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Click here for Signal Trades spreadsheet. Updates 1:45 AM - Thursday 12/1/22 The implication of Powell's speech Here is a WSJ article providing more insights regarding Powell's speech and its implications for stocks. $VIX is still supportive of stocks We've been discussing that $VIX may be forming a W bottom. But by end of day on Wednesday, it is clear that $VIX 20 EMA blue line is going to keep heading down. This means volatility is going to keep dropping for now. This is bullish condition for stocks. Note that this changes to bearish if $VIX 20 EMA blue line rises and stays above its 200 EMA green line, currently at about 22.4. Lucky for bulls, it's not happening yet.  Key S/R levels The S/R table has been fully updated to reflect ES NQ RTY potential rise. Note that the previous R1 has become the new S1 level.  Our Personal Trade Plan We plan to enter TQQQ when NQ retests the new S1 again and finds support to rise. This is likely to happen on Thursday. We have a trade prepared, but we are waiting for pattern confirmation before entering. 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 3:50 PM ET - Tuesday 11/29/22 New resistance levels above R1 The bullish momentum is quite strong, and the "failure to rise above R1" scenario did not happen. As a result, ES NQ RTY are pushing hard to continue rising higher. The next levels of resistance are: ES: 4150 NQ: 12200 RTY: 1910 But $VIX is most likely building a W bottom We will share $VIX and $VVIX charts later tonight, but for now we will share that $VIX retested 20.31 and is building a tiny base at this level. If this base holds and $VIX starts to climb back up to 22, $VIX will be forming a W bottom. This is a bearish setup for stocks. If ES NQ RTY keep climbing and $VIX continues to build out the W bottom, it is a big bearish divergence that will catch up with ES NQ RTY at some point. Therefore trading is very tricky here. We tested 1/2 bear position via SQQQ, but got stopped out for a small loss. We don't want to chase TQQQ TNA up because they are likely to be approaching bull trap levels soon. So we'll stay in cash for now and reassess. Updates 1:15 PM ET - Tuesday 11/29/22 R1 and S2 levels will be in play Ahead of Powell's speech (1:30 PM ET), market is in choppy wait-and-see mode.
We are monitoring Powell's speech, but basically we are planning on entering one runner bear position when R1 is retested and fail. The spreadsheet has been updated to show another possible entry with TZA in addition to SQQQ. Note that we only plan to enter one position today, if any. Click here for Signal Trades spreadsheet. Updates 12:30 AM ET - Tuesday 11/29/22 Busy Wednesday Below are key events for Wednesday as well as the rest of this week, into next week. Powell's speech at 1:30 PM is going to set the tone for FOMC announcement next Wednesday.  $VIX is likely to form a W bottom $VIX spent most of Tuesday in a very tight range while ES NQ RTY chopped around in a bigger range. $VIX is still likely going to retest its low of 20.5 before rising, thereby forming a W bottom. This W bottom is a bearish setup for stocks.  Key S/R levels The S/R levels below are the same as yesterday. ES NQ RTY are basically hovering at S1, waiting for a catalyst from Powell's speech to surge or drop. While there is a chance that ES NQ RTY may surge from Powell's speech, unless he promises something extremely dovish, ES NQ RTY are unlikely to surpass R1 at this point. And if Powell is extra hawkish, ES NQ RTY may drop fairly quickly down to S2.  Our Personal Trade Plan We plan to enter SQQQ when NQ retests R1 again and fails. This may happen on Wednesday when Powell gives his speech. We have a trade prepared, but no buy order yet. 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 11/29/22 Market breadth may be forming a short-term top Yesterday, we shared with you a chart that shows 63% of S&P stocks are above the key level of 200-day MA. This is bullish in the big picture. However, in the short term, the S&P Advance-Decline Percent chart shows its 20-day EMA blue line are forming multiple tops above all the other EMAs. This is a bearish setup for stocks, as it is usually followed by drops in market breadth.  Volatility is setting up to rise Also in Monday's post, we wrote that both $VIX and $VVIX charts are building a base from which they are likely to rise. Below is $VIX hourly chart. We are monitoring for its 20-hour EMA blue line and 50-hour EMA red line to form a W or U or V bottom. This would be a bearish setup for stocks. It would set the stage for a more substantial climb by $VIX where it may retest 30-31. We have mentioned before that if $VIX forms such a pattern, as long as it doesn't exceed 34, it actually is quite bullish for ES NQ RTY in the big picture. But it looks more and more likely that bulls will have to endure a climb in volatility this week through next week possibly.  