Click here for Signal Trades spreadsheet. Updates 12:18 PM ET - Wednesday VIX is likely to rise and market breadth likely to drop post FOMC VIX is starting to rise, likely to retest 20 between now and Friday. S&P and Nasdaq percents (Stockcharts.com $SPXA200R $NDXA200R) are starting to drop. Look for:
ES NQ RTY likely to retest S1 between now and Friday. They should find support at this level. We've updated our buy orders to enter into UVXY for a quick trade. Updates 11:45 PM ET - Tuesday Upcoming key events Read more economic analysis here. Key S/R levels The levels below have not changed. Big picture: bear market in effect Short-term: multi-week relief bounce FOMC rate announcement is at 2 PM ET today Wednesday. Here is the setup we are looking for that we think will happen soon after the announcement.
It will be disconcerting for bulls to see these bearish conditions again post FOMC. However, in order for ES NQ RTY to experience a multi-week relief bounce, we need to see the above setup which then turns into this setup below.
At that point, conditions will be ripe for a big short squeeze. We may then see:
Our personal trade plan Given that stocks are likely to experience a big bounce, we want to capture it via SVIX. See updated buy orders in 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 11:52 AM ET - Tuesday Breadth is likely to retest Oct 27 low Market breadth (Stockcharts.com $SPXA200R $NDXA200R) is up this morning by a small amount. Here is what we would really like to see for the bounce to happen.
VIX is currently at 19.15. It is likely to retest the zone 20 - 21 before dropping down to the zone 17.5 - 18.5 for this equity relief bounce. ES NQ RTY currently look like they might just take off. But looks can be deceiving. In order for them to successfully get back up to R1, or possibly higher, we need to see the above setups for breadth and VIX. Updates 12:30 AM ET - Tuesday Upcoming key events Read more economic analysis here. Key S/R levels The updated levels are highlighted in bold. Big picture: bearish In the big picture context, the bear market is intact, as shown clearly by these indicators:
Short-term: relief bounce We wrote over the weekend that we looking for the following setup to indicate a bounce is under way.
How far will this relief bounce go?
Our personal trade plan At this point we think the relief bounce is likely to take off after FOMC announcement. But we are planning to scale partially into SVIX when it retests the low of Friday. 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 11:26 AM ET - Monday Pause in selling today, but breadth needs to stabilize a bit more Market breadth (Stockcharts.com $SPXA200R $NDXA200R) is not dropping sharply this morning. These percents are trying to rise a tiny bit today. However, in order for a multi-day relief bounce to happen, these percents need to stabilize for more than one day in order to form W bottoms on their 15-min charts. Otherwise, the pause in selling may only last one day. VIX and VVIX continue to form lower highs. They are in supportive mode for ES NQ RTY to bounce. Now we just need breadth to improve a bit. We may see this happen post FOMC announcement on Wednesday. Updates 12:20 AM ET - Monday Upcoming key events Lots of economic news this week, along with FOMC rate decision. Read more economic analysis here. Earnings this week Chart courtesy of Earnings Whispers. Apple will be releasing earnings after closing on Thursday this week. Big picture: bearish In the big picture context, the bear market is intact, as shown clearly by these indicators:
VIX is easing up >> supportive of relief bounce VIX 4-hour chart below shows it has been forming lower high top since Oct 23. It is also sitting at the top of its channel. The odds are high that VIX will soon dip, enabling ES NQ RTY to have a relief bounce. We may see VIX start to dip after FOMC rate announcement on Wednesday. VIX may drop down to the zone 17.5-18.5 by November 14 CPI report. Then it is likely to revert back up again. When VIX starts rising again, ES NQ RTY relief bounce will end. Breadth is dismal, but may be approaching bottom soon The daily chart of S&P percent of stocks above 200-day MA shows all of its EMA lines dropping sharply. It is now at 24.6%, which is pretty dismal. However, it is a low probability that this percentage would just drop straight to 2022 low of 12%. Instead, we are likely going to see a bounce where breadth will recover some amount, possibly bouncing to 35% before diving again. Nasdaq 100 percent of stocks above 200-day MA is currently reading 40%. Nasdaq Advance-Decline Percent daily chart looks like it may be forming a W bottom soon. If this happens, it's a bullish setup for NQ to bounce. Key S/R levels The table below has been fully updated. How do we know when the bounce will happen? We are looking for the following setup to indicate a bounce is under way.
