In this week's watchlist, we take a closer look at our favorite stocks and predict how the market will respond after last week’s sell-off.
ES [S&P 500 FUTURES]
After days/weeks/months of wondering if and when we would get a pullback, it finally happened. On Wednesday we warned that we were noticing something brewing. VIX futures were being bought up, Dollar was up, bonds were up, and all indices were catching a bid as well. This is very odd to say the least, and we warned that in such cases one side of things will have to give. In this case, that was the indices. In the case of the S&P 500 we are well above our macro bull/bear line which for now is residing somewhere in the neighborhood of 3200, so as far as we are concerned, the macro trend is obviously up.
The technology world was hit more so than anything else, and we capitalized on multiple trades in the value/financial world. AAPL for example got a 20% haircut in 2 days. We expect a large degree of probability that this is going to continue as we have been talking about for weeks — Money out of tech and into value. It’s hard to tell where the market is going from here on a day to day basis, but at least we know the macro trend is still intact. Despite the drop there is little to no change in the S&P 500 index as far as hedge funds are concerned as of Tuesday. Their buying was on a slightly lesser scale last week, but nowhere near to actual short levels. For immediate and macro levels to look out for, please consult the charts.
Last but not least let us not forget, overall, the S&P 500 is down only 0.8% week on week!
VIX [CBOE VOLATILITY INDEX FUTURES]
We warned that anything above 30 on VIX futures spelled trouble and indeed once it climbed over it did. One thing to note is that VIX futures closed below 30 and ES closed well above previous ATH (3397.5). Nothing on the COT report that shows hedge funds buying up VIX futures. They are still net long but by a relatively very small margin. As the name would imply, those are hedges. Same level is under watch. Give or take a point. There is supply at 30 on VIX futures and above that there is 32–33. If those levels get turned into buy zones all hell breaks loose again.
The U.S. Dollar made a bounce out of the expected area that we had if you look at our last newsletter. For now we still see a micro downtrend that we are keeping an eye on, but the demands are being registered as a buyer’s zone and money is stepping up. For now DOllar is in a relative downtrend and the supply at 93.6 is still intact but we are looking at a possible breakout/breakdown of the recent trading range.
NQ [NASDAQ FUTURES]
Nasdaq experienced the biggest drop due to its exposure to tech, however still relatively untouched in the large picture. We see a daily supply above on Nasdaq at 11,780–11,855. If price manages to get above that area and turn it into a buyer’s zone it could leg up again. There is also immediate demand below at 11,500 level. Needless to say we will be watching closely to see where Nasdaq decides to head to. The macro bull/bear line for now resides at 10,500.
Now that the stock split is over with, the hype seems to have fizzled out. All of tech had quite the pullback on Thursday and Friday which spooked investors/traders, but truth be told, this was a healthy pullback needed for new highs in the future. Market makers aren’t convinced AAPL has found a bottom yet, but, on the weekly, it came down to test the 9EMA and is looking like it could bounce.
If market holds, expect AAPL to climb back to 128.75 and if not, a revisit to 110–100 is not out of the question.
Darkpools: Above: 126.50, 132.49, 132.60 ; Below: N/A
GOLDMAN SACHS [GS]
With tech taking a step back, rotation seems to be going and more favorable towards financials and value stocks. GS on the weekly chart fired a long bias on our algo and is in a prime position for a run up to 215–220. Market makers feel the same way by shorting Sept 11th 212.5 puts and longing calls from 205–220.
Darkpools: Above: N/A ; Below: N/A
JPMORGAN CHASE & CO [JPM]
JPM not feeling the same kind of love like GS, but, a sympathy play none the less if GS runs as anticipated. JPM on the weekly fired a sell signal on our algo back in Mar when the whole market came crashing down, and currently, it’s trying to reclaim and fire a long. On the 4hr, 2hr, and hourly, all three time frames however have fired a long and are supporting the likelihood of a strong run setup.
Support currently at 101.43 and resistance at 116. Market makers are long but skeptical with 103–108C long but in between bid/ask. They aren’t jumping out of their chairs on this one.
