$VXN $VIX
Both $VIX and $VXN daily charts below tell us that $VIX and $VXN are going to drop down first, to their respective "lines in the sand".   The crucial line in the sand for $VIX is 20, and for $VXN is 25.

What they do after they reach these key levels is not clear yet.   But while they are still dropping and until they reach their lines in the sand, we can expect $SPX $NDX IWM to continue rising.

$NDX $SPX IWM
Even though $VIX $VXN are providing short-term bullish tailwinds for stocks, $NDX $SPX IWM may still have a dip on Thursday.   

If this happens, it will most likely be a shallow dip.   However, in their hourly charts below, we've marked different dip levels, just in case something deeper happens. 

Given that $VIX $VXN are sending out bullish messages, we will treat these dips as buying opportunities to enter Quick Bull positions based on $NDX $SPX IWM.

​$VXN $VIX UVXY
$VIX $VXN charts warned on Monday that they were going to rise.   And just like clockwork, $VIX $VXN rose on Tuesday.   

So far the volatility rise is minor, and the resulting dips in $NDX $SPX are shallow.   The exception is IWM which has a bigger dip. 

Here are the same charts that we shared yesterday, with Tuesday data added.  For now $VXN $VIX UVXY have formed short-term tops and are likely to drop early Wednesday.

However, $VXN $VIX UVXY may still rise further as we explained yesterday.  Therefore, we have outlined bullish and bearish scenarios to monitor for.  There is no guarantee which one will show up, but you will know how to interpret them as $VXN $VIX UVXY patterns unfold on Wednesday. 

​Table of Support & Resistance Zones
IWM and TNA S/R levels have been updated again in the table below.

$NDX $SPX IWM
Market internals are sending out early "dark cloud" warnings.   $VIX $VXN are not fully done with their current spike yet.   These are bearish undertone that can turn fully bearish on the stock market.

However, $NDX $SPX IWM 30-minute charts below show that they are unlikely to have reached their short-term climax yet.   The key pattern to observe is how price candles are rising at a steady pace, not too far from their 200 EMA green lines.   

As long as this relationship is intact $NDX $SPX IWM  are still capable of rising up some more.   

If $NDX $SPX IWM surge very rapidly suddenly, then that is likely the short-term climax where we should definitely exit any Quick Bull positions.

,
Signal Trades
Pre-market Tuesday morning, we wrote:
Pre-market $VIX UVXY and general price actions indicate this will most likely be a shallow dip.   We've exited QuickBull TNA for now because it's acting the most bearish of all the indices right now.   There will opportunity to re-enter IWM TNA at a lower price. 

That opportunity came later in the afternoon, and after-hours, when IWM TNA anchored themselves at their 200 EMA green lines on their 30-minute chart.  This possible end of the dip was confirmed by $VXN $VIX UVXY forming short-term tops on their respective charts.

We will hold our Quick Bull positions (SOXL and TNA) for now, but will exit if $VIX $VXN form the bearish scenario.

We plan to hold Big Bull TQQQ through the bigger dip if it comes. 

Note that depending on the pattern setup that materializes for UVXY, we may enter a Quick Bear UVXY position.   But this is a risky move, so we need to wait for $VIX $VXN UVXY to show the patterns that would support a big rise in UVXY.

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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

$VXN
By end of day, $VXN formed a concerning chart.   Those tiny candles formed at end of day Monday is a setup for $VXN to rise up.   The question is how high.   

$VXN 2-hour chart below shows $VXN with a potential quick rise, which usually corresponds to a quick dip for $NDX, which actually relieves some of the selling pressure and brings in more buyers.  

​$VIX UVXY
We are showing UVXY hourly chart below because it is easier to read right now than $VIX.   

Similar to $VXN 2-hour chart above, if UVXY successfully anchors and retests the zone from 10.25 to 10.5, UVXY is likely to rise higher over its 200-hour EMA green line.   This would correspond to bigger dips for $SPX IWM. 

Like $NDX, the bigger dips for $SPX IWM actually would bring in even more buyers, enabling $SPX IWM to resume their climbs.  But again, first long positions based on $SPX IWM would have to endure the bigger dips.

