The S&P 500 (/ES) rallied to the weekly 21 exponential moving average (EMA) on Friday but closed the week below the weekly mean. Keep in mind that it’s completely normal to see a reversion to the weekly mean in a bearish market, just as we’ve seen flushes to the weekly mean in bullish markets.

What this means for the short term is things could appear more bullish. So long as the market closes below the weekly mean, we can use these rallies to the weekly 21 EMA as opportunities to get short. 

For now, we’ll patiently wait for the Volatility Index (VIX) to rise and trigger more downside momentum before we enter short positions on the indexes.

In the video above, we’ll lay out scenarios we could see with our line in the sand, trend/structure, and volatility.

Stay Focused!

This week the S&P 500 (SPY) rallied back to the weekly 21 exponential moving average (EMA), which is a pivotal level of resistance for this bearish trend. For both the bears and the bulls, how the market behaves at this level will likely dictate the direction of the next few weeks.

Keep in mind that reversions to the weekly 21 EMA are normal throughout the course of a trend. Looking at the chart below, you can see that last year we had several pullbacks to the weekly mean, which all made for great buying opportunities.

In a bearish trend, rallies to the weekly 21 EMA make for great opportunities to get short, so long as the market continues to finish the week closing below the mean. At the moment we are patiently waiting to initiate a few shorts on the indexes here, but we’ll need volatility to spike to start triggering more downside.

While the SPY rallied to its weekly mean on Friday, the Volatility Index (VIX) faded to its own weekly 21 EMA, which could be the “low” for volatility. 

Watch VIX closely next week, especially after having closed Friday trading under the bottom daily Bollinger band. In the event VIX begins to rally from here, we could see the markets begin to roll back over.

Remember there’s no need to rush trade ideas in this environment. 

Focus on structure, identify your levels, and patiently let things unfold while you pick your spots wisely. If the markets finish next week with a close above the weekly mean, it signals a big shift in trend and structure and would require us to begin tweaking our game plan. 

So long as we’re under the weekly 21 EMA, be prepared for the next flush once VIX begins to wake up.

Stay Focused!

Happy St. Patrick’s Day, traders!

The market had a monster rip on Thursday as we approach the end of this busy trading week.

It’s been a volatile week dealing with big catalysts with the Federal Reserve, interest rate decisions, and retail sales. Keep an eye out on Friday as big money will rebalance their portfolios and equity options and index options & futures expire due to triple quad witching. 

When we see big pops for a few days straight like this, it’s important to flip the switch and capitalize on these big moves. We have to stay flexible and switch from shorting pops to buying dips. 

As the S&P 500 (/ES) is still trading under the daily Ichimoku Cloud, keep in mind that we can see price rip to key ranges, stop and reverse, and head lower. The range from $4,400 to $4,455 is a hard level that the ES will either break through or hit and roll over. 

In the video above, we’ll discuss the key liquidity levels for the market indices, how volatility can shape the narrative, and potential setups on SNOW, SHOP, TSLA, AND NVDA.

Stay Focused!

We’re expecting a busy week of catalysts for the market with events on the trading calendar, economic calendar, and world wide news. 

Market Events

On March 18th, we have triple quad witching – the expiration of equity options and index options & futures. Pay attention as this could lead to liquidity hunting, pinning at levels, and many options getting destroyed.

S&P Indexes rebalancing also occurs on Friday, which is when big money rebalances their portfolios at the end of the quarter. Be prepared as we could see certain stocks pop and rip hard or unexpectedly drop.

Take a look at the economic calendar on Wednesday for retail sales in the morning and the statement from Federal Reserve Chairman Jerome Powell in the afternoon.

As for the headlines, there are many catalysts from Ukraine and Russia to China that could affect the market.

Here is our focused list:

AAPL — Negative supply chain news over the weekend caused a large drop into Monday. The make-or-break zone is $151.90 to $154.70, with the 200-day simple moving average (SMA) at $153.60. If AAPL drops below this zone, it could hit $147 and lead the technology sector lower.

NVDA — Liquidity is above at the $225 to $230 zone, with point of control (POC) specifically at $226. If NVDA hits $208 to $206, it could dump hard to $200 and $195. If NVDA pops, it could hit multiple key levels above starting with $218.

