. We plan to tighten the stop on TNA swing position to lock in some partial profit. But we'll leave the stop at breakeven for TNA runner and give that position a chance to grow. Note that we plan to re-enter TNA swing position during the pullback. Buy orders for this will be posted as we get more data. 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 12:47 PM ET - Friday 10/21/22 Volatility and Breadth are supportive of stocks
RTY has formed W bottom ES NQ RTY all rose this morning from the opening lows. RTY hourly chart continues to show a complex rising W bottom similar to the one formed between May and June. We sent out a series of alert as soon as we noticed that $VIX was continuing to drop and ES NQ RTY were turning bullish at opening. They didn't dip into the support zones that we cited last night. That is the nature of trading. It's very difficult to predict the pivot points. But we have been prepping you to visualize a bullish W bottom being formed. We showed you what to look for with $VIX and market breadth to confirm the thesis. And we said OpEx Friday is likely to be the major pivot day. So it should come as no surprise that ES NQ RTY headed up today. Here are the entries that we scaled into. Keep in mind that there will be wild intraday swings as $VIX is still yearning to rise up and tag 30 one more time. Also as long as ES is still below 3800, the way market makers have to hedge their books result in wild price swings as they need to sell into weakness and buy into strength. Once ES rises above 3800 (R1), price should calm down and start to grind up more steadily. Updates 12:15 AM ET - Friday 10/21/22 Summary Big picture signal is bearish based on macro conditions. But short-term signal is still bullish. ES NQ RTY are building W bottom to rise post OpEx. Market breadth continues to improve, but... The daily charts of NYSE and Nasdaq A/D net issues are still forming rising bottoms. However, the weekly charts of NYSE and Nasdaq percentage of stocks above 200-day MA suggest they are capable of dipping a bit more before rising more substantially. Nasdaq weekly chart below shows a topping pattern so far for this week, while the percentage hovers at 13%. It could dip back to below 10% before rising again. Volatility of $VIX shows a quick rise in volatility likely $VVIX formed a hammer on its daily chart below on Thursday. It is the type of pattern typically seen before $VVIX rises a bit, possibly back up to 95 before dropping again. $VIX may not retest that high Despite these cautions, we don't think will rise back up to 34 at this point. On $VIX 30-minute chart below all of its EMA lines have been trending down. $VIX is likely to tag 32 again before dropping more substantially. Key S/R levels
Trade plan Our buy orders placed yesterday are still the same. 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 1:15 AM ET - Thursday 10/20/22 Summary Despite price oscillating up and down rapidly, the short term signal is still the same. ES NQ RTY are setting up to test the low once again to finish forming a W bottom before rising as part of a bear market rally. This process may take until end of Friday or into Monday. Market breadth continues to improve $VIX is getting ready to rise again As we've been saying (and boring you) for the last few posts, we expect $VIX to rise back up to retest 33 - 34 one more time as part of a complex top formation before volatility can really drop off. On Wednesday, $VIX showed that it is done with building a base at 30.4, and is ready to rise up from there. We expect to see $VIX finishes forming this top by 10/24 (+/- one day) Key support levels Based on price actions Thursday, we think that when $VIX gets back to 33 - 34, we may see the indices retest the following support zones:
We will update this as $VIX pattern develops. Trade plan Our main trade plan is still the same, scale into TNA swing and runner positions when RTY retests the low zone above. We've updated the buy orders to reflect the lower support zone. We want to pause here to discuss a communication issue. A number of our subscribers live in different time zones in different parts of the world. It is not possible for them to track market movements all day long. Actually, it is not possible for us to track market movements all day long every single trading day either. Furthermore, even when we track the market closely, it is not always easy to spot pivot points that will lead to true pivots, as opposed to head fake. Finally, the stress and the emotions associated with tracking market all day long and making decisions on the fly take their toll, resulting in trade fumbles for us and for you. So to get away from that, we are going to focus on sharing with you just the major directional moves that are confirmed by volatility and market breadth over multiple days. These have the highest probability of succeeding, with good reward/risk ratios. Furthermore, because they telegraph their moves in advance, we can try to anticipate the pivot zones and place orders in advance to scale in/out in these zones. The downside of this trading style is that you have to accept higher average entry price, larger stop loss settings, and lower average exit price. The upside though is a lot less stress, and a lot less time and energy devoted to tracking the market. It also removes the emotion from the execution, which may lead to better results. 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 1:41 PM ET - Wednesday 10/19/22 Trade plan updates As expected, ES NQ RTY are dropping down to retest their low zones. $VIX today is starting its climb upward in earnest. We think there is now a much higher probability of $VIX retesting 33-34. Our TNA buy orders got filled partially, but now that we have more data regarding $VIX climbing to retest its high, we plan to lower our scale-in buy orders for TNA with updated orders shortly. Meanwhile, we have already exited 1/4 position, and have a buy order to exit the remaining 1/4 position that got filled. There is now a more obvious opportunity to enter at lower price. If you want to hold on the partial TNA positions that got filled, keep this in mind. The odds of the W bottom forming and ES NQ RTY surging from these bottoms are high. Not guaranteed. But high. So these prices are likely to be re-visited on the way back up, after they drop a bit more. Updates 12:15 AM ET - Wednesday 10/19/22 Summary Market breadth and volatility continue to send out supportive messages for ES NQ RTY. This boosts the possibility of a bear market rally post OpEx this Friday. ES NQ RTY testing the low zone on OpEx If you examine RTY 4-hour chart below, you can see that at each OpEx event where it is trying to build a bottom (May, June, July, September), RTY dipped into its low zone before surging for real. ES and NQ charts show the same pattern. For OpEx this Friday, we think the following zones will be retested.
Trade plan Where exactly will price bottom out, no one knows for sure. But the probability is high that ES NQ RTY will dip into the above zones before they finish forming their bottoms around OpEx. So we plan to use that opportunity to scale into TNA swing and runner positions during the retest of the lows. Now that we are reasonably sure that a bullish bottom is forming and is likely to hold, we are confident enough to scale into the low zone. 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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