​$NDX $SPX 
We don't have enough data yet from $VIX $VXN to determine the size of the dip. 

• If a shallow dip results, look for $NDX $SPX to retest their 50 EMA red lines below (2-hour charts).

​

• If a bigger dip shows up, look for $NDX $SPX to retest their green support zones.

​Signal Trades
Even though our inner bull doesn't like it, $VIX $VXN have issued their signals indicating they are likely to rise some amount Tuesday and/or Wednesday.   

So our strategy for Signal Trades is to exit Quick Bull positions (SOXL and TNA) for now, and re-enter at a lower price.   We plan to hold Big Bull TQQQ through the dip.   

Note that depending on the pattern setup that materializes for UVXY, we may enter a Quick Bear UVXY position.   But this is a risky move, so we need to wait for $VIX $VXN UVXY to show the patterns that would support a big rise in UVXY.

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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

$VIX $VXN
$VIX $VXN spiked up quickly last Monday 12/21.   In the process, they formed the "anchored to drop" pattern.   Since then, they have been dropping steadily.   Soon they may cross below the crucial levels:  $VIX at 20, $VXN at 25.   

Once they cross below these levels, their drops may accelerate and provide even more bullish tailwinds for $SPX $NDX IWM.

One word of caution.   Even though $VIX $VXN both look ready to drop, it is still important to monitor UVXY for confirmation.   Look for the following potential bullish and bearish setups.   

​$NDX $SPX IWM
The green support zones remain the same for $NDX $SPX IWM as last week.  As shown on $NDX $SPX IWM daily charts below, they are price levels where many buyers may step in if price dip into these zones.

The orange resistance zones have been raised a bit for $NDX $SPX IWM.   There is a good chance that $NDX $SPX IWM may rise up at least to the bottom of the orange resistance zones by Friday.

Signal Trades
When the market is marching up steadily, sometimes we get the urge to cash out because we think it has gone up enough.   And it certainly is a wise strategy to take partial profit.   But keep in mind that frequently, the irrational exuberance phase is the grand finale, the climactic surge where prices can surge up a lot.   

Cashing out early may mean missing out on some big gains.   But staying in for too long may mean enduring a sharp reversal and giving up our precious gains also.   So how do we know when to book profits on our positions?

We personally rely on $VIX $VXN signals.   You've seen them in action and know that they are sensitive leading indicators.   The challenge is to be disciplined and respond to their signals, and not let the noise in the market drown out the main message.   This is why we drill down into $VIX $VXN charts daily.

See Signal Trades for our current positions.

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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

Click here for current Signal Trades.

Updates 11:51 AM EST - Thursday 12/24/20

$VIX $VXN dropping >> bullish
Happy Holidays!
Volatility has delivered a gift to the bulls.   $VIX $VXN are dropping steadily.   

Additionally, the following signals all indicate lots of bullish tailwinds building up for $SPX $NDX IWM.

• $VVIX has formed a top and is dropping.
• SVXY has anchored and surged.
• VIX M1 contango is at almost 7%.
• VIX M2-M6 contango has turned positive.

Better yet, $SPX $NDX IWM have not yet factored these bullish tailwinds into their prices yet.   So we are taking advantage of the drop in FNGU to enter at a much lower price in. 

See Signal Trades for current positions.

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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

​Table of Support & Resistance Zones
The S/R table has not changed since yesterday.

​$NDX $SPX IWM
We have shown on $NDX $SPX IWM hourly charts below their possible price trajectory between now and end of year.   

Basically, we expect $NDX $SPX IWM to end the year at a higher price than current price.   But there may be a dip again to retest close to the lows of Monday before taking off.

Signal Trades
Yesterday we wrote "We don't plan to re-enter bullish positions until $VIX $VXN show that they have formed short-term tops, and therefore are done with their spike/rise."   

On Wednesday, we expect to see $VIX $VXN form their 2nd lower-high spike.   This would be the place for us to enter long FNGU and TNA again in Signal Trades.

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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

Updates 9:22 AM EST - Tuesday 12/22/20

Retest of Monday lows
$VIX is poised to rise again this morning.   There is a high probability that it will retest yesterday's high.   

As a result, $SPX $NDX IWM may retest yesterday's lows.   

