Alex's daily Market update & Focuslist - 12/07
The chop fest is here!
Good evening folks!
I hope you had a good day and could stay out of this very volatile & choppy market. Now, let’s see how we can play the next two days of this week.
Alex ✌️
GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
Today, we tried to reclaim the 21dma and the 3964$ level but got rejected. We are starting to live below the 21dma, which is not good.
Today was very volatile and directionless, as I pointed out as a possibility for the rest of the week, as next week will be packed with important news. This is the worst action to trade, and the best was to sit on our hands today.
We are still above the 50dma and essential support area, so if we break down in the next few days, I will look at a potential HIGHER LOW from the October lows as a potential downside target. We’ll take it day by day, level by level.
As usual, we’ll follow price action, but this adds conviction to the rollover scenario right now...
On the upside,
I will watch the 3096$ level and the 21dma tomorrow for a potential reclaim of the recent support area.
On the downside,
3903$ level & area is my next target on the downside.
If we can’t hold that level, the 50dma is the next logical support within reach.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
Alex’s TAKEAWAYS
LT SIGNAL: downtrend (red) + below 50dma = BEAR market (🟥)
MT SIGNAL: downtrend (red) + above 10dma = RALLY under pressure (🟨)
Today we chopped, but we retested and rejected the 21dma and 3964$ level. The more of these retests & rejections we’ll get (short BORS), the more likely we’ll continue down.
I don’t know how far this pullback will go, especially with next week's FED FOMC & important quad witching week…we might very well chop around these levels waiting for the FED next week. (between 3903 and 3964$)
One thing is sure, this current rally is really under pressure, and I would be cautious with any new long exposure. If we do rollover it could go very fast.
Remember, risk first 🛡️
Some observations:
ES_F living below the 21dma & 3964$ previous support area
Overall, we saw good action in the leading names (RS list) and way less destruction than yesterday
VIX followed through and closed above the 21dma. We are not above the resistance area, but watching that closely tomorrow.
DXY 105$ retest. Not a lot of strength on that bounce.
10Y broke the important base area and continues selling off - recession playbook?
Breadth improved a bit today - but still negative.
Leading sectors SMH & XLV acted OK, but TAN & ITA made a nasty reversal. XBI is close to a bear flag UTL breakdown as well.
Like always, I’m always staying alert if the conditions were to change. One step at a time using progressive exposure!
Gameplan:
Tomorrow, the game plan will be to recognize QUICKLY if we have a RANGE day or TREND day. If we get a down TREND day, I will push things a bit with the short ETF (SPXS) position. But if we have a RANGE day, I will only manage my current open positions and stay on the sidelines to not get hurt in the chop & volatility like today.
Seeing that many constructive actions are in the leading names today, I stay open to a bounce from these levels tomorrow. If that happens, I want to see a reclaim of the 3964$ level to cover my short positions. If that happens, I will have a couple of setups in the FL. If this happens, I will take at least 50 to 75% profit into strength EOD to finance the overnight risk.
This is not a time for position or intermediate swing trading, we have to hit singles.
I would not be too surprised if we chop around that level (between 3903$ and 3964$) until next week with FOMC, CPI, etc. (big week)
LONG FOCUSLIST
I will keep a FocusList close for tomorrow in case of the market bounce from these levels. Still, I would be VERY cautious opening any new long exposure with the anticipation of a possible rollover OR a choppy market. If I do, I will make sure to take a lot of profit into strength to finance the risk.
Above all, ONE position at a time, and if you don’t get profits building quickly, you don’t add any other positions. It’s called PROGRESSIVE EXPOSURE.
CPRX 17.22, LSCC 70.15, PCG 15.91, ELF 55.66,
CPRX 0.00%↑
Still building nicely above the 21dma, and we just created a higher low today with a possible 3-day mini-channel breakout.
LSCC 0.00%↑
One of the strongest semi in the group and one I lost my position two days ago. I like how we are still in that mini-channel and finding support at the 10dma. The volume is still very low in that pullback, and I also notice the higher lows with today’s bounce.
PCG 0.00%↑
One name that I have followed for a while but can’t seem to take off. The RS right now is very telling, and I will bring back my focus on it. We retested the previous structure area and right at the 10dma and even tested near the 21dma yesterday.
ELF 0.00%↑
Still pulling back at the 10dma and nearly broke the DTL today. We are building higher lows, and we want to see that UTL hold. Otherwise, it will be a rollover candidate. It makes or breaks tomorrow…
SECTORS PERFORMANCE
Leading sectors
(XLV) Healthcare - Bounced at the 10dma and confirmed a potential BORS at the stage 3 base area. This is very constructive…
(SMH) Semiconductors - First gapped down below the UTL and were later rejected by it. It looks a bit precarious here, but I do find a very nice setup in semis names, so I’m staying open.