Our personal trade plan We are waiting for the above setup to materialize before entering a bull position via SVIX to capture the bounce. After that, we will be looking to enter UVXY to capture the next wave of selling. 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 12:19 PM ET - Friday Breadth improving slightly; yield subdued post PCE Nasdaq Advance-Decline Percent (Stockcharts.com $NDXADP) visibly improved this morning. It has now gone from negative 85% at the start of Monday, to 38% this morning. As a result, NQ is stabilizing and attempting to rise. Yield (US10Y) is subdued in the 4.85% range after PCE numbers came inline. VIX is steadily forming lower high, unable to rise above 20.6 so far today. Below is the schedule of key market events for next week. As you can see, next week is all about jobs plus the all-important FOMC rate decision on Wednesday. Given this environment, we think that ES NQ RTY will stabilize for the early part of next week. However, a true relief bounce is unlikely to take off until post FOMC. We also don't think that VIX is going to retest the low zone of 15.5 - 16 for this bounce. VIX may tag 17, but then it is likely to resume rising from this level. As VIX does this, the bear market will resume for ES NQ RTY. The most we can expect is for ES NQ RTY to rise back up and retest R1 as part of this relief bounce. After that though, S2 is the likely destination. We are not planning to hold on to our 1/2 SVIX position for very long. Possibly over the weekend, but likely will sell it on Monday. Updates 9:00 AM ET - Friday PCE PCE report came in inline as expected. Read more here. VIX ES NQ RTY reactions are all muted. There is no market breadth data before open. We will monitor for any substantial change in breadth after open. If breadth starts to form a W bottom today, then the next key pivot date will be after FOMC announcement on November 1. This means the relief rally for ES NQ RTY is unlikely to start until then. Updates 11:50 PM ET - Thursday Upcoming key events Read more economic analysis here. Key S/R levels The updated levels are highlighted in bold. Big picture: bearish Short term: bounce is still likely All the big-picture bearish patterns we discussed on Monday are still intact. However, in the short term, ES NQ RTY are likely to find a strong support level at the new S1 and proceed to bounce from there. They are likely to rise from S1 up to R1. This is a relief bounce in a bear market, not the start of a new bull market yet. How do we know when the bounce will happen? We've been writing that we will be looking for the following setups. Here is how they unfolded today.
After PCE report on Friday, we may see VIX spike. But if VIX does not exceed 22, then we may scale in half of our SVIX position. If you are trading equity positions based on ES NQ RTY, you may want to wait for market breadth to stabilize first. The chart above should form a W bottom, which would indicate that more stocks are becoming bullish. 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 11:15 AM ET - Thursday VIX: lower high top; breadth: still struggling GDP rose at a 4.9% which is higher than expected. Read more here. Yesterday we shared that we will be looking for the following setups. Here is how they unfolded today.
Conditions are starting to stabilize ahead of a substantial relief bounce for ES NQ RTY. However, until breadth stabilizes, it's quite risky to enter bull position right now. The risk of another sharp dip is still possible post PCE report tomorrow morning. Updates 8:20 PM ET - Wednesday Upcoming key events Amazon releases its earnings after closing Thursday. Read more economic analysis here. Key S/R levels The updated levels are highlight in bold. Big picture: bearish Short term: bounce is still likely All the big-picture bearish patterns we discussed on Monday are still intact. However, in the short term, ES NQ RTY are likely to find a strong support level at the new S1 and proceed to bounce from there. They are likely to rise from S1 up to R1. This is a relief bounce in a bear market, not the start of a new bull market yet. How do we know when the bounce will happen? Yesterday we shared that we will be looking for the following setups. Here is how they unfolded today.
If VIX tops out after PCE on Friday, and the rest of the setup materializes, then VIX may begin dropping from 21.8 down. It may reach 15.5, possibly after FOMC on Dec 13. After some basing in the zone 15.5 - 16, VIX is very likely to resume the sharp rise to continue the bear market. This may happen after OpEx in January. Our personal trade plan We are waiting for the above setup to materialize before entering a bull position via SVIX. 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 12:15 AM ET - Wednesday Upcoming key events Meta releases its earnings after closing Wednesday. Read more economic analysis here. Key S/R levels The updated levels are highlight in bold. Big picture: bearish Short term: bounce is very likely All the big-picture bearish patterns we discussed on Monday are still intact. However, in the short term, ES NQ RTY are likely to find a strong support level at the new S1 and proceed to bounce from there. They are likely to rise from S1 up to R1. This is a relief rally in a bear market, not the start of a new bull market yet. How do we know when the bounce will happen? We will be looking for the following setups.
We are starting to see $SPXA200R $NDXA200R stabilize. As the chart below shows, S&P breadth is stabilizing, but it needs to stay at or above 31.6% level in order for a bounce to occur. Nasdaq breadth needs to stay at or above 51%. Our personal trade plan We are waiting for the above setup to materialize before entering a bull position via SVIX. 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 12:30 AM ET - Tuesday Upcoming key events Microsoft and Google release their earnings after closing Tuesday. Read more economic analysis here. Key S/R levels The table below has not changed. Big picture: bearish Short term: bounce is likely All the big-picture bearish patterns we discussed on Monday are still intact. However, in the short term, we may see ES NQ RTY find a strong support level at S1 and proceed to bounce from there. They are likely to rise from S1 up to R1, or possibly exceed this level. Can VIX rise some more before the bounce? Absolutely. We will be looking for the following setup to capture VIX rising again.