The probability of $VIX rising higher than its high yesterday is not that strong right now.   So basically, the dip in $SPX $NDX IWM price may get repeated from Monday, but it isn't likely to grow into a bigger dip.

In Signal Trades we have decided to hold both TQQQ and SOXL through this dip, unless the setups change to indicate a much bigger sell-off is imminent.   We will let you know.

Updates 12:00 AM EST - Tuesday 12/22/20

​Summary
There is no crash signal right now from $VIX $VXN charts.   But we may see a larger spike in volatility which can result in a bigger short-term pullback for $SPX $NDX IWM.

Market Internals
$SPX $NDX IWM may finally be waking up to the bearish divergence messages from market internals.   Recall that we've been sharing this divergence with you since 12/17.   

Keep in mind these bearish messages are not warning us about an impending crash.   They are simply telling us that under the hood, market internals are weakening.   So we factor these messages into the overall picture, but don't assume the worst yet.

$VIX $VXN UVXY SVXY
We posted $VIX $VXN charts on Monday afternoon to explain how the spike in volatility may unfold.    See annotated $VIX $VXN charts here.  

Let's take a look at UVXY chart.   UVXY tracks $VIX movements, but with contango and backwardation factored in (See Simple explanations of contango and backwardation).    

UVXY hourly chart below shows that UVXY has just formed a big W bottom with today's rise.   This is a bearish setup for stocks.   Observe the W bottom formed on 8/26 and 10/23.   They preceded a VMajor spike which is a sharp rise in volatility, and a sharp drop in $SPX $NDX IWM.

We marked the key UVXY levels below.   Basically, these levels correspond to a shallow dip for $SPX $NDX IWM, or a deeper drop for $SPX $NDX IWM.   

There is a chance that we may see a deeper drop for $SPX $NDX IWM.   $VIX contango for M1 is at 2.99%, while M2 - M5 are all slightly negative.   Traders are getting worried.

​Table of Support & Resistance Zones
In the slightly updated S/R table below, we have lowered the orange resistance zones for IWM and TNA, as they are starting to weaken.

Click here for current Signal Trades.

Updates 2:59 PM EST - Monday 12/21/20

Be more cautious
The spike in $VIX and $VXN this morning is the shot across the bow, or in this case, the shot across the 200-day EMA line.   It's a warning that we should pay closer attention to $VIX and $VXN actions.

In the charts below, we highlighted the orange zones where $VIX $VXN may anchor and rise.  If $VIX $VXN do this, they can surge into what we call a VMajor spike.   This is a major rise in volatility.  $SPX $NDX IWM may experience a bigger sell-off as a result of tis surge in volatility.

We have adjusted stops and sell targets in Signal Trades.   We will continue to tighten the stops to protect our QuickBull and BigBull positions.   We are not entering UVXY at this point, but if $VIX $VXN anchor to rise in the orange zone, we will enter UVXY.

​Updates  7:45 PM EST - Sunday (for Monday 12/21/20)

​Summary
$SPX $NDX IWM are likely to keep marching upward to higher highs by end of year.   

Market Schedule This Week
This will be a short week due to Christmas.   Stock market will close early by 1 PM EST on Thursday 12/24, and closed on Friday 12/25.   

Here are the important reports for this week.
Tue:   

• GDP 8:30 AM EST

Wed: 

• Durable Goods Orders 8:30 AM EST
• Jobless Claims 8:30 AM EST

• Personal Income 8:30 AM EST

• House Price Index 9:00 AM EST

• New Home Sales 10:00 AM EST

• Consumer Sentiments 10:00 AM EST

​
Market Internals
The current bullishness in stocks is starting to verge on irrational exuberance.    But as the famous economist John Maynard Keynes said, “markets can remain irrational longer than you can remain solvent.”

It is going to be disconcerting to continue looking at the bearish divergence between market internals and stock price actions.   These are the kinds of signals that can fool eager early bears.   

In our experience, bearish divergence can go on for quite a while.  At some point, the bearish messages will have a big bearish impact.   But not right now.  We have to trade what's in front of us, while keeping in mind that the good times will not last forever.

$VIX $VXN
While market internals are showing the start of bearish divergence, $VIX $VXN are showing the continuation of more bullishness.