Key S/R levels The S/R levels below have been updated. Note that there are now 3 support levels shown, and only one resistance level. This is because we want to emphasize that in the short-term, ES NQ RTY are unlikely to surpass R1. Furthermore, if $VIX rises substantially as described above, and market breadth drops quite a bit, ES NQ RTY may end up retesting S3. While this may sound very bearish, it is actually a good thing for the bulls in the big picture. Similar to $VIX forming lower high pattern described above, if ES NQ RTY retest S3 successfully, they will be forming higher low patterns on their weekly charts. That is a very bullish setup, which can lead to an intermediate term bottom for ES NQ RTY.  Before we get to this highly bullish pattern, as we said above, bulls will most likely have to endure a substantial pullback in price for ES NQ RTY. On Monday, ES NQ RTY dropped sharply and ended the day near or touching S1. ES NQ RTY are unlikely to just keep dropping though. S1 is strong support, and ES NQ RTY are likely to bounce from this level. They yearn to make one last attempt to retest R1, where they are likely to fail. Our Personal Trade Plan We plan to enter SQQQ when NQ retests R1 again and fails. This may happen on Wednesday when Powell gives his speech. We have a trade prepared, but no buy order yet. 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 1:05 PM ET - Monday 11/28/22 Volatility is setting up to rise Both $VIX and $VVIX charts are building a base from which they are likely to rise. The operative word here is "base". We have to give this pattern a chance to form. If this base forms, then the bear market rally is likely done as volatility is going to rise. Powell's speech this Wednesday is going to give a big hint of what the Fed will do at FOMC meeting next Wednesday. So this Wednesday is likely going to be the pivot date for $VIX to start an up trend (bearish for stocks), or for it to resume the down trend. In the interim, you may want to trade lightly if at all. Take profit quickly because conditions are likely going to be choppy ahead of Wednesday. Updates 12:30 AM ET - Monday 11/28/22 Upcoming key events This week is overloaded with economic reports. The key events that may move the market a lot are highlighted in yellow below. Given the timing, this may be a very volatile week ahead of another hugely volatile week next week.  Earnings releases this week Chart courtesy of Earnings Whispers.  Market breadth: supportive of stocks The weekly chart of S&P 500 percent of stocks above 200-day MA below shows a key achievement last week. This percentage has surged over its 200-week EMA green line. This is a very bullish setup. It tells us that 63% of S&P stocks are above the key level of 200-day MA. Nasdaq chart is similarly bullish, currently showing 52% of its stocks are above their 200-day MA.  Volatility: likely to rise this week Given the number of key events happening this week, traders are likely to load up on puts which is likely to raise implied volatility ($VIX). Furthermore $VIX is hovering at the edge of its pivot zone of 19.5 - 20.5. So we would not be surprised to see $VIX goes sideway and then spikes up, or just simply spikes up. However, $VIX retesting 26 or higher, forming a lower high relative to 10/13, and then dropping is a bullish setup for ES NQ RTY. This setup can substantially renew the bear market rally. We would aggressively enter long if this setup appears.  Key S/R levels The S/R levels below have been updated.  Bullish scenario for stocks As you can see in ES 4-hour chart below, its 200 EMA green line is still rising. If $VIX spikes up like how we describe above, we may see a sharp and substantial dip in ES NQ RTY. They may dip into the support zone S1 - S2. And this is a good thing for the bulls. A sharp and substantial dip by ES NQ RTY while $VIX has a sharp and substantial spike is a bullish setup for stocks. This is true as long as $VIX drops quickly after spiking up, and forms a lower high relative to its 10/13 level.  Bearish scenario for stocks If ES NQ RTY have only shallow dips and then rise up quickly to push up against R1, they may encounter tough resistance, and may end up dropping lower than S2. This is especially true if market breadth starts to drop, and $VIX builds a base to rise from. Our Personal Trade Plan Given the potential rapid swings in ES NQ RTY this week, we are planning to exit our current TQQQ runner as close to breakeven as possible. We plan to wait for the bullish scenario described 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 12:30 AM ET - Wednesday 11/23/22 We are taking a Thanksgiving break and will post the next updates on Sunday 11/27. Wishing you a safe and joyful holiday. Summary: bullish It is still a bear market, but our indicators are highly supportive of stocks rising. In other words, the bear market rally is resuming.
