ES [S&P 500 FUTURES]
Remember how we always say the market tells a story? Listen to it instead of fighting it. Well…Let’s start the story from the very beginning.
On the monthly chart we can see that in these past two weeks we have managed to reverse the previous month. Actually, not even. Just shy of reversing it. The macro bull/bear line is still intact and sitting pretty at 3150. S&P is still very much on its overall bullish trajectory. Not saying that can’t change at the drop of a hat, but as things stand…There are no flashing red warning signs on a macro scale. On the daily we managed to close out the week just above the red trendline that runs across the top of previous trend rejection pivots. For now we’re watching this line to see if it holds or breaks, and perhaps most importantly for shorter timeframes we finished the week in a higher low over the previous posted low for the week. That is a very important level to keep an eye out for. If sellers manage to push below and keep it below we might see another selloff. For now…It’s a higher low.
The story the market here is telling you is:
“Hey. Sellers are strong. I managed to break down every previous low during the week. However, towards the end of the week after bouncing to retest 3365 DBD supply, sellers only managed to push me down into a higher low in the buyers zone. At the end of the week, just barely, buyers managed to hold up. Watch to see If that low gets defended by buyers and 3365 gets broken up and held as new demand. That could indicate a flip in sentiment. However if the low gets broken down and back tested as a new supply, more pain is coming.”
Always account for both scenarios in trading! It’s what it means to have a plan.
Something behind the scenes seems to be brewing in the markets. This selloff could have simply started off a bigger momentum shift in the making. At the end of the trading session on Friday September 11, a lot of sweeps hit the tape on: Spy 318p, IWM 142p, QQQ 265 and 257p indicating a bigger selloff might be on the way.
VIX [CBOE VOLATILITY INDEX FUTURES]
In the world of VIX things are even more ambiguous. As of writing this /VX is stuck between a breakdown and a breakout unsure of direction. On Friday VIX futures posted a lower low by 0.25. Insignificant to most, but I take it because the devil lives in the details. As of right now VIX futures are in an RBR demand zone. However this is the second test, and as mentioned a lower low was posted. If that low breaks and gets turned into a sellers zone there’s a massive gap down to fill.
On the higher time frames, as depicted on the chart, VIX is contained within a channel and has not broken out or down yet. It rejected the top of the channel however it is now testing a weekly RBR within the channel. If that holds as a buyer zone it could indicate a further selloff in the indices. If that gets broken down however, look to the gap. As always, account for any and all scenarios!
In previous newsletters we mentioned how we’re bullish on the U.S. Dollar and called out where it is going to bounce. Dollar bounced in the demand as expected and is now looking to break above the supply. It backtested the channel it was trading in and held, now we’re waiting to see if it will manage to crawl above 93.5 – 94 supply. Regardless, that was the first profit taking level. No need to hold and hope. If it manages to break up and hold we are eventually looking for a test of 96.5 – 97 level.
Heavy selling last week for this highly overbought stock. However, we anticipate a decent pullback into high 220s during this week. However, it is critical for the low 180s area to hold. On the options side, bullish bets are still being. This week 250 calls are net long and huge flow detected for Oct monthlies with 210 calls being net long. On the puts side, 195s being short for this week.
The selloff may have started on Sep 9th with the markets, but FB started selling off on Sep 3rd. It may have bottomed out at 262.22 on Sep 11, and if it has, can potentially reverse back to 280-282.50. Market makers feel the same with 265-280c long for 9/18 while at the same time protecting the position with 260p long in case it dips into the 250’s.
Darkpools: Above: 290.00, 281.40, 271.50; Below: 262.12, 260.14
Testing Fib retracement area around 92 and expecting a bounce back from here, if this area holds. It seems like the selloff is over extended and bullish bets are being made on forward month plays. Puts sweeps are non-existent and bullish calls for 100 strikes are being heavily long for Nov and next year mark expiries
Despite the market selling off in the past few days, FedEx has been holding its ground for its upcoming earnings on 9/15. Fib retracement on the weekly chart is showing it’s trying to get over the 0.786 fib @ 234.75 approximately. Once it’s over 234.75 and holds, FDX could ramp straight to 275+. Market makers feel the same way with 275C long for 9/18 and 350C long for Jan 2021.
This could be a long term hold stock and leap hold for Jan 2021 options. FDX is now over the 2019 highs and testing to breach 2018 highs of 274.66, over this and FDX could be flying in clear blue skies with new all time highs.
Darkpools: Above: N/A; Below: 230, 228.50, 220, 211
MORGAN STANLEY [MS]
MS is trading at near the bottom of the trending range. Friday close was slightly be- low the 50 ema however, the new tech IPOs in the coming weeks could drive the bank stocks higher through the week. Expecting the 50 area to hold, we also see the Puts are net short at 50 strikes and net long for 53 Call strikes
Hindenburg Research came out with some serious allegations that Nikola is nothing but a fraud. The allegations sent the stock in a downward spiral from Sep 9 into Sep 11. NKLA CEO came out with a rebuttal to refute the claims but it didn’t seem to hold it’s footing as the stock only slid further. Market makers feel there may be some truth behind the allegations and have taken 20p long for 9/18 as well as 10/16. At the same time, to likely protect the short position, 35-38c are long for 9/18 if it should recover.
Darkpools:Above: N/A; Below: N/A
ORCL had quite the surprising earnings and made a solid move, had it not been for the market selloff, it may have tried to reclaim and reach new all time highs. Market makers feel the same way with 63c long for 9/18. Although they have taken the long, this goes without saying that, the market needs to hold herej in order for the tech giant to reclaim its own footing. 57-63c are long for 9/18 while 52.5p are long for 10/16. There may be more blood in the streets.
Darkpools: Above: N/A; Below: N/A
Square is finding support at around 134 area and is one of the highly bullish options trades in tech sector. Anticipating that the 50 EMA could hold otherwise, we could see a bit more sell off into high 120s. This week, we see a lot of puts are being sold on the bid and calls being bought at ask. 155 Put sweeps are net short and 160s and 172.5 Calls being net long.
Visa broke the previous 52 week highs around 215 area, however it is met with extensive sell off during this week and last. Expecting that the 50 ema levels to hold, there could be a decent push into the highs one more time. Options show bullish beha- vior thru the week with 215 calls being net long and 197 strike puts being net short.
INDICATOR OF THE WEEK: Ichimoku Oscillator
We’ve noticed plenty of our members like using the Ichimoku cloud.This is a lower declared Ichimoku Oscillator. Works much in the same way but is removed from the chart so you can focus on the price action above.
WEEKLY TRADING TIP: Pro Traders Are Measured By Their Losses.
Pro traders aren’t measured by their wins, but rather by their losses.
I know that might sound weird at first, but hear us out. We’re not going to say that it’s easy to win, however a 12 year old could get lucky and put on a TSLA trade because he likes Musk, and end up making money. However, career traders are much more concerned with losses rather than wins. What does that mean? That means you must have a plan and follow it. Position yourself accordingly, and if a stop loss you have set for yourself gets hit take it. No questions asked, no ifs and buts. Sure, sometimes you might just sell at the bottom and stock will bounce after it stops out but that should not deter you. That happens once or twice out of 50 times, the other 48 times it will save your hide…provided you have a plan. If you chase spray and pray however, that’s going to be your unfortunate reality for a long time.
Losses and the subsequent management thereof is much more important in the long run. Only one 100% winner can reverse nine 10% losers on the same position in terms of financial value, so why hold? Why hold until the position is beyond saving and you are down on your account way more than you can afford to be? Ladies and gents, trade smart. Have a plan and set your stops. When those stops hit, take the exit!