SPX - daily TF break down - fifth leg down to new lows starting
SPX is breaking down on the daily timeframe - after tagging the top of the resistance trendline from ATHs and breaking the rising wedge, as well as (today) breaking the red horizontal levels from the May 2022 highs (similar to the Dec '21 and Mar '22 tops running stops on the previous swing high)
At the top (Tuesday of last week) - SPX also perfectly tagged the 200 day SMA...
From ATHs at the beginning of 2022 we have formed 4 legs with the 5th leg down of 5 possibly now underway - MACD has also just crossed bear...
On the weekly TF - SPX top also appears to be in, having failed to reach the 50 week SMA and currently below the 100 week SMA again - this week's closing price will be key to determine whether we see a continuation of last week's candle and also to determine the direction from the FED in Jackson Hole (see more below)
VIX and VVIX are close to yearly lows and breaking out of resistance on this move
All the while recession fears continue to grow in Europe as evidence by their respective falling indices, but especially by the EURUSD - which has again reached parity with the Dollar for the second time this year and has today broken below the March lows (EUR/USD hasn't been this low since 2002)
The continued strength in the dollar (see DXY) - which takes a large part of it's weighting against the ever weaker EURO - continues to threaten US commodities, metals and equities prices
As always with the current bear market any further large & sustained moves lower will be driven by:
(1) Inflation (CPI and CPE appear to have peaked in the last month's reading - primarily driven by Oil's large move lower - the largest weightings on CPI and CPE are energy and food prices)
(2) the FED's monetary policy and continued QT (quantitative tightening) - rate hikes and selling off of their balance sheet (which has been observed in recent month's to be occurring at a much slower pace than promised by the FED www.businessinsider....cleshow/92677960.cms) - the next FED meetings are August 26th (Jackson Hole) and September 20-21 (FOMC)
I remain of the view that the bottom in the markets is when the FED flips.
At the top (Tuesday of last week) - SPX also perfectly tagged the 200 day SMA...
From ATHs at the beginning of 2022 we have formed 4 legs with the 5th leg down of 5 possibly now underway - MACD has also just crossed bear...
On the weekly TF - SPX top also appears to be in, having failed to reach the 50 week SMA and currently below the 100 week SMA again - this week's closing price will be key to determine whether we see a continuation of last week's candle and also to determine the direction from the FED in Jackson Hole (see more below)
VIX and VVIX are close to yearly lows and breaking out of resistance on this move
All the while recession fears continue to grow in Europe as evidence by their respective falling indices, but especially by the EURUSD - which has again reached parity with the Dollar for the second time this year and has today broken below the March lows (EUR/USD hasn't been this low since 2002)
The continued strength in the dollar (see DXY) - which takes a large part of it's weighting against the ever weaker EURO - continues to threaten US commodities, metals and equities prices
As always with the current bear market any further large & sustained moves lower will be driven by:
(1) Inflation (CPI and CPE appear to have peaked in the last month's reading - primarily driven by Oil's large move lower - the largest weightings on CPI and CPE are energy and food prices)
(2) the FED's monetary policy and continued QT (quantitative tightening) - rate hikes and selling off of their balance sheet (which has been observed in recent month's to be occurring at a much slower pace than promised by the FED www.businessinsider....cleshow/92677960.cms) - the next FED meetings are August 26th (Jackson Hole) and September 20-21 (FOMC)
I remain of the view that the bottom in the markets is when the FED flips.
Comment:
🔨
Trade active:
Today saw a BIG break down across all risk assets, following Jay Powell's speech at Jackson Hole stating the FED will 'keep at it' in a hawkish speech - some key statements are included below:
"Reducing inflation is likely to require a sustained period of below trend growth. (...) While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain."
"Restoring price stability will likely require maintaining a restrictive policy stance for some time."
Big breakdown today with big volume:
On cash session (SPY and QQQ etfs) both showed RVOL > average on this drop
Zooming in the next support I have is 4000 area (which also happens to be an equal leg down in leg from the first leg down off 200dma)... Given how oversold this move is on small TFs I would cover some shorts there, in anticipation of a bounce. However any bounces are to be shorted in my opinion. With such shitty fundamentals we may slice right through the 4k level next week.
Stay tuned.
I refuse to call bottoms on any risk asset until the FED and other central banks flip.
"Reducing inflation is likely to require a sustained period of below trend growth. (...) While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain."
"Restoring price stability will likely require maintaining a restrictive policy stance for some time."
Big breakdown today with big volume:
On cash session (SPY and QQQ etfs) both showed RVOL > average on this drop
Zooming in the next support I have is 4000 area (which also happens to be an equal leg down in leg from the first leg down off 200dma)... Given how oversold this move is on small TFs I would cover some shorts there, in anticipation of a bounce. However any bounces are to be shorted in my opinion. With such shitty fundamentals we may slice right through the 4k level next week.
Stay tuned.
I refuse to call bottoms on any risk asset until the FED and other central banks flip.
Comment:
VIX - expecting 30's in the near future (blue TL) - if/when that TL does finally break I would look for a move to 2022 highs at a minimum and possibly up to 50
Comment:
We may have just put in a temporary bottom today...
We're very extended to the downside after the last few days of selling...
Daily TF - dragonfly doji printed:
1hr TF & 8hr TFs:
Looks like the beginning of a break out here - would like to see confirmation tomorrow (we may just be in another small TF bear flag/flat/structure). I am expecting another (small) bear market rally as pictured above.
