Good evening folks,
Hope you had a very good weekend away from the screens and recharged your batteries before another trading week!
✌️
MARKET REVIEW
Market followed through on the downside last week and sliced through pretty important levels (1819$) before closing the week below all kma’s. As of the writing of this letter, we gapped down more than 1.3% on RTY and now below 1779$ that I was talking Thursday night.
Trend is clearly down at this point and if you’re not playing defense yet, now you really want to be careful and backing down exposure. We know that we’re in a bear market, and we rejected the 50dma/10wma last week, so we could really be seeing the start of the next leg down right now. Keep in mind that we never had a climax and panic selling that normally ends corrections.
Next potential area of support is around 1700/1725$ where we bottomed back in May. This is a 3.4% move from Friday’s close (2% from current price).
Bullish scenario:
Right now, a one day reversal would not even act as a bullish scenario for me. It will take bottoming action before I even consider covering my short & putting back long exposure. Stay tuned when we’ll get there.
Bearish scenario:
Clearly, the first bearish scenario for me would be that we stay below 1779$ Monday. We might retest it, but if we get a rejection back down it would confirm again the move down. Then a first thrust to 1700/1725$ would be the first place I would look for potential support.
MARKET BREADTH
NET new 1M & 52W LOWS on the NYSE & NDX.
McClellan only at -128…we’re not even oversold…!
Stocks > 50dma continue to correct and now back at 26%. Oversold levels will be in the 10’s, so still room to go here as well.
VIX really spiked again Friday. We popped above all kma’s and found resistance at both recent structure DTL & 30$. We don’t want to see it close above 30, but by seeing the futures tonight…I would be really surprised if we don’t open above 30 Monday morning. Volatility is being priced in!
ECONOMIC CALENDAR
Big week again. We have Interest rate decision and FOMC on Wednesday. This will definitely move the market, so be carful around this time.
Market begins to price in a 0.75% rate hike on Wed…which we didn’t see before CPI data last week. (we were around 2-4% probability)
SECTORS PERFORMANCE
3 sectors stood out last week in an overall very rough week across the board.
Despite market rollover last week, many leading names in these sectors are above their 10 & 21dma building wedges.
I also notice SOLAR sector pulling back, which will probably give us a nice opportunity to find an entry, which we were not able to do in the past few weeks.
Crude Oil (CL_F) Opening the week below 119.98$ pivot, but is still above 10dma & 116.5$ recent base level. After a bullish candle like last week, a backfilling on Monday is only expected & normal.
PORTFOLIO UPDATE
Still managing my TZA position right now and did not open any long position Friday as market clearly in downtrend and below all kma’s.
This is were the pro’s manage risk first, reduce exposure aggressively and play the short side, compared to still trying to play strength in a bad market, trying to pick stage 4 high Relative Strength or praying your newly positions will come back because the company is showing so much potential.
You want to PLAY DEFENSE first, this is a SHORT or CASH market right now, make no mistake.
New positions:
Trimmed positions:
Closed positions:
DAILY FOCUSLIST
4 names in my FocusList tonight
Ok, you heard me say from start to end of this letter that trend was down, play defense, blah blah…typical Alex’s stuff. Why the hell do you have a FocusList with 4 names Alex?
Part of being a professional and preparing for success is to ALWAYS BE READY for every scenarios. EVEN if it don’t materialize.
In case with get a major news or a relief rally happens, I want to have a few names that have good setups in which I could take quick intraday swings or 1-2 day swing at max. Right now, this is more day trades, as like I said, we are far from seeing bottoming action. But some sectors are showing good strength & setups showing good R/R and are that within my playbook.
Does it mean that I will take them tomorrow…hell no! IF market is not showing strength I will stay on the sidelines and wait. That’s the beauty of BUYING ON STRENGTH. Your alerts are above, so if we open weak tomorrow and these stocks never reach these entry pivots, I don’t have any reason to touch the BUY button at all.
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