(TAN) Solar - Rejected by the 21dma but supported at the 77.73$ support area. It all will depend if we can bounce or continue lower from here.
(XME) Metals & Mining - Failed bounce - looking weak.
Sectors on watch:
(XLE) Energy - Failed bounce off support area - looking weak.
(XBI) Biotech - Tried to bounce off the UTL but got rejected at the 81.75$ level. Looking very weak.
(IGV) Software - Not able to bounce at the support area and even got rejected by the overhead 50dma. Closed below support.
(XLF) Financial - Tried to rally but got rejected and closed below the 21dma. Looking weak.
MARKET BREADTH & INTERNALS
$USHL (Cumulative new 52W Highs/Lows & 50dma)
LT SIGNAL: downtrend (red) + below 50dma = BEAR market (🟥)
!MCSUMNYA (McClellan summation index & 10dma)
MT SIGNAL: downtrend (red) + above 10dma = RALLY under pressure (🟨)
NYHL (New 52W Highs/Lows) - Stayed negative
NYAD (Net Adv/Decl) - Flat today.
MMFI (Stocks > 50dma - MT breadth) - Rejection of the overbought area and now below 21dma. (trend turning down)
VIX (Volatility S&P 500) - Followed through and closed above the 21dma. We are not above the resistance area, but watching that closely tomorrow.
DXY/TNX (US$) - It was not able to breakout of the 105.78$ level & support area, so we’ll have to watch closely tomorrow the action of the US$ as this has a great correlation with the market direction.
US10Y/TNX (US 10Y bond yield) - Broke the important base area and continue selling off - recession playbook?
ECONOMIC & EARNINGS CALENDAR
PORTFOLIO UPDATE
INTRADAY/CLOSED TRADES:
PRIME MODEL SPREADSHEET (PT_database)
Access to the PT_database 👇
LEADERS LIST
Relative Strength names that I’m looking at closely:
These are NOT setups, they are STRONG stocks still showing constructive price action worth tracking during a bad market environment.
Overall leaders (PRIME Score)
PDD,ELF,GPS,NTNX,LSCC,GMAB,ALGM,PRTA,RCUS,YMM,PFGC,AEHR,TGTX,IGT,RLX,HZNP,TMHC,CEIX,BTU,VIPS,
Fundamental leaders (FA Score)
NOG,PSX,FRO,PR,ESTE,CALM,PDCE,RUN,MUR,HGV,HP,ERF,GFS,STNG,JXN,LBRT,DVAX,SPWR,PDD,CEIX,
Technical leaders (TA Score)
GPS,NTNX,RLX,PRTA,LSCC,PDD,ALGM,ELF,SLVM,RCUS,HZNP,GMAB,TGTX,BAND,YMM,VIPS,TMHC,PFGC,IGT,PCG,
Relative Strength 1 Month (1M-RS)
RLX,XPEV,VIPS,IQ,YMM,BZ,PDD,HZNP,CELH,BIDU,LI,RCUS,BMRN,JD,SABR,TGTX,PAAS,CEIX,ARRY,DLO,
Relative Strength 3 Month (3M-RS)
PRTA,RLX,AEHR,HZNP,GPS,SLVM,BAND,WFRD,BIIB,ELF,VCYT,ALGM,IGT,SMCI,YMM,NTNX,AER,SLB,LSCC,CHX,
Relative Strength 6 Month (6M-RS)
AEHR,CPRX,PRTA,ELF,NTNX,CCRN,YPF,TGTX,SMCI,CELH,INSW,ENPH,DHT,ARRY,GMAB,VCYT,GPS,BIIB,CHWY,PFGC,
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IMPORTANT NOTE:
I have the discipline to build a detailed FocusList each night, but I want to emphasize that I DON’T take all the trades that would trigger their entry. Some reasons to take a specific position over another or not take any trade, even if the alert is activated, are:
The general market price action
My Market-Based exposure model
My Portfolio-based exposure model (progressive exposure)
A high-conviction setup
Price action around the entry pivot
STOP LOSS:
Recent swing low pivot
For less active trading, you can use the recent swing low pivot as a good structure level to place your SL, but consider that the distance with the entry is more significant. You need to adjust your position size to keep the trade risk as a % of your portfolio, ideally below 0.5% or even 0.25% when the market conditions are imperfect.
LOD (Low Of Day) / HOD (High Of Day)
I like to use the LOD of the day I enter the trade. This way, I can use a larger position for the same trade risk as a % of my portfolio. BUT requires more active trade management and expects to be taken out more often (lower hit rate).
Then even if I take a trade at the entry pivot, I will very often sell it right away if the market roll over or the stock is backing out of the gate. I prefer to re-enter on the entry pivot reclaim than to be stuck with a more considerable loss. Please study all my education articles closely to learn how I handle trades around these entry pivots.
REFERENCES
Articles on the system:
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