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11:19 AM EST
There are 3 scenarios we are monitoring for. Sideway at Support1 (bullish):
Quick Drop to Support2 (bullish):
Quick Surge to Resistance1 (bearish):
At this point, we are not seeing evidence of the short-term bearish scenario. So be prepared for one of the two bullish scenarios above, which most likely will not fully appear until Jan 2. Before we go, we want to wish all our readers a Happy New Year and a Happy New Decade! May you find Profits and inner Peace in your trading.
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Updated Tuesday 12/31/19 at 1:28 AM EST Market Internal Indicators  Below are the reasons why we think that the current dip is not a Major Pullback. Before Major Pullback1 at the start of May, and before Major Pullback2 at the end of July, we saw a persistent bearish divergence between market internal indicators and stock prices for multiple days. In contrast with right now, market breadth and the percentage of bullish stocks overall have been bullish. They only started their decline in the last couple sessions. They have not been steadily declining in a bearish divergence from stock prices for multiple days. CBOE equity put/call ratio is not forming the kind of pattern that suggests a Major Pullback is imminent either. $VIX and $VXN are the only indicators that have been bearish since 12/16. But they have surged enough since Friday to begin a top formation. When we see this top formation finalizes, we’ll know that the current dip is over, and Surge10 is resuming its upward march. Support & Resistance Levels All S/R levels have been updated to reflect the pullback.  Market Projections Long-term projection: The Up Trend that started on 12/26/18 should last at least until early March 2020. Surge10 to resume after current dip: We are awaiting a short-term top formation in $VIX $VXN to signal that the current dip is over, and Surge10 will resume its march to a higher high. While $VIX $VXN form this top, we may see $SPX $NDX $RUT drop some more, getting closer toward Support2 before Surge10 resumes. Current shallow dip becomes medium dip: There is a potential scenario that we are monitoring for that is a bit more bearish. $VIX $VXN may start dropping sharply without forming a real top. They then may form a quick anchor instead, and rise again immediately. While volatility does this, $SPX $NDX $RUT may all rise sharply, but get stuck at Resistance1. This failure to rise above Resistance1 may result in a medium pullback for $SPX $NDX $RUT. Prices may end up dropping from Resistance1 to below Support3, possibly retesting the highs of November. Note that even if $SPX $NDX $RUT end up going through this more bearish scenario, we still expect prices to rise higher as Surge10 resumes after this medium dip. Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: In our trading plan posted last night, we said we were planning to exit TNA at breakeven because $RUT appeared to be losing steam. Our TNA position got closed out at close to breakeven today. We had 2 limit orders for TQQQ which got filled this morning during the sharp drop at open. The stop limit orders for these positions also got activated. Per the trading plan posted last night, the stop-limit orders were set up to enable us to get out at close to break even if things got too bearish. And so we got out of TQQQ at close to break even also. Here are the trades.  We were prepared to enter TQQQ on a shallow dip, but not hold the positions if the dip was going to get deeper. That's why we set our trades up as above. $SPX $NDX $RUT price actions this morning demonstrated that they could go lower. So we got out. At this point, we are waiting for $VIX $VXN to form a real top that spans more than one session. We will re-enter TQQQ if we see this top. Otherwise, we are going to wait for the possibility of the more bearish scenario described above and trade SQQQ instead for the short-term. Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. Update 1:52 PM EST In our trading plan posted last night, we said we were planning to exit TNA at breakeven because $RUT appeared to be losing steam. And TNA got closed out at close to breakeven today. We had 2 limit orders for TQQQ which got filled this morning during the sharp drop at open. The stop limit orders for these positions also got activated. Per the trading plan posted last night, the stop-limit orders were set up to enable us to get out at close to breakeven if things got too bearish. And so we got out of TQQQ at close to breakeven also. Here are the trades.  We were prepared to enter TQQQ on a shallow dip, but not hold the positions if the dip was going to get deeper. That's why we set our trades up as above. $SPX $NDX $RUT price actions this morning demonstrated that they could go lower. So we got out. At this point, one of 2 scenarios is likely to show up.