SHOP — As long as SHOP is below $585 to $574, SHOP appears bearish. The largest level we’re watching is $500. If SHOP fails to break through $529, it will likely breach $500 to $470. If it pops through $529 and holds, it could hit POC at $556.

Stay Focused!

Heading into the new week, the market is showing bearish structure across the board on the major indexes. The issue lies in the fact that there isn’t much movement happening because of large levels of support.

Note that the key level of support for the S&P 500 (SPY) is $420. 

There are weekly and daily squeezes on the SPY with lower time frame squeezes on the 4-hour, 2-hour, 1-hour, and 30-minute charts. These nested squeezes could fuel the fire short and take the market through the key level of support at $420.

Remember, a squeeze is a large build up of energy. If the market can release a large amount of energy and break support below, this could trigger a move into a new low. 

In the video above, we’ll discuss the scenarios for the market next week and review both short and long setups on names like INTC, IWM, AMZN, and UBER.

Stay Focused!

The market finished the Friday session with weakness which could open the door for more downside next week…  

Despite the bearish structure of the indexes, we’ve seen a handful of nasty short squeeze rallies, which are to be expected in a downtrend. The key, and what matters most, is that up to this point these bear market bounces have not shifted the structure of the indexes, sectors, and leading stocks. In other words, everything still looks bearish for the time being.

Heading into the weekend, the S&P 500 (SPY) has bearish squeezes on the weekly, 2-day, daily, 4-hour, 2-hour, 1-hour, 30-minute, and 15-minute time frames. When we have bearish structure and momentum on the weekly and daily charts, these clusters of nested squeezes on lower time frames can serve as a great gauge of the next directional move.

We’ll be watching for the “domino effect” that can take place when a lower time frame squeeze fires short and triggers the other squeezes to do the same. This release of energy across multiple time frames can lead to a lasting move in either direction.

While the squeezes can help, we will have to see the SPY break support in order to get a meaningful flush into new lows.

For now, $420 is the key level of support to watch on the SPY next week. If that level can break as the squeezes fire short, the market may begin its next leg toward new lows.

But, if $420 holds as support, there is always the potential for another vicious short squeeze into resistance.

We have open short positions in IWM, AMZN, INTC, and long positions in energy names like EOG and DVN. In our Sunday watchlist video, we’ll break down a few of these setups in detail, and the entry/exit levels we’re using for our swings.

Stay Focused!

After an uneventful core Consumer Price Index (CPI) report on Thursday morning, the market continued its indecisive chop. With new headlines daily, the market and even the world doesn’t necessarily know what to do or think. 

These are the periods of time when the market might chop between ranges, so it’s even more important for traders to focus on the technicals and fundamentals that keep us successful in all environments. 

We’re still focusing on the same zone on the S&P 500 (/ES) from $4,212 to $4,260. On Thursday, the market was still stuck in this range that is our “line in the sand.”

In the video above, we’ll cover a few scenarios that are possible for the rest of the week and review setups on AMZN, SHOP, and GOOGL.

Stay Focused!

The S&P 500 (/ES) finally broke down the major zones we have been covering, causing the 4-hour squeeze to fire down. 

After a break last week, the market is starting to look vulnerable again. If the ES stays under the $4,260 to $4,212 range, we can see a continued flush this week toward $4,100. 

Our main focus will be on capitalizing on the indexes and setups on SHOP and NVDA.

Here is our focused list:

SHOP — If SHOP stays below $585 to $574, it has a chance to see $530 and then $500. 

NVDA — $208 to $206 is going to be a major level that can cause a nice bounce, or we can see a break down toward $195.

Stay Focused!

The S&P 500 (SPY) is still printing a bearish weekly squeeze and was rejected at the daily 21 exponential moving average (EMA) on Friday.

For this weekly squeeze to fire short, the daily chart will need to break below the key level at $430. Until the SPY can break this level, this will be our line in the sand for the next flush to new lows.

In times when the market needs to crack through a key level of support or resistance, there tends to be many squeezes letting out energy. 

The main focus for next week will be on the 4-hour squeeze as it is releasing a build-up of bearish momentum under key support. Be prepared as this release of energy could send the rest of the market to new lows.

In the video above, we’ll review the bigger picture trend and pick out spots wisely for potential shorts on names like IWM, AMZN, and SNAP.

Stay Focused!