Darkpools: Above: 103.80, 103.90, 104.40 ; Below: N/A
MSFT late into Friday was awarded the Jedi contract which saw a beautiful squeeze that eventually lifted the market out of the hole it was sinking into. Arguably, this giant is what saved the market from diving even further for the remainder of the day last week. Our algo fired a short on the 4hr, 3hr, 2hr and almost on the 1hr time frames telling us that this selloff may not be quite over yet.
Market makers are long 215–230C to possibly reclaim the loss from TikTok hype with the Jedi announcement (may the force be with you). But at the same time, they have taken 210–200 puts just in case there’s a lackluster performance like Attack of the clone wars.
Darkpools: Above: 216, 218, 225 ; Below: 213.75, 211
NVDIA just keeps on breaking record after record and receiving price target upgrade after upgrade with currently the most bullish price target set at $650. After hosting it’s Beforce Special Event this week it was on another roll before getting brutally cut down as all tech flushed end of week. If it is able to break above 505 next levels of resistance are 515 and 529 and 566. Support is at 487 and 479. Looking at option flow general market sentiment is still highly bullish. A weekly 9/11 535 CALL could be an interesting play should it hold above 505 levels.
UNITED AIRLINES [UAL]
UAL is finding support near the 50 ema and there has been quite an accumulation this week on airlines stocks. UAL is leading the pack with high bullish call activity with this week 38 call strikes heavily long and 36 strike puts are being shorted.
Slack has found support on 200 ema line and given that this level to hold, we could expect to see a bounce back into the highs of the previous week at 34, 31.5 and 37 strikes are net long this week and 09/18 37, 40 and 45 strike calls are of interest. This week 31 and 33.5 strike PUTs are still net short, so the expectation is that it could retest the previous weeks highs.
INDICATOR OF THE WEEK: Opening Range Breakout
We see many people utilizing trading strategies based on the Opening Range Breakout.
This is a pretty straightforward script. As the name suggests it plots the previous day’s ORB to the current trading day. The ORB ‘timing’ can be changed as well. Typically an ORB strategy has to do with the first 30 minutes of the day, but it can be customized to any time.
WEEKLY TRADING TIP: Patience / The Truck Syndrome
Patience is everything in trading. Patience to study the market, patience when plotting your trades, patience in waiting for a trade to present itself, patience in profit taking, and so on and so forth. Rash decisions lead to many mistakes and a large number of blown up accounts. At any given point in time, there are thousands of stocks that are trading, and that’s not even counting the currency and commodities market.
I have something I call the truck syndrome. Or the truck exercise if you will.
Since I can remember, when I am out on the road, I purposely position myself behind a semi-truck whenever one is available. Whether it is on the freeway or at a red light, I position and ride behind the truck for as long as the truck is going where I am going. That is my exercise in patience. Semis can take a while to get going, and even then they maintain a speed that’s well below the average car. As I see the cars in front of me put their blinkers on and one by one pass me and the semi, what I envision is traders. Traders who one by one are blowing up their accounts intraday chasing the latest and greatest stock that has already run 5% on the day without any strategy or patience whatsoever while I wait for my opportunity. The opportunity comes when the truck turns. A truck with 1–2 trailers can take up the space of 5–9 average-sized vehicles, so when the truck turns I have all the space in the world to accelerate, or otherwise maneuver however I’d like. I have 7 spaces all to myself. I apply that to the market. When everyone is putting on their turn signal and passing me, I stay behind the truck (Plotting entry/exit levels and stop losses).
When the truck turns (Price comes into my intended buy zone) I step on the gas pedal and enjoy a relaxing and fun experience while gazing to my left to see countless cars flipped over and totaled while the wildly bemused drivers are yelling in anger and pacing back and forth trying to contact the local tow service (ACH anyone?)
Trading or investing in financial markets in any capacity involves substantial risk. These activities may not be suitable for every investor. All information and content provided for the sole purpose of education and research. Any opinions, analysis, prices, and other information are provided entirely as general market commentary and should not be construed as investment advice.