Scenario 1 (sideway) has a higher probability because of the thin trading around the holidays. But one can never rule out a tantrum tweet. Either way, the opportunity exists to re-enter TQQQ either at (1) today's low, or (2) Support3. This can happen tomorrow Dec 30 or Jan 2. We will monitor more closely. Updated Sunday 12/29/2019 at 12:19 AM EST Since 12/16, we’ve been describing how $VIX $VXN have been forming an “anchored-to-rise” pattern. And on 12/23, we wrote: “$VIX $VXN patterns right now suggest that a shallow dip is coming. It most likely will appear right after Christmas.” Meanwhile $SPX $NDX $RUT ignored the message from $VIX $VXN, marching gleefully up along with volatility since 12/16. But on Friday 12/27, $VIX $VXN finally got some attention as $SPX $NDX $RUT dropped sharply at the start of the day. That, we believe, is the shallow dip mentioned above. So is it done? Market Internal Indicators  Why do we think that the price drop on Friday is just a shallow dip? Because market breadth is still strong. To qualify as a medium dip, we would need to see market breadth going down for at least a few days. At this point, $VIX $VXN have risen up enough to qualify as a possible short-term top for volatility. We are likely to start seeing prices rise up again as volatility starts dropping a bit. One thing we are keeping an eye on is the performance of $RUT. Small caps are no longer exhibiting that really super bullish attitude. They usually lead on the way up, and on the way down. So we’ll be keeping a close eye on the performance of $RUT. Support & Resistance Levels All S/R levels have been updated to reflect the pullback.     Market Projections Long-term projection: The Up Trend that started on 12/26/18 should last at least until early March 2020. Surge10 to resume after shallow dip
Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: Per our trading plan posted Thursday evening, on Friday we had partial entries of TQQQ and TNA at the gap up. But these entries quickly got stopped out. Then our TNA position got filled at the limit order price, but we are no longer impressed with TNA. So we are placing an order to exit at breakeven.  We are planning to redeploy our capital to into 2 TQQQ entries instead. The target prices are Support1 and a bit below Support1.  Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. Updated Friday 12/27/19 at 1:12 AM EST We expected a bit of a dip today, but only $RUT dipped its toes a tiny bit. $SPX and $NDX surged up big, in the parabolic pattern that we mentioned on Dec 19. The bullish strength of the market is very high. Therefore we need to adjust our game plan. Market Internal Indicators  The CBOE equity put/call ratio is very low suggesting extremely overbought condition for stocks. However, this overbought condition can stay this way for a while before before a serious selling process will start. In the short term, the overbought condition does make stocks vulnerable to a minor pullback. Support & Resistance Levels We updated all S/R levels to reflect the bullish strength.     Market Projections Long-term projection: The Up Trend that started on 12/26/18 should last at least until early March 2020. Surge10 to continue higher:
Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: In the Model Portfolio below, we are showing re-entry for TQQQ and TNA at Support1, which is a very shallow dip. If TQQQ and TNA instead gap up at open, we’ll enter ½ position at market for each ETF.  Note that we are showing a possible 5% gain from Support1. We think TQQQ and TNA can possibly reach this by the time the short-term top forms in January. We are also showing stop-loss settings below Support2. The swings can be unpredictable at this point, so we have to give the positions some wiggle room. Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. Updated Wednesday 12/25/19 at 6:14 PM EST $VIX $VXN Anchored-to-Rise Pattern Some of our readers have asked us to explain $VIX $VXN “anchored-to-rise” pattern. This is a proprietary pattern filter that we have developed over the years. We apply it to intraday $VIX $VXN charts for the most accurate readings. However, we can share with you what the pattern looks like on $VIX $VXN daily charts. It is a pattern of $VIX $VXN bottoming process. In general, you should monitor $VIX $VXN every day even if you don’t trade volatility directly. Be on the alert when $VIX and $VXN form white hammers with long tails at a low level, as shown with the red arrows below. When this “anchored-to-rise” pattern appears on the daily chart, it means volatility has bottomed out in the short-term, and will start the process of rising up.  When volatility rises, stocks prices tend to drop in the short-term. Whether the drop is a shallow dip, or medium dip, or a Major Pullback depends on information provided by other market internal indicators and stock price actions themselves. Market Internal Indicators  $VIX $VXN continue to rise in a small but steady way. This suggests a dip of some sort is coming for $SPX $NDX $RUT. We project that it most likely will be just a shallow dip to start, based on the type of “anchor-to-rise” pattern. The CBOE equity put/call ratio is very low, suggesting extremely overbought condition for stocks. However, this overbought condition can stay this way for a while before a serious selling process will start. In the short term, the overbought condition does make stocks vulnerable to a minor pullback. This supports our shallow dip theory. Support & Resistance Levels We adjusted $RUT S/R levels to reflect its bullish strength. All other levels are the same.  Market Projections Long-term projection: The Up Trend that started on 12/26/18 should last at least until early March 2020. Surge10 shallow dip and short-term top: There is a high probability that the following scenario will unfold between now and early January.
Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: We took profit on our TQQQ and TNA positions on Monday because of the upcoming shallow dip. When you combine a shallow dip with a holiday week and weak volumes, swings can become exaggerated. So to be on the prudent side, we locked in our profits. Here are the recent trades.  Here is our trading plan for the Model Portfolio.
 Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. Updated Tuesday 12/24/19 at 1:28 AM EST We want to wish all our readers a healthy and happy holiday season. The Trend Is Your Friend (Don’t fight Surge10) When it comes to market timing, it's important to keep in mind that markets do not move equally up and down. During an upward Surge in an Up Trend:
The opposite is true during a Big Drop in a Down Trend. This is why even though we exited our long TQQQ and TNA positions in the Model Portfolio today, we did not go short with SQQQ or TZA etc. We wanted to take our profits ahead of some minor turbulence. We know our timing is close, but not necessarily perfect. And we are ok with leaving a bit of money on the table with this temporary exit. But because our timing is not perfect, we did not want to risk a short position. To make any profits with a short position in this current bullish Surge10, we would have to have perfect timing in order to avoid a loss or a drawdown. Market Internal Indicators  There is a clear and growing bearish divergence between $VIX $VXN and $SPX $NDX $RUT prices. This bearish divergence will have an effect on prices eventually. We will discuss how prices and volatility are likely to unfold below. Support & Resistance Levels We adjusted S/R levels to reflect the latest price actions.     Market Projections Long-term projection: The Up Trend that started on 12/26/18 is still intact. This Up Trend has a lot of bullish momentum behind it right now. We should expect it to last at least until early March 2020. Surge10 shallow dip and short-term top: $VIX $VXN patterns right now suggest that a shallow dip is coming. It most likely will appear right after Christmas. $SPX $NDX $RUT will most likely recover quickly and rise up to Resistance2. Resistance2 is likely going to be the short-term top that will form in early January. After this short-term top and a medium-size pullback, there is a strong possibility that $SPX $NDX $RUT will then rise up to a higher high. Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: We took profits on our TQQQ and TNA positions today because of the upcoming shallow dip. When you combine a shallow dip with a holiday week and weak volumes, swings can become exaggerated. So to be on the safe side, we decide to lock in our profits. If you are holding long $SPX $NDX $RUT SPY QQQ TQQQ IWM TNA, consider placing your stops at just below Support1 to accommodate this dip, or take your profits soon and re-enter later. Here are our recent trades in the Model Portfolio.  We aim to re-enter TQQQ and TNA at Support2, and ride until the early January top forms, which most likely will be at Resistance2.  Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. 12:24 PM EST
We don't like the way $VIX $VXN are persisting in building the "anchored to rise" pattern. There is a high probability that a dip is coming either tomorrow or Thursday 12/26. We don't think prices will go below Support1 (from yesterday's table) during this shallow dip. Nevertheless, we are going to take our profits now with TQQQ and TNA in the Model Portfolio and wait to re-enter at Support1. If you are holding long $SPX $NDX $RUT and their ETFs, consider placing your stops at just below Support1 to accommodate this dip, or take your profits now and re-enter later. Updated Sunday 12/22/19 at 7:54 PM EST Market Context We projected on the evening of Thursday 12/19 that $SPX $NDX $RUT would break out on Friday, and indeed they all did that. They gapped up and spent most of Friday at our projected Resistance1 level, as shown in the comparison below. We don’t usually achieve this level of accuracy across all indices, so we thought we might show off here a bit :-)  Market Internal Indicators  Market breadth is still strong, indicating that Surge10 still has momentum behind it. However, the percentage of bullish stocks are approaching top levels. 83% of Nasdaq stocks are above their 200-day EMA. That’s very bullish, but it also means that prices are approaching a short-term top soon. 90% is typically where the percentage starts to drop again. This potential short-term top is confirmed by volatility. $VIX $VXN continue to form the “anchored-to-rise” patterns. The scale of this anchor is small, so the most immediate rise in volatility will most likely be small. This will result in a small pullback in price for $SPX $NDX $RUT. Support & Resistance Levels We adjusted S/R levels to reflect the latest price actions. As you can see prices have broken out, and so the S/R levels have been pushed up.     Market Projections Long-term projection: The Up Trend that started on 12/26/18 is still intact. This Up Trend has a lot of bullish momentum behind it right now. We should expect it to last through most of the first quarter of 2020. Surge1 breakout: On Thursday last week we wrote “There is a strong possibility that we may see parabolic price movements, surging sharply upward as year end approaches. We are likely to see new all-time highs for $SPX $NDX, and $RUT may even catch up to the high of September 2018.” This parabolic price movements started on Friday for $SPX $NDX $RUT as expected. The bullish strength is high. High-risk sectors such as semiconductors ($SOX), biotech (XBI), emerging markets (EEM) all marched up steadily. The only fly in the ointment is junk bond (JNK), which formed a top on Friday 12/20. There is a high probability that prices will do a shallow dip before Christmas. But then they most likely will recover quickly and march higher. After that, there is a high probability that prices will reach a top by end of December, and this top will be followed by a medium-size corrective pullback in early January. Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: On Thursday, we posted an intraday update to let you know we were entering TQQQ and TNA with ⅓ of capital at market prices, in anticipation of the breakout on Friday. Below is Model Portfolio showing the long positions that got filled at market prices. We are now planning to add to these positions at Support2. This is the level where we expect prices to end up when they do a shallow dip.  Note that we plan to hold on to these positions until the short-term top that are likely to form at end of December or early January. Gmail Users: please read this It would appear that Google tweaked their Gmail algorithm recently and decided to dump most emails into the Promotions tab. Anyway, a number of our subscribers have been experiencing this problem lately. Below are instructions for how to fix the problem. In general, if you don’t receive email from us by 3:00 AM EST, please do:
To ensure that our emails don’t end up in your Promotions tab, do:
Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. Updated Thursday 12/19/19 at 11:12 PM EST Market Internal Indicators  The majority of market internal indicators are bullish, except for $VIX $VXN. Volatility patterns are suggesting a corrective pullback, but they are not implying a Major Pullback. However, prices are ignoring $VIX $VXN messages right now. We may end up seeing $VIX $VXN continuing this moderately bearish divergence for a while before we see a short-term top forming in price. Support & Resistance Levels We adjusted the S/R levels to reflect the latest price actions. As you can see prices have broken out, and so the S/R levels have been pushed up.     Market Projections Long-term projection: The Up Trend that started on 12/26/18 is still intact. This Up Trend has a lot of bullish momentum behind it right now. We should expect it to last through most of the first quarter of 2020. Surge1 breakout: $SPX $NDX broke out to a new high today, while $RUT steadily marched upward. The bullish strength is very high. Besides prices forming bullish patterns, we have most of market internal indicators confirming this bullishness. The high-risk sectors such as semiconductors ($SOX), biotech (XBI), small caps ($RUT), and junk bonds (JNK) are all marching up, in addition to $SPX and $NDX. So even though our gut is telling us that this bull market can’t be real, we have to trade what’s in front of us. And what’s in front of us right now is a bull charging along at top speed. What’s making this bull charge along? The Fed and their “non-QE” liquidity injection, at a time when the economy is still strong and job growth is still robust. Will we pay a price in the future? Most definitely, but not right now. There is a strong possibility that we may see parabolic price movements, surging sharply upward as year end approaches. We are likely to see new all-time highs for $SPX $NDX. $RUT may even catch up to the high of September 2018. The stage may then be set for a corrective pullback in early January. Planning Your Trades Long-term investment portfolios: As long as the Up Trend is projected to stay intact, these portfolios can stay in stocks and buy the dip. Intermediate-term Model Portfolio: Like you, we’ve been patient in trying to wait for a reasonable dip before entering long. But in a market like this, the dips keep getting more and more shallow. So we decided to try a different strategy. We posted an update at 1PM EST today to let you know our intention in entering long immediately with ⅓ of our capital. And we did just that. So here’s the Model Portfolio showing the long positions that got filled at market prices. They have gone up a small amount since the entry prices. So we set the stop a very close to break even.  We are going to keep trailing the stops upward to capture this potential parabolic price surge coming up. The target sell prices reflect where we think prices will be in early January. If we get stopped out tomorrow, we will wait to enter at Support2 as shown below.  Gmail Users: please read this It would appear that Google tweaked their Gmail algorithm recently and decided to dump most emails into the Promotions tab. Anyway, a number of our subscribers have been experiencing this problem lately. Below are instructions for how to fix the problem. In general, if you don’t receive email from us by 3:00 AM EST, please do:
To ensure that our emails don’t end up in your Promotions tab, do:
Disclaimer The information presented here is our own personal opinion. It is intended to supplement your own research and trading systems. Consider it as food for thought. We are not registered financial advisers or licensed brokers. We make no guarantee that anything will unfold according to our projections. While we offer scenarios for you to consider in your trade planning, know that you are proceeding at your own risk if you follow our suggestions. Note that we trade highly risky 3x leveraged ETFs. You may end of losing a lot of money with them. They suit our portfolio, but they may not be appropriate for you. Please read more about them before trading them. |
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