The macro picture hasn't gotten any better, however I would like to see some mean reversion and indicators reset, before resuming the downtrend. We didn't quite reach my white TL from the lows, but I still think this will be tested in the coming weeks.
We're very extended to the downside after the last few days of selling...
Daily TF - dragonfly doji printed:
1hr TF & 8hr TFs:
Looks like the beginning of a break out here - would like to see confirmation tomorrow (we may just be in another small TF bear flag/flat/structure). I am expecting another (small) bear market rally as pictured above.
The macro picture hasn't gotten any better, however I would like to see some mean reversion and indicators reset, before resuming the downtrend. We didn't quite reach my white TL from the lows, but I still think this will be tested in the coming weeks.
Comment:
Finally got the breakout yesterday after forming a second descending wedge...
However SPX is now playing Ping Pong between two huge Put Walls expiring next Friday (september monthly opex)
3900 may be the floor for the next few days - but expecting this to breakdown after the monthly expiry on Friday 16th
However SPX is now playing Ping Pong between two huge Put Walls expiring next Friday (september monthly opex)
3900 may be the floor for the next few days - but expecting this to breakdown after the monthly expiry on Friday 16th
Trade active:
Back to the 4k put wall level CPI data released today (8.3% YoY - more than expected but less than last months reading - this cements another large rate hike by the FED next week)
Trade active:
4000 is now the key level going into this Friday's mopex - I'm still expecting new September lows (and eventually new yearly lows) from next week, after the huge expiry - especially with FOMC next week
Trade active:
Comment:
just about every FOMC day so far in 2022 has finished positive - what will be key to see is whether we give everything back on Thursday (like May and June 2022 FOMC's)
See tweets below:
twitter.com/Quantifi.../1572265983456477186
twitter.com/MrBlonde.../1572271146950881280
See tweets below:
twitter.com/Quantifi.../1572265983456477186
twitter.com/MrBlonde.../1572271146950881280
Trade active:
Kaboom
Comment:
Bounce may be on for this week - on larger TFs we are very extended to the downside...
Zooming in - need to see if SPX stays within lasts weeks megaphone - will be key to see this week if we can break up out of this structure, or if it is a continuation structure (i.e. breaking below the megaphone will lead to increased selling) - I am leaning towards the former for now
Zooming in - need to see if SPX stays within lasts weeks megaphone - will be key to see this week if we can break up out of this structure, or if it is a continuation structure (i.e. breaking below the megaphone will lead to increased selling) - I am leaning towards the former for now
Comment:
Bounce still on - as per my last update...
SPX and NAS too are getting real close to the 20 day SMA now and the daily MACD has crossed over bullish
The set up is there on daily charts and I would like to think this leads to another 10% - 20% bear market rally - but too soon to say & we are not out of the woods yet
It is unclear whether this rally gets smacked down at resistance or following another poor CPI or other data reading or whether this lasts into the midterms elections - but I think either way we get another leg down end of Oct / early Nov
Zooming in - SPX is still within the megaphone structure from last week...
SPX and NAS too are getting real close to the 20 day SMA now and the daily MACD has crossed over bullish
The set up is there on daily charts and I would like to think this leads to another 10% - 20% bear market rally - but too soon to say & we are not out of the woods yet
It is unclear whether this rally gets smacked down at resistance or following another poor CPI or other data reading or whether this lasts into the midterms elections - but I think either way we get another leg down end of Oct / early Nov
Zooming in - SPX is still within the megaphone structure from last week...
Comment:
The previous MACD crossover (bearish) in end August when this idea was published led to a large move... As have other MACD bullish crossovers in this 2022 bear market...
I wouldn't underestimate this one...
I wouldn't underestimate this one...
Comment:
Updated SPX daily chart
Bulls get another chance with CPI reading next week.
FED raised interest rates again yesterday by another 75bps (4 consecutive 75bps hike) - we are now at 2008 levels...
The markets were expecting a FED pivot, after some FED chairs having been talking up the possibility of the FED finally starting to reduce the speed of rate hikes in the past month.
We got a pivot - but not the one markets were anticipating - we pivoted from hawkish FED to even more hawkish FED.
Some key takeaways:
''The incoming data since our last meeting suggest the terminal rate of Fed Funds will be HIGHER than previously expected (4.63%), and we will stay the course until the job is done''.
''What's far more important now is for how long rates will remain high, and we will stay the course until the job is done''
''Risk management is key here: if we were to overtighten, we could use our tools to support the economy later on; but if we failed to tighten enough, inflation would become entrenched and that would be a much bigger problem''.
Bulls get another chance with CPI reading next week.
FED raised interest rates again yesterday by another 75bps (4 consecutive 75bps hike) - we are now at 2008 levels...
The markets were expecting a FED pivot, after some FED chairs having been talking up the possibility of the FED finally starting to reduce the speed of rate hikes in the past month.
We got a pivot - but not the one markets were anticipating - we pivoted from hawkish FED to even more hawkish FED.
Some key takeaways:
''The incoming data since our last meeting suggest the terminal rate of Fed Funds will be HIGHER than previously expected (4.63%), and we will stay the course until the job is done''.
''What's far more important now is for how long rates will remain high, and we will stay the course until the job is done''
''Risk management is key here: if we were to overtighten, we could use our tools to support the economy later on; but if we failed to tighten enough, inflation would become entrenched and that would be a much bigger problem''.
