Weekly Candle …

Today the SPY ETF pushed below the 200 daily simple moving average of $276.28 and made a low of $273.91 … a close back above or around the 200 SMA will be a bit of a victory for the bulls but it would be best if we did not make another lower low today.

As I discussed in yesterday’s blog post, the weekly candle needs to close somewhere off of the lows when we close for the week tomorrow.  The 50% level of the current weekly range is $281.385 and the 38.2% level would be $279.62.  For me, a close at or above those levels gives me more confidence that there is not a lot more selling right now.  Things can change with a new Presidential tweet next week, but that kind of close for the week would be good.

Cheers … Leaf_West

Market Comment …

The market today inflicted a lot of pain to the long bulltards … many of them probably were taken out with margin calls late in the day.  Is the short-term selling over?  Let’s take a look at the market indicators.

McClellan Oscillator – Daily Chart

Ok … I like to keep track of the McClellan Oscillator to tell me when markets get at extremes.  Below -100 on the Oscillator generally marks an oversold market, and below -150 usually is seen only during wicked capitulation selling that is seen only occasionally.  The indicator ended today at -148.36 and is the second lowest reading group seen this year.  Only the early Jan/Feb carnage generated readings this low.

I mark on the above daily chart the four extreme readings, and then marked those same periods on the weekly SPY chart on the right.  You can see that generally, those were great times to step into the market to buy the dips.  Can we say that same thing here again?  Only time will tell, but let’s look closer at those four candles to see what additional information when can garner.

Remember, those price candles are weekly candles and therefore, the look of the current weekly candle will not be determined until the close on Friday.

Candle #1 … see how the candle bounced off of the low and closed closer to the middle of the weekly range?  That showed strength to close the week and as it turned out, price continued to bounce for about 5 more weeks.

Candle #2 … that weekly price candle ended right on the lows.  That shows selling right into the end of the week.  The next week saw a rather large range price action, but it was an inside candle that stuck to the bottom 50% of the bigger losing candle.  You can see that we actually made another lower low on the 2nd week that followed the bigger sell-off candle.  Then we had a bigger sustainable rally that benefited traders willing to wade back into stock positions.

Candle #3 … That weekly candle bounced off of the lows and finished the week around the mid-point of the candle’s range.  Again, that shows strength into Friday’s close.  The market bounced hard out of that low.

Lessons for Candle #4 … so what can we garner from the other extreme readings seen this year?  I would suggest that the next two trading days are important – if the market continues to see more selling the next two days, then I think we are still likely going to see some volatility for the next little bit.  Maybe we push to new lows right away, or maybe we get a half-assed bounce and then a new lower low with positive divergences in many momentum indicators.

Bottom-line will be to be patient and keep your trading time frame intra-day until we get more information about a low being made over the next 5-7 days.

Let’s look at the VIX to see if it will tell us anything …

S&P 500 VIX Index – Daily Chart #1

I had a trend-line alert set for the VIX index … that was a nice level to watch for a warning.

The 30-Day VIX / 90-Day VIX ratio is a great indicator to help traders find extremes in the short-term fear of the market.  We are well into the 1:1 ratio extreme zone here at 1.11x so we are getting near the end of the extreme fear in option premiums.

S&P 500 VIX Index – Weeky Chart

When you back out to a weekly time frame, you can see that we are at levels on the VIX that typically mark a level where support will typically be found.  Remember, these are weekly candles, so lots of daily anguish can be felt in the interim.

S&P 500 VIX Index – Daily Chart #2

I pushed the second daily chart above by pushing the illustrated days to early 2018 so that traders could see the wild daily swings that we can typically seen when the market makes these large outsized moves.

Bottom Line … Be safe, don’t be a hero, but don’t be paralyzed either.  Know what could happen and how oversold we are becoming.  Trade accordingly.

Cheers … Leaf_West

TSLA Update …

TSLA has been my favorite stock for trading during 2018 … I have made several posts about TSLA’s set-ups and I am looking once again at zones where resistance can be expected,  Here are the charts …

TSLA – Weekly Chart

The rising/broadening price pattern is still intact but the median line is likely to be formidable resistance here soon.