Key S/R levels The table below has been fully updated to reflect where ES NQ RTY are likely going to rise to. There is a good chance that ES NQ RTY will tag S1 one more time before rising up into the resistance zone R1 - R2 by FOMC on December 14.  Our Personal Trade Plan We plan to scale into TNA runner position when RTY tags S1 (1850) again. 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 11/22/22 $VIX is still in decision zone We've been monitoring to see if $VIX forms a W or U bottom in its key pivot zone of 22.4 - 23. On Monday morning we posted that the pattern was leaning bearish (for stocks). But $VIX didn't rise from the top of the key zone. Instead, $VIX dropped to the bottom of this zone. And now it is truly decision time.
Until one of these patterns emerges, we are planning to wait because $VIX is not done forming its message yet.  Key S/R levels The S/R levels are the same as yesterday's. ES NQ RTY are stuck in a tight choppy range this week as market participants await FOMC minutes on Wednesday.  Of all the data coming out this Wednesday, FOMC minutes have the ability to move the market substantially, especially if the minute are hawkish. Traders got overly bullish on November 10 with the cooler-than-expected CPI report. And as the WSJ article explains, the last thing the Fed wants is for falling bond yields and soaring stocks to help pump up inflation again. So FOMC minutes may become an opportunity for the Fed to realign the overly bullish response. However, even if the FOMC minutes are hawkish, ES NQ RTY may not drop by that much. RTY 2-hour chart below shows that RTY 200 EMA green line is converging on its S1 level at 1820. If RTY successfully retests this level, we may see the bullish momentum resumes for RTY ES NQ bear market rally.  Our Personal Trade Plan We will enter bullish TNA runner and swing positions when RTY retests S1, and $VIX forms the bullish pattern described in 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 11:03 AM ET - Monday 11/21/22 $VIX forming pattern that's bearish for stocks We've been monitoring to see if $VIX forms a W or U bottom in its key zone 22.4 - 23. Before open this morning, $VIX formed this pattern just above 23, which is bearish for stocks. Additionally, we have described to you that if $VIX 20-hr EMA blue line and 50-hr EMA red line wind around each other and go sideway, it is also a bearish for stocks as $VIX is likely to rise substantially from that kind of a base. We are now observing this pattern on $VIX hourly chart. And it is bearish for stocks. We have manually exited all our bull positions pre-market. Stock price actions are very choppy this morning so we are just waiting on the sideline with cash.  Updates 9:30 PM ET - Sunday Upcoming key events Since all markets are closed on Thursday this week for Thanksgiving, a sleuth of economic reports are delivered on Wednesday, including FOMC minutes on Wednesday afternoon. This makes the market incredibly vulnerable to bad news as liquidity is thin on Friday following Thanksgiving. Worse, it's only a half day. You may recall stocks dropped sharply and $VIX shot up when the news of a new COVID variant hit last Thanksgiving.  Earnings releases this week Chart courtesy of Earnings Whispers. Earnings season is winding down.  Recession and the Fed rate raise The cooler-than-expected CPI and PPI reports have added more fuel to the bear market rally that started on October 13. Traders are hoping that with the cooler inflation data, the Fed may choose to raise rate by 0.5% rather than 0.75% in December. But the post CPI rally may be the very reason that the Fed will feel compelled to keep raising rate at 0.75%, rather than a more gradual increase. According to WSJ: The last thing the Fed wants is for falling bond yields and soaring stocks to help pump up inflation again. (Read more about this here.) Furthermore, the threat of a recession continues to loom as earnings may be trending down. (Read more about this here.) These macro factors continue to put a lot of bearish pressure on the stock market, but still it does not mean that the bear market rally is done. So far we haven't observed signs of a true bearish pivot yet. Market breadth > moderately supportive of stocks NYSE and Nasdaq A/D charts are unclear right now in their messages. But the weekly charts of NYSE and Nasdaq percentage of stocks above 200-day MA are rising slightly, as shown below.  