Signal Trades
See Signal Trades for latest positions and buy orders.   We plan to add a Quick Bull FNGU position.   

We are not planning to bet against this bullish market.   At least not in the short term.

When will we sell the QuickBull positions?  When one of these conditions is true:

• Price is 130% higher than the 200-hour EMA.

OR

• $VIX $VXN 20 and 50-hour EMA are bunching up, going sideway and ready to rise.
  

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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

Click here for current Signal Trades.

Updates 11:10 AM EST - Friday 12/18/20

$SPX $VIX TSLA
At 12:55 AM, we posted the full analysis explaining that $VIX may rise today based on the signal from $VVIX.   Indeed $VIX rose a bit, and $SPX dropped correspondingly this morning.   

This is not surprising.   We alerted you earlier this week that today will be one of the biggest trading days in history.  In addition to quadruple witching, TSLA is being added to $SPX at the close.

Indexers tied to $SPX will need to buy $80B worth of TSLA, which means issuers will have to sell $80B of the remaining stocks in $SPX.   Tesla will likely be roughly 1% of the S&P 500′s market capitalization after its inclusion.

However, given that IWM is continuing to climb, and the dip in $NDX is fairly shallow, and $VIX $VXN are forming lower high short-term tops, $SPX is likely to resume the rise after anchoring one more time in the green support zone (see below).

​$VXN
$VXN hourly chart below shows all EMA lines heading down.   This will provide a lot of bullish tailwinds for $NDX.

Table of Support & Resistance Zones
The S/R table has not changed since yesterday. ​

​$NDX $SPX IWM
At this point, given that $VIX $VXN are heading down, we don't expect to see much selling for $NDX $SPX IWM before year end.   There may be minor dips, but $NDX $SPX IWM are likely to keep marching up along the current trajectories to higher highs by year end.

​Signal Trades
See Signal Trades for latest positions and buy orders.   We plan to trade just Quick Bull and Big Bull positions for now.   We are not planning to bet against this bullish market.   At least not in 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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation

Updates 1:43 AM EST - Thursday 12/17/20

​Summary
$SPX $NDX IWM are likely to keep marching upward to higher highs by end of year.   They may still anchor with one or two more shallow dips, but overall conditions are quite bullish in the short term.
​
Market Internals
Two elements of market internals, net A/D issues and percentage of bullish stocks, are sending out bearish divergence messages. 

Keep in mind that in a bullish market like right now, bearish divergence from market internals can last for quite a while.   This is what happened in late 2017.  $SPX $NDX IWM kept going up while market internals sent out bearish messages.   It took until late January 2018 before $SPX $NDX IWM dropped substantially.

So we'll keep an eye on the bearish divergence.   But we are going to trade the bullish momentum for now.

$VIX SVXY
Sometimes it's worthwhile to track volatility movements using SVXY.   This is the inverse ETF of UVXY.   So when $VIX goes down, SVXY goes up.   Just like UVXY, SVXY has $VIX futures contango/backwardation values factored in.   Sometimes it's easier to read SVXY direction than $VIX oscillation.

SVXY hourly chart below shows how it spent multiple weeks from mid-September to early October, anchoring at its 200-hour EMA green line, before rising sharply.  When SVXY rose, $SPX and IWM rose correspondingly.

This month, SVXY has anchored twice already on 12/11 and 12/14.   It may take off sharply, or it may anchor a couple more times.   Either way, SVXY is sending out a bullish message supporting the rise of $SPX and IWM.   

$VXN
$VXN hourly chart below shows that it is most likely going to drop in the short term, at least down to the low of 12/9.   This is a bullish message for $NDX.

$NDX $SPX IWM
$NDX $SPX IWM daily charts below show their likely movements between now and end of year.   

Keep in mind though that $NDX $SPX IWM may just take off quickly, without any more shallow dips to anchor one more time in their green zones.

Signal Trades
See Signal Trades for latest positions and buy orders.   We plan to trade just Quick Bull and Big Bull positions for now.   We are not planning to bet against this bullish market.   At least not in 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.  

Why 3x ETFs like TQQQ lose money over the long term
The risks of investing in inverse ETFs
Simple explanations of contango and backwardation