TSLA – Daily Chart

The Median Line resistance is around the $358 level.

TSLA – 195 Minute Chart

The 195-min chart is painting light blue candles warning me of an extreme move of price away from its slower moving averages.  Note that volume is tapering off as we get higher and higher on this expansion move.

Be on guard if you are long TSLA as we push into the $350 – $360 levels.

Cheers … Leaf_West

Bonds into Support as Stocks Push into Resistance …

My read of the current price structure for the market-leading stock sector (tech or the QQQ’s) match up pretty well with my read of the price structure for bonds … bonds are pushing into a logical support SLOT zone while the Q’s push into a prior high and a logical termination zone for the 2nd of 3-waves I am looking for from stocks.  Here are the charts …

US 30-Year Treasury Bond Future Contract (ZB) – 195 Minute Chart

I have been calling this move in bonds pretty well for the past couple of months … I think that we should see the long bond find support in the SLOT support zone – we are right at the important 61.8% that often acts as support/resistance during corrections.  The FOMC meets June 12th and 13th, and bond moves often happen/begin around those FOMC dates.  Maybe bonds bounce around here for about a week before beginning what I think will be either a Wave 2 or Wave C move to the next level of resistance.

NASDQ 100 ETF (QQQ) – 195 Minute Chart #1

Everybody is pretty hopped-up with the break by equities out of the big multi-month consolidation patterns they had been making.  When something is so obvious that “everyone” sees it I begin to worry about a massive failure/fake-out move … aside from that minor concern of mine, it appears to me that the Q’s are pushing right into an obvious level of resistance for a Wave 2 of a 3-wave price stucture.  Wave 2’s typically fail in resistance right at the 1.618x extension target … we are right there for the Q’s now.  To top off that obvious target is the fact that we are also pushing right into a prior pivot/all-time high – what are the odds that we blow right through that level and tack on another 5% or so without pausing??  I think it makes more sense to see a fake-out and consolidation/corrective price action which would set-up a more sustainable break to new highs.

NASDQ 100 ETF (QQQ) – 195 Minute Chart #2

So if my read is right, then the Q’s are making a push this week that could lead into an important pivot high followed by a pullback into SLOT support.

Cheers … Leaf_West

Bond Update …

As an update to my prior post on the bigger wave structure for bonds (click here), I think that we are likely inside the corrective wave move after the first leg higher out of the major area of support I identified in that earlier blog post … here are my current thoughts.

US 30-Year Treasury Bond Futures (ZB) – 195 Minute Chart

Based on the look of the move/candles, the move higher out of support for bonds was clearly impulsive and not corrective.  Therefore, I would expect at least another push higher by bonds after a period of consolidation/minor correction.  The next move higher is likely to be made from a bigger level of support so I would look for price to make it down somehow into the typical SLOT support zone.

The next push higher will I believe, offer another attractive risk/reward trade and one that traders should be willing to swing trade.

Cheers … Leaf_West

Bonds – Are We at Near the End of this 3-Wave Structure??

I have been waiting for the TLT to break below the low from February 21st to possibly begin the completion of its current bigger time-frame price structure … today price broke below that $116.51 level and I think the next swing trade in bonds will be to the upside.  Here is what I am seeing. Continue reading

Where to Next?

The NASDQ 100 Index has just broken above an important level and we should see in short order, what the market has in store for investors.  Here is the daily chart and three possible roadmaps for the tech market …

NASDQ 100 Index ETF (QQQ) – Daily Chart

The April 18th pivot high for the QQQ was $167.00 … that level was taken out with today’s price action.  By doing so, you have taken out an obvious prior high/resistance level, and one that the entire market will take note of.  Many algorithm trading programs will attack breaks of obvious resistance/support levels, and that is why you often see the market break to new minor highs/lows before reversing.  In essence, the market traps traders playing the initial break, and you see those “weak hands” get rinsed out of their positions by the stronger, more sophisticated trading entities.