Monitor for $VIX W bottom next On $VIX 30-minute chart, its 20 EMA blue line steadily dropped on Friday. This was the bullish scenario that we discussed in Friday's updates (bullish for stocks). However, we also wrote that if $VIX 20 EMA blue line forms a V or W bottom in the 22.4 - 23 zone, it is a bearish setup for stocks. So we have to monitor for this potential pattern next. If this W bottom pattern forms, we will exit all our current bullish positions. Otherwise we continue holding them.  Key S/R levels The S/R levels are the same as Friday's.  We discussed above how $VIX pattern can turn bearish for stocks. In ES 2-hour chart below, we want to show a pattern to look for that would be bullish for stocks. ES 200 EMA green line is converging at its S1 level. If ES successfully retests this convergence zone, it's a very bullish setup for ES as well as NQ and RTY.  Our Personal Trade Plan Friday's price actions were tough for traders, as conditions were very choppy. We got stopped out 3 times before getting some traction with our TNA runner and SOXL swing positions. In retrospect, we may have been a bit too enthusiastic with the bull position entries. We probably should have held off on SOXL swing position. The truth is real life trading is messy. And sometimes our emotions can temporarily cloud our judgement. We may have to institute a rule for ourselves that does NOT allow us to enter into more than one position per day. This rule stops us (all of us) from going off the deep end and over-commit our capital. In any event, our bull positions (TNA runner and SOXL swing) have their stops in place for now. Note that we will also manually exit these bull positions if $VIX forms a W bottom (30-min chart) in its key zone 22.4 - 23. 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 4:25 PM ET - Friday 11/18/22 Current positions and today's trades  Updates 2:47 PM ET - Friday 11/18/22 $VIX is steadily dropping >> bullish for stocks At 12:15 AM today, we wrote: Using $VIX 30-min chart, we are looking for:
Despite the intraday choppy price actions, $VIX 20 EMA blue line is steadily dropping as shown in its 30-minute chart below. This is the bullish setup for stocks that we were looking for. So despite being stopped out 3 times, we re-entered TNA runner position, and added SOXL swing position. We may still see $VIX forms a V or W bottom in 22.4 - 23 zone and rises again. But we are assuming bullish conditions for now, until $VIX proves otherwise.  Updates 12:15 AM ET - Friday 11/18/22 Market breadth leans bearish NYSE and Nasdaq market breadth charts are looking similar to yesterday's charts, leaning bearish. Volatility: wait for $VIX $VIX is coiling for a big move. We just don't know which way yet. Here are 3 patterns that we are looking for that will lead us down the bullish vs. bearish path. Using $VIX 30-min chart, we are looking for:
Only one of these scenarios will unfold in the end. However, we may have the case where $VIX starts out dropping steadily before it reaches the 22.4 - 23 zone. We have to assume conditions are bullish in that case, until $VIX forms that V or W bottom in that zone. If $VIX doesn't form the V or W bottom, then the bullish condition continues.  Key S/R levels S1 and S2 have been updated for ES and RTY in the table below. If conditions turn bearish, ES NQ RTY may end up retesting S2. If ES NQ RTY find strong support at S2, the bear market rally will resume with vigor and can rise up to R2 by FOMC on December 14. If ES NQ RTY fail at S2, we may see them retest the lows of October 13.  Trade Plan Given that there are 3 possible scenario, in the spreadsheet we have shown the trade plan for each scenario. Once we have observed a clear pattern on $VIX chart on Friday morning, we will alert you which scenario we are trading. Stay focused but flexible. Let the signals unfold first. Keep in mind that we don't have to nail top or bottom to make a reasonable profit. We just need to consistently take a chunk of profit out of the middle of the trend. And don't give it back. 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 - Thursday 11/17/22 Market breadth NYSE and Nasdaq market breadth charts as shown below are starting to turn bearish, at least for the short term.   Volatility While market breadth charts are sending out somewhat bearish message for stocks, $VIX has not fully confirmed this bearishness yet. Take a careful look at $VIX daily chart below. Note that all of $VIX EMA lines as well as $VIX candles are starting to converge in the key 25-26 zone. It's what happens after this conversion that will determine the next direction for the market.
