Gap closed. With the aggressive week we had on ES last week we are currently 50 points away from ATH. Friday’s price action was a little peculiar, we saw a glimpse of what we’ve been talking about for a while: The great tech exodus. We don’t necessarily think that tech is going to crash out of nowhere, however we are starting to see piece by piece rotation out of tech and into value. Tech being dropped is not bearish, far from it, technology is merely a defensive play. The entire money world is waiting on the stimulus bill and somewhat better numbers on Covid to rotate the money from the defensive technology sector into more aggressive value tickers, RTY leading on Friday against NQ getting dropped is merely a glimpse of what is to be when the rotation is in full effect.
On the COT data we see small specs absolutely going for it. Every retail household in America is long on the S&P. Leveraged funds on the other hand, while net long, we can see them pulling back somewhat. We will continue to monitor their actions through the trading weeks but this could be the beginning of the divide between retail and hedge funds.
Some technical levels on ES can be found on the charts, and we will update intraday levels every day on the server as per usual.
Nothing changed on the VIX futures front as far as the COT data is concerned. On a technical side a lot has changed into VIX. Even as NQ was fading the entire Friday along with S&P for the first portion of the day, VIX futures got dropped as well. On the chart as you can see VIX futures are playing the prediction to a T. As long as 30 doesn’t get retaken as a buyer’s zone we expect VIX futures to sell off all the way down to 20 with a very long shot at 12.5. For now the bottom is still holding on VIX future however just barely, we will be monitoring throughout the week to see how it all plays out. As long as VIX futures stay under 30 there will be no major selloff to be had so it is very important to pay attention to /VX as the trading week/weeks develop.
Dollar played out as we expected it to, it had a nice solid bounce this week. Our long on it is already up a significant amount so for now we are holding this position because it also doubles down as a defensive position. This is the important area however, and we would like to see the Dollar reclaim this zone. If 93.5 – 93.7 area gets reclaimed then we see a possibility of Dollar squeezing to a value of 94.8 – 95. As always eyes on down below to the week’s low, as long as that holds an upside on the Dollar is still in play.
On the COT side of things in the U.S. Dollar hedge funds remain unchanged practically in the middle between buying up and selling, while retail is going more and more short on it. We will keep an eye on it and see how it develops.
From the COT report we can ascertain that commercials have no interest in buying up gold at these levels. There’s no reason for them to. Hedge funds are net long but little by little perhaps pulling back and the small specs still extreme long and chasing. Gold had a pullback this week right into an hourly RBR zone and bounced from there. From here on out the levels on a technical side are on the chart. Demand zone below at 2040 that we would like to see held if gold is to have another leg up. Supply zones above are at 2050-2055 and 2072.
Should gold continue down there is a daily RBR 1992-1997 level and we will be keeping a very close eye on that one.
On the silver front we see a bit of a pullback in buying on the side of the hedge funds. Commercials have no interest in these levels however that doesn’t mean we short silver. On the technical side of things we see silver trying to breakout of the previous supply zone at 28.3 – 29.3. Should it pullback we see demand zones whereabouts 24.6 and 23 level below respectively. Should silver pull back into these levels and hold it would be a nice entry for a long on a pullback. If the 29 area on the other hand gets reclaimed as a buyer’s zone silver could get going to 32.4.
Ever since we mentioned NatGas 5 weeks ago and scaling in at the bottom it has been on an absolute tear. At this point we don’t see a reason to sell out of our longs unless it has difficulty breaking out of this area. If it can get over 2.3 however we see a possibility of NatGas shooting for 2.7. On the COT data hedge funds are as long as ever so for now we’re sticking with the ride.
Ever since we warned 2 weeks ago that leveraged funds have started buying up Bitcoin big time it has squeezed considerably, congrats on all who took it. On the COT reports there isn’t any apparent slowing down in hedge funds buying Bitcoin, there is still interest so we think Bitcoin has ways to go. Some areas of interest are 11040 and 9670 should there be a pullback, and a supply level at 13800 – 14200 above. If 1400 whereabouts gets reclaimed as a new buyer’s zone there is a high probability Bitcoin will have another leg up.