So basically, now that price has broken above the prior resistance level, we are either going to fail and reverse, or we are going to gather momentum, and have the MOMO traders jump on this latest move and we should gain steam as we march towards prior major highs.  I have labeled this bullish scenario as #1 on the above chart … the move off of the last low will need to push through the “ABC” extension target zone of $170.05 – $173.69 if we really are headed to new highs.  Typically, I would expect for price to make a new minor high, and then pull-back slightly to test that break – if the move is real, it will trap sellers at the high and steamroll through them.

Scenario #2 is the bullish scenario I would rather see unfold … in this case, price will fail at this break of a prior pivot high and head down to SLOT support.  From support, price would begin moving higher thereby trapping traders who think that a Heads & Shoulders pattern was about to confirm and price was about to head lower.  It is this outsized opinion and short position that fuels the bigger, more sustainable move to new highs.  In essence, bigger corrective moves prior to an attempt to break higher usually leads to a higher odds chance of that break succeeding.

For the possible bearish scenario, (Scenario #3) I would think that we need to fail here as price moves above the obvious prior minor high, likely in the extension target zone.  Price would then correct lower and slice through minor SLOT support at the $160.92 – $156.86 level.  As price breaks below the prior lows, there would be an outsized chance that price was just setting up an even bigger squeeze that could fuel a move higher, but more likely, this type of move would signal some bigger corrective pattern or even the beginning of a bigger trend lower.

Bottom Line … in any of these case, traders should be paying close attention to closing daily and weekly charts to see what type of move is confirming itself.  I will try and update what I see as we go along.

Also, note that my charting software is painting the past 4 daily candles yellow, which visually warns me that trend strength has contracted to the point where trend was now officially in the “Contraction” zone – what follows contraction?? Expansion does … should be an interesting next couple of weeks/months.

Cheers … Leaf_West

AMZN … Where will the Music Stop?

AMZN is paying the price during this market correction for being so widely held and for having run so hard for so long.  Where is support likely to re-appear?  No one, knows and I think that will depend almost entirely on when the tech market gets a bid finally.

Here are the levels I am looking at …

AMZN – Weekly Chart

The weekly broadening price formation has seen price pullback to the upper support/resistance line.  Will price find meaningful support here at around $1375??  Maybe …

AMZN – Daily Chart

On the daily chart, I can see what looks like a nice band of prior volume in the $1125 – $1200 zone … with that zone in mind, I decided to sell some OTM put options that expire before the next earnings date (April 26th).  I sold some of the $1150 puts that are going to expire on April 20th.

AMZN – 195 Minute Chart

I continue to trade AMZN as my main focus intra-day, but I am not yet prepared to hold any long/short position overnight.  Selling some OTM puts at that $1150 level is a much safer way of making a multi-day bet on what will happen to AMZN over the next couple of weeks.

Cheers … Leaf_West

TSLA Update – December 11, 2017 …

TSLA just took out the prior pivot high that I was talking about last Friday (click here).  I have begun positioning for the next move lower by selling Dec 29th $355 calls.  I have started small as is typically the case and will add to the position over the next couple of days.  I received a credit of $0.90/share.  I typically also day trade/follow a stock more closely while I am waiting for the pivot high and change in trend direction to get underway in earnest.

I will be tweeting/posting when I become more convinced that the new trend direction has begun.  The stock may stay elevated until year-end, but I don’t think we are going to get above $350 before year-end.

Cheers … Leaf_West

AMZN Update – October 23, 2017 …

Earnings are scheduled for after the close on October 26th for AMZN … I posted on October 18th & 19th (click here) the reason why I had started a bearish position on AMZN and today’s close saw AMZN push right into the area that I thought would hold going into the earnings report.  Here are the updated daily charts …

AMZN – Daily Chart #1

The daily ATR support level and the lower parallel line are right here where AMZN closed today … I think this level will likely be where AMZN is going into its earnings report this week.

AMZN – Daily Chart #2

I suspect that any bounce coming out of the earnings report will be the bounces I will be looking for to get more aggressive in shorting AMZN.  I have a Nov 24th weekly put spread (1000/980) that is trading at about $13 currently vs the $8.72 I paid on the 18th.  Max profit is $20, so I will see where AMZN is trading tomorrow to see if I want to take partial or entire profits before the earnings on Thursday.

Cheers … Leaf_West