We think that $VIX will provide us with the answer by Friday OpEx.  Key S/R levels ES NQ RTY S/R levels as shown below still haven't changed. These zones are quite important. Increasingly it looks like ES NQ RTY will retest S1 as we've been anticipating. If $VIX starts to rise again, then ES NQ RTY are likely to retest S2. There is a low probability that $VIX will rise above 34, even if it starts to rise again. And there is a low probability ES NQ RTY will drop below the lows of October 13 as $VIX rises.  Trade Plan At this point, we think there is a high probability that $VIX will rise some amount, and ES NQ RTY will drop to retest S1. This is likely to be a multi-day drop, but it is unlikely to be a huge drop. S1 is likely to hold. We've are planning to enter SQQQ to capture this drop with a multi-day runner position. We plan to trade just one runner position, no additional swing position as the potential gain is less than 20% profit. In the spreadsheet, we show a buy plan for SQQQ at 42.15. This is approximately S1 level of NQ. The buy order is not placed yet. We want to see how chart actions look pre-market Thursday and get a clear confirmation from $VIX first. Note that if we see a clear bearish confirmation from $VIX chart, then we will enter SQQQ at whatever price it is at that point. We will alert you whenever we enter. 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 PM ET - Wednesday 11/16/22 Summary
There is a bearish leaning, but there is no low-risk bullish or bearish setup right now. We continue to stay in cash. Updates 1:15 AM ET - Wednesday 11/16/22 Summary Macro conditions are still bleak, but there is a ray of light at the end of the tunnel in the form of cooler-than-expected CPI and PPI reports. It is too early to tell if that bullish trend will continue, but we can always hope. Short term signals from our system are "mixed" right now. We will explain more on that below. Market breadth: mixed signals
$VIX is vexing Yesterday, we discussed two $VIX chart patterns to look for, one is bearish and one is bullish. $VIX latest chart from end of day Tuesday show both of those patterns in one day: 20-hour EMA blue line and 50-hour EMA red line both starting to go sideway (bearish), and a sharp $VIX spike that reached 26 intraday (bullish). So how do we proceed from here? We don't. We wait instead. We wait for the following patterns to evolve.
 Key S/R levels ES NQ RTY S/R levels as shown below still haven't changed. These zones are quite important, as we discuss further below.  Running into strong resistance despite good news The cooler-than-expected CPI report brought out large number of buyers who pushed ES NQ RTY up sharply last Thursday November 10. The cooler-than-expected PPI report brought out some buyers too, but not enough to get ES NQ RTY all the way up to R2. All three indices are struggling in the R1-R2 zone right now. Buying momentum clearly has waned for ES NQ RTY, after a few intraday quick spikes. Bullish or bearish on OpEx Friday? Right now, there is a growing inventory of calls bought by traders to capture the bear market rally. When traders by calls, dealers have to hedge their sold calls by buying stock futures. This OpEx Friday a lot of these calls will expire. This means dealers will be selling their previously purchased stock futures. And when dealers sell, they sell in massive volumes. So there will be substantial selling pressure on stocks as a result. In other words, we should expect a pullback or a dip of some sort this Friday if this scenario unfolds. How low will ES NQ RTY go? There is a good chance that ES NQ RTY will retest at least S1, possibly even S2. Trade Plan On Tuesday, we saw that $VIX 20-day EMA blue line and 50-day EMA red line were starting to go sideway. This combined with SVXY chart gapping up but forming a spiky topping pattern on its hourly chart pre-market told us to take precaution and tighten the stop on our TNA runner position. We alerted you soon after open, and then our TNA runner position got stopped out. While we could have hung in there and waited a bit longer before tightening the stop, the risks were too high. We are quite happy with 12% profit for 3 days of holding. There is no low-risk bullish or bearish setup right now to use for our next trade. Furthermore, our system signals are mixed and require more time to become clearer. So we plan to just stand aside and observe for now. 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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