Taking a break as planned from SPY but thought I would share my thoughts on IWM. But in full disclosure some referencing of SPY will happen.
Additionally, I have ran the probabilities on all of my stocks except BA, and they are all pretty underwhelming. So let's get into it:
Next week:
Probability is mixed. As you can see from the chart, we have 1:3 for the bull range and 1:3 for the bear range.
What does this mean? Generally, this kind of mixed probability means a sentiment shift mid week.
Looking at the economic calendar for next week, we do have some catalysts, most notably jobless claims on Thursday, so that is where I would be looking for a potential sentiment shift if it were to occur.
Looking deeper into the probability, there is a slight preference for bullishness, but nothing overly substantial that I would feel comfortable swinging to.
We also have a short trading week next week which is something to keep in mind.
Price Targets:
Weekly price targets for IWM are as follows:
Bull
1. 188.31
2. 190.44
3. 192.57
Bear:
1. 185.37
2. 182.82
3. 180.27
Reference Target
Immediate reference target is shown in purple and rests at 186.89.
Opening below, I would be bullish, opening above, I would be bearish (until the target is taken out).
Tuesday Outlook:
There is definitely a notable bearish bias showing up in the probability for Tuesday. What is interesting is that, the prospective targets seem to favour a move to 185.63. But the intra-day (Real time) targets have a slight bullish bias.
This leads me to speculate that dip buying will continue into Tuesday, with a potential gap down leading to dip buyers stepping in as the market opens. However, again, the probabilities do favour, overall, more of a bearish bias on Tuesday, so its important to exercise caution if you plan to day trade this index.
Overall Analysis:
When the stock has these kinds of odds, in order to gain more insight into the likely trajectory, I apply a test that is applied in law, called the "Totality of the Circumstances" test. This simply means I look at all the facts and all of the data I have available to me and develop the most logical and simple thesis that attempts to explain the data in logical and actionable trading plans.
Based on this type of qualitative analysis, the thesis I would adopt leading into next week would be:
Overall bullish bias to start of the week with a notable pullback leading into Tuesday. This is supported by the overall need of pullback (IWM gained over 5% on the weekly and is running pretty hot on its overboughtness) and the fact that the intra-day probabilitie support bearishness on IWM with a move to the 185 range.
We can expect the stock to move towards the upper bullish range. This is supported by the slight bullish bias noted in the quantitative data on the weekly.
However, we can expect the market to react to a catalyst and change direction mid-week. Whether that be SPY hitting its overhead, year long trendline in the 400s, or whether that be jobs data or another economic catalyst. This is supported by the overall probabilities having identical support for bullish and bearish targets. It is possible we come crashing down to the bear targets (if we start with a bullish sentiment) or go parabolic up to the bull targets (if we start with a bearish sentiment). However, it is also possible, and supported with the probabilities, that we remain range bound without actually making or piercing into the bullish or bearish range. If the catalyst is not strong enough to sway the market in either direction, we could very well see a market that remains range bound and undecided.
One thing is likely though. That is that IWM is going to experience some selling. How do I know? Because IWM has exceeded its monthly range:
While IWM will drop from its range and sustain this, it generally will not sustain a bullish exceedance of its range this early on in the month:
It doesn't usually sustained this kind of selling either this early in the month:
It generally waits to later in the month before it does any type of more aggressive move out of its range. So judging by current timelines, we should see this sell back into the range at some point.
My plan:
How I manage weeks like this is by limiting my trades to day trades and, if taking a swing position, limiting it to small positions.
I would be inclined to swing short if we see IWM make it to that green box and SPY reject from its overhead resistance.
I would be inclined to buy dips on Tuesday.
We will have to see where the 99% targets fall. RTY, YM1! and ES1! have already taken out their weekly 99% targets this evening. So we will need to reference the 99% on SPY, DIA and IWM on Tuesday. These can give us a clue into the overall direction of the stock for the week.
As always, I will update to this post as an addendum as information and data become available to me.
Leave your questions and comments below and trade safe everyone!
Additionally, I have ran the probabilities on all of my stocks except BA, and they are all pretty underwhelming. So let's get into it:
Next week:
Probability is mixed. As you can see from the chart, we have 1:3 for the bull range and 1:3 for the bear range.
