Alex's daily Market update & Focuslist - 02/09
The market is slipping and getting rejected for the THIRD time at major resistance area
Good evening! If you like the PrimeTrading newsletter, please consider taking a few seconds to help make these articles possible and support my work… THANKS!
Leave a like on this post.
Share this post on Twitter.
Alex ✌️🙏
GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
ES_F gapped up this morning, along with a very strong opening breadth (a lot of stocks opened higher and showed some strength right at the open. The institutions used that strength to sell into liquidity. The indices were never able to push higher and eventually rolled over with the entire market. The downtrend was pretty strong all day as we broke below the 4137$, 10dma & 4109$ levels.
This creates a THIRD major resistance area rejection on a lower high. Today’s candle looks very back with that large tail and close near the lows.
I still see two potential scenarios:
We just made three rejections of a major resistance area, with the failed reversal attempt making a lower high. That’s the kind of pattern we would observe at the end of market rallies in 2022 before the market rolls over. We are still above the 21 & 50dma, but with other breadth indicator flipping, we must keep this scenario in mind and be cautious.
We have many potential support areas below the 21dma, so this scenario only highlights a possible pullback deeper than the 21dma.
We are building a two legs-down pullback with the two recent highs creating a new DTL to confirm the breakout & continuation. If we take the Measured Move of the initial leg down, that will bring at the 4082$ level and also the 21dma. A very plausible scenario IMO. (See Glossary for Measured Move explanation)
Update: We tested that level today, so tomorrow, we will have to bounce in that area for that scenario to remain valid.
On the upside,
If we find support near the 4082$ level & 21dma tomorrow, I’ll look at the 10dma and 4109$ reclaim as the first constructive sign.
On the downside,
If we push below tomorrow, 4082/4056$ area and the 21dma would be the next target.
Then, 4016$ pivot.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
In the following sections of tonight’s letter, I’ll cover essential parts of my daily routine & preparation for tomorrow’s trading session.
✅ My overall current market Takeaways & GAMEPLAN for tomorrow
✅ PRIME_LIST (potential TML’s)
✅ My daily Focuslist, including setups, alert levels & explanation (LONG/SHORT)
✅ My Portfolio update
✅ Sectors Review
✅ Market Breadth & Internals
✅ Economic Calendar
✅ Prime Model spreadsheet (PT_database)
✅ Leaders list (technicals, fundamentals & potential TMLs)
Alex’s TAKEAWAYS
Today, the market could not hold the base/resistance area, and we rejected the area once again.
This action, coupled with all the below observations, is adding up, and I am now very defensive. I want constructive action at a critical support level before looking for long exposure again. Right now, the risk of this market rolling over is too high (I’m not saying this will happen, I point out that there the probabilities increased considerably)
The bottom line is it’s either a healthy pullback, and we find support soon, or we rollover and head for a new leg down. Looking at the MT_SIGNAL chart, we’re just about to cross the 10dma to give us the SHORT-TERM DOWNTREND signal. If that happens, I doubt we’ll be back up in the next 1-3 days…but we never know!
This is a time to be careful. RISK FIRST!
Some observations:
NQ_F is back 6.8% above the 50dma.
VIX reclaimed the base area and broke out of last month’s DTL…with a new high today and at the 50dma - CAUTION
DXY 10/21dma rejection and retesting the 50dma again - CAUTION
Credit Spreads followed through and spiked above the 10/21dma - CAUTION
Strong stocks showed a lot of fakeouts after this morning's gap up, and others are solid short setups - CAUTION
McClellan's summation index (MT_SIGNAL) follow through down and about to cross the 10dma for our ST DOWNTREND signal - CAUTION
3rd rejection on the indices is on a big tail of the major resistance area. - CAUTION
But we are still above the 21 & 50dma.
Stocks above 20/50/200dma pullback continue.
The intermediate term is bright, and I think this rally might be the start of something more, but the market will not move in a straight line. This could also be another technical rally in this bear market, and we don’t know…so it’s very important to bend with the trend and follow price action.
Market health & Trend indicators:
LT_SIGNAL: uptrend (black) + ABOVE 50dma = INTERMEDIATE-TERM UPTREND (🟩)
MT_SIGNAL: downtrend (red) + ABOVE 10dma = SHORT-TERM UPTREND under pressure (🟨)
Tomorrow's economic news/events:
GAME PLAN:
Tomorrow I will manage my current positions and not plan any new long exposure until we confirm the market is supported.
If we gap down tomorrow, I will look to trim some of my SPXS trade into strength.
We’re still above the 50 & 21dma so I won’t look to short individual names either.
EXPOSURE MODEL:
PRIME_LIST (potential TMLs)
Tonight’s some leading names of the past days/weeks are in danger, and the list might rotate quickly in the next few days as I’ll be looking to share the stocks holding the best and basing well. These will be the first out of the gate when the market turns.