FINANCIAL SELECT SECTOR SPDR FUND (XLF)
On Friday XLF broke out of its recent small trading range and chop area. It is still in a larger area of chop which we believe to be accumulation and think this sector is where the rotation is going to end up. It has a very high promising ceiling and is at the moment near the bottom of the trading range. We saw a lot of sweeps go out Friday for names in the financial sector, but even overall this sector has a lot of promising factors going for it when the time comes for leaps.
As for an immediate area of interest on AMZN we would have to say it’s around 3000 – 3040.
For us to get long for a mid-long term however we would best case scenario like a retest of 1800. Before we get to those drastic levels, if ever there’s areas of interest around 2700 and 2250. As long as the 3240 area on the upside stays unbroken we are not looking for momentum continuation to the upside on AMZN just yet. If that area gets broken and re-established as a buyer’s zone, we could take a position.
Darkpool: 3145 and 3100 below, 3200 and 3250 above
Flow: not much interest in calls, a good chunk of 3100p traded above ask. For the week of Aug 28 seeing bullish volume to 3300
With the 4:1 split coming up, we can expect AAPL to reach for 500 to maintain its equity price between 100-125. Option chain isn’t liking the market outlook and again pricing a pullback this week with puts long to 430. With the split on Aug 24 expect profit taking and a dip potentially to 435 before a move back up to 500 if it maintains 460-470. We would like to see AAPL hold the immediate breakout. RBR demand below at 427 level.
Darkpool : 444.75, 443, 442.50, 427.50 below, nothing above
Flow : puts long 435-415, calls long 465-480
The team did very well this week with FB and caught the run with Aug14 260C that hit 1000%. A lot more potential out of this social media giant with market makers pricing a move to 300-305 by aug 28. Prior to that however, market suspects if no stimulus or executive decision, FB could drop back to 250. RBR at 264 and 266 Friday LOD areas of interest. We would like to see 270 get broken and held as a buyer’s zone to consider an upside.
Darkpool: 266 and 264 below, 268 above
Flow: 262.5-235p long, must hold 265. Bullish if over 270 for potential 300. Aug28 275-325C all long.
A lot is going on with MSFT over TikTok news. We see a demand area at 205 – 206 level should this giant decide to sell off. Currently as things stand MSFT is backtesting the bottom of the breakdown as depicted in the chart. If it reclaims that as a buyer’s area there is a supply zone at 215 which would be a decent PT should the buyers show up.
Darkpool: 212 below, 212.50 and 213 above
Flow: market makers pricing a drop to 200 with all puts from 210-200 long
Earnings are coming up and this could be worth playing depending the direction it runs. Currently sitting at all time highs. With the rest of FANG behaving bearish this week, getting the feeling we might see a pullback. However if 448 holds as a new buyer’s zone we could see the highs be challenged. RBR at 435 level but it is not fresh, and a DBR at 420 that is of interest. Supply above at 453 and 460 obvious top.
Darkpool : 420 below, nothing above
Flow : 430 & 420p long, 460-477.5c long
TSLA is still overall in a 2 week chop area and it has not broken up, or down. We are going to play this on either a breakout and retest, or a breakdown and retest of the trading range to whichever direction is chosen. If it breaks down we see it going as far as 1250-1300.
Darkpool: 1425 below, 1460, 1500, 1550, 1600 above
Flow: 1500-1700C are long above, 1350p small size puts long also
INDICATOR OF THE WEEK: Volume Sell Pressure
We found this indicator to be relatively simple but extremely helpful more so than some other overcomplicated indicators. It tells you what % out of 100% of the volume on the current candle bar is selling volume so you can easily tell who’s in control where. It works on any timeframe from 5 minutes to daily and weekly and it tucks itself away in the upper left portion of your chart where it’s not at all intrusive but provides wealth of information.
WEEKLY TRADING TIP: Make the Same Types of Trades Over and Over Again.
So much about trading is having an edge. A personal edge at that. Having a system. Something that suits your personality and emotional intelligence. Often we hear and use the analogy of the bricklayer. The bricklayer/builder uses the same methodology and work ethic day in and day out and works diligently in the same way in order to create engineering marvels. He doesn’t one day just wake up and start laying bricks with his forehead. It sounds silly, but it’s exactly what most traders try to do. Don’t be a random shotgun, be a sniper, be a bricklayer, lay down a foundation and do it over and over and over again until your edge becomes second nature to you. That way when you win you’ll know exactly why you won, and when you lose you’ll know exactly why you lost and how to lessen the impact or avoid the loss altogether the next time.