What does this mean? Generally, this kind of mixed probability means a sentiment shift mid week.
Looking at the economic calendar for next week, we do have some catalysts, most notably jobless claims on Thursday, so that is where I would be looking for a potential sentiment shift if it were to occur.
Looking deeper into the probability, there is a slight preference for bullishness, but nothing overly substantial that I would feel comfortable swinging to.
We also have a short trading week next week which is something to keep in mind.
Price Targets:
Weekly price targets for IWM are as follows:
Bull
1. 188.31
2. 190.44
3. 192.57
Bear:
1. 185.37
2. 182.82
3. 180.27
Reference Target
Immediate reference target is shown in purple and rests at 186.89.
Opening below, I would be bullish, opening above, I would be bearish (until the target is taken out).
Tuesday Outlook:
There is definitely a notable bearish bias showing up in the probability for Tuesday. What is interesting is that, the prospective targets seem to favour a move to 185.63. But the intra-day (Real time) targets have a slight bullish bias.
This leads me to speculate that dip buying will continue into Tuesday, with a potential gap down leading to dip buyers stepping in as the market opens. However, again, the probabilities do favour, overall, more of a bearish bias on Tuesday, so its important to exercise caution if you plan to day trade this index.
Overall Analysis:
When the stock has these kinds of odds, in order to gain more insight into the likely trajectory, I apply a test that is applied in law, called the "Totality of the Circumstances" test. This simply means I look at all the facts and all of the data I have available to me and develop the most logical and simple thesis that attempts to explain the data in logical and actionable trading plans.
Based on this type of qualitative analysis, the thesis I would adopt leading into next week would be:
Overall bullish bias to start of the week with a notable pullback leading into Tuesday. This is supported by the overall need of pullback (IWM gained over 5% on the weekly and is running pretty hot on its overboughtness) and the fact that the intra-day probabilitie support bearishness on IWM with a move to the 185 range.
We can expect the stock to move towards the upper bullish range. This is supported by the slight bullish bias noted in the quantitative data on the weekly.
However, we can expect the market to react to a catalyst and change direction mid-week. Whether that be SPY hitting its overhead, year long trendline in the 400s, or whether that be jobs data or another economic catalyst. This is supported by the overall probabilities having identical support for bullish and bearish targets. It is possible we come crashing down to the bear targets (if we start with a bullish sentiment) or go parabolic up to the bull targets (if we start with a bearish sentiment). However, it is also possible, and supported with the probabilities, that we remain range bound without actually making or piercing into the bullish or bearish range. If the catalyst is not strong enough to sway the market in either direction, we could very well see a market that remains range bound and undecided.
One thing is likely though. That is that IWM is going to experience some selling. How do I know? Because IWM has exceeded its monthly range:
While IWM will drop from its range and sustain this, it generally will not sustain a bullish exceedance of its range this early on in the month:
It doesn't usually sustained this kind of selling either this early in the month:
It generally waits to later in the month before it does any type of more aggressive move out of its range. So judging by current timelines, we should see this sell back into the range at some point.
My plan:
How I manage weeks like this is by limiting my trades to day trades and, if taking a swing position, limiting it to small positions.
I would be inclined to swing short if we see IWM make it to that green box and SPY reject from its overhead resistance.
I would be inclined to buy dips on Tuesday.
We will have to see where the 99% targets fall. RTY, YM1! and ES1! have already taken out their weekly 99% targets this evening. So we will need to reference the 99% on SPY, DIA and IWM on Tuesday. These can give us a clue into the overall direction of the stock for the week.
As always, I will update to this post as an addendum as information and data become available to me.
Leave your questions and comments below and trade safe everyone!
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Off to a good start, 99% is unrealized on IWM at 186.05.
We should look to see what it does tomorrow, whether it pushes up to the top of its weekly range at 189.10. This would be the most ideal situation because then we would know a big selling event would be planned towards the end of the week.
If we gap down into tomorrow and remove the target, then it becomes extremely anti-climactic.
All other targets are realized as far as I can see (DIA and SPY).