How do we know when the bounce will happen? We will be looking for the following setups.
Our personal trade plan We have outlined two possible trades based on setups discussed above. 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 11:01 AM ET - Monday VIX forming short-term top Bear market patterns are still intact. However, yields (US10Y) has formed a short term top and so VIX is forming one for now.
We are not placing any buy order right now because VIX has not revealed its next real move yet. Updates 2:00 AM ET - Sunday Upcoming key events Earnings this week Chart courtesy of Earnings Whispers. Lots of big name companies reporting this week, including:
After Jerome Powell fumbled his message on Thursday, yields rose sharply and stocks sold off hard. On Friday, the Fed sent out a more coherent message via WSJ Nick Timiraos. The message is the Fed is willing to pause on rate raise for now as long as inflation doesn't start to trend the wrong way. (Read more about it here.) However, unless the Fed actively stops QT, or starts cutting rates, this new bear market still has a lot of pent-up energy to do some damage. VVIX confirms bear market In preparation for last Monday Oct 16, we discussed the big bearish warnings from VVIX (vol of VIX). This pattern is now in full effect, indicating that VIX may rise substantially. Breadth confirms bear market At this point, the daily chart of S&P Percent of Stocks Above 200-day MA (Stockcharts.com $SPXA200R) shows all of its EMA lines heading down. This is a very bearish chart. The only comforting bit is that this reading is now at 32%. $SPXA200R formed a W bottom at 12% back in late September 2022, the bottom of the last bear market. 32% is not that far from 12%, and if this low level provides strong support, the bull market may resume. VIX confirms bear market Observe the W bottom formed by VIX 200 EMA green line (4-hour chart) last week. This is similar to the pattern formed back in September 2021, at the start of the last bear market. For this week, we may see VIX quickly revisits 20, and then surges from there to potentially reach 24 after PCE report this Friday. Key S/R levels Changes to the table below are highlighted in bold numbers. Most of the levels have been lowered. ES NQ RTY may quickly retest R1 before resuming their drop this week. Then they may drop to reach S1 by end of week, as VIX surges up to 24. Our personal trade plan We plan to capture VIX rise from 20 to about 24 via UVXY. 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 1:50 AM ET - Friday Upcoming key events Jerome Powell spoke on Thursday, and pulled the rug from under bulls as well as bears. Read more about what happened here. Key S/R levels The table below has been fully lowered. Transitioning to bearish climate Some key things happened on Thursday that are giving us big warnings that ES NQ RTY may be transitioning to bearish climate. As traders, we personally are bulls at heart. So this is not the kind of news we brandish about casually. Here are the key indicators that we have observed.
The key bearish catalyst is of course the steadily rising bond yields. US10Y has tagged 5% tonight. Powell's comments certainly are not helping. However, while this bearishness may be shaping up in the big picture, in the short term we are more likely to see a relief rally. Despite the surge in volatility on Thursday, market breadth (Stockcharts.com $SPXA200R $NDXA200R) actually managed to stabilize. Nasdaq 100 breadth in particular seems ready to climb back up again in the short term. So what does it take for a relief rally to succeed?
For the very short term (between now and early next week), we expect ES NQ RTY to continue selling while VIX continues climbing. The path won't be straight up or down, but we don't think a relief rally can take place until we see all of the components in the above setup. Our personal trade plan Our beautiful SVIX position entered in the low zone got stopped out from Powell's comments (sigh!) Now that market is entering the rising VIX era, we are not going to trade SVIX bounce because the risk is too high. Instead, we'll focus on TQQQ for the relief rally, and UVXY for the sell-off. We don't plan to chase UVXY right now though, even if it may rise higher as the possibility of a sudden short squeeze is high. Best to wait for the relief rally setup described above to trade 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 2:00 AM ET - Thursday Upcoming key events Jerome Powell is speaking at noon ET on Thursday. Read more about it here. Market breadth and bond yield
VIX is at a critical point VIX calm period that we've been anticipating since Oct 4 has not truly lasted. VIX is still yearning to climb higher. Thursday is going to be a critical day. VIX 30-minute chart below shows 2 possibilities.
Key S/R levels Only NQ S1 level changed a bit in the table below. All other levels remain the same.
Our personal trade plan We made the crucial mistake of trying to catch a falling knife on Wednesday and it was rather painful. At this point, if our SVIX 3/4 position gets stopped out, we will wait for VIX, breadth and yield to agree on the next key message before entering either SVIX or UVXY. 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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