AEHR ALGM FOUR ELF BAND
AEHR: At the 21dma, and looking at risk. If we undercut the 21dma tomorrow, I’ll have to remove the name from the list.
BAND: Failed again, and now the 4th inside day. Looks at risk too.
FOUR: Failed to bounce at the 10dma and closed below. At risk here too.
ALGM: The strongest of all, but we look tired & extended up there. A pullback would only be healthy.
ELF: New high, but look tired as well on decreasing volume. We probably need to base & consolidate.
FOCUSLIST (LONG)
There are no actionable setups for tomorrow. We need to let the pullback playout and good setups form. I’m not interested in catching the first reversal but the follow-through instead.
PORTFOLIO UPDATE
INTRADAY/CLOSED TRADES (Included in Discord membership):
SECTORS PERFORMANCE
Leading sectors:
(SMH) Semiconductors - Still holding well in that base area above 246.76. Strongest sector.
(TAN) Solar - Follow through on increasing volume. now below all kma’s.
(XBI) Biotech - follow through today and now approaching the 85$ base area again. This could be a potential support level.
(XLE) Energy - We confirmed the kma’s rejection. I’m looking for a possible higher low here. The chart is not terrible and might find support.
(XME) Metals & Mining - Failed to bounce at the 21dma and now retesting the 54.91$ potential support level.
(XRT) Retail - Gap up and retested the 71.89$ level but got quickly rejected and closed below the 10dma.
(IGV) Software - Short BORS at the 293.41$ area retest. It looks like a short setup to me… but we’re still above all kma’s.
MARKET BREADTH & INTERNALS
$NYHL (Cumulative new 52W Highs/Lows & 50dma)
LT_SIGNAL: uptrend (black) + ABOVE 50dma = INTERMEDIATE-TERM UPTREND (🟩)
!MCSUMNYA (McClellan summation index & 10dma)
Watching for a potential 10dma cross tomorrow that would bring us in a SHORT-TERM DOWNTREND.
MT_SIGNAL: downtrend (red) + ABOVE 10dma = SHORT-TERM UPTREND under pressure (🟨)
$NYMOT (McClellan Oscillator - Breadth extensions)
Big push again today. We are getting low but still have room on the downside.
NYHL (New 52W Highs/Lows) - Remains positive
NYAD (Net Adv/Decl) - -1500 negative thrust
$NYA200R (Stocks > 200dma - LT breadth) - slipping again.
$NYA50R (Stocks > 50dma - MT breadth) - slipping again.
$NYA20R (Stocks > 20dma - ST breadth) - Downtrend
VIX (Volatility S&P 500) - VIX with a big spike out of the base area again. We found resistance at the 50dma today, so we’ll have to see if we get rejected there tomorrow or if we push higher.
DXY/TNX (US$) - 10/21d rejection and retesting the 50d again.
Credit Spreads (IEI/HYG) - We followed through on the UTL reclaim today and pushed higher above the 10/21dma.
ECONOMIC & EARNINGS CALENDAR
PRIME MODEL SPREADSHEET (PT_database)
Access to the PT_database 👇
LEADERS LIST
Overall leaders (PRIME Score)
ELF,ALGM,RPD,AEHR,TGTX,JXN,OII,MNDY,FOUR,LSCC,BAND,RCL,SPLK,ATI,FTAI,PATH,FRO,DOCS,VAL,BLDR,
Fundamental leaders (FA Score)
EURN,FRO,ALB,NOG,CALM,ELF,TRIP,LTHM,ESTE,GFS,RUN,PR,JXN,CPRX,SPLK,LNTH,ALGM,AEHR,CPE,ARRY,
Technical leaders (TA Score)
TGTX,ELF,RPD,ALGM,OII,MNDY,AEHR,JXN,LSCC,BAND,RCL,FOUR,FTAI,PATH,ATI,DOCS,SPLK,BLDR,MELI,MPWR,
Relative Strength 1 Month (1M-RS)
LCID,APP,RPD,ELF,MNDY,ABNB,TGTX,DKNG,JXN,MELI,TOST,CNK,EXPE,PATH,RCUS,MRVL,ALB,ON,PK,LNTH,
Relative Strength 3 Month (3M-RS)
TGTX,RPD,MNDY,ALGM,OII,FOUR,AEHR,ELF,DOCS,BAND,FTAI,LSCC,PATH,CENX,MPWR,SPLK,EVH,WMG,ATI,RCL,
Relative Strength 6 Month (6M-RS)
NINE,TGTX,OII,ELF,AEHR,ALGM,RCL,BAND,VAL,PRTA,FRO,INSW,WNC,JXN,FOUR,FTAI,PARR,GPS,LSCC,RPD,
REFERENCES
Articles on the system:
I really hope that you enjoyed it. If you did, please share it & hit the LIKE button so that more folks can be reached and this Newsletter can grow. :)