My post Friday, warned of a bounce coming soon and it mentioned covering shorter term trades. Please refer to the attached "related idea" at the bottom.
Now we have gotten a nice little bounce, it already looks like it's trying to top to me. It could top here or surge higher to 279.30 or 281. But regardless wherever it does top it will be the next best place to get out into the safety of cash (or short) if you hadn't done so already last week.
If we make it all the way back up to the top at 281 area then I would be cautious of a break above that horizontal level, if that happens then we could see a retest of the yearly highs. This is an unlikely scenario in my opinion, but anything could happen, which is why closing out of shorts or re-entering the market long, if we do break 281 would be responsible for managing risk.
My analysis tells me that the odds are; we have just put in the last high point this market will see in a long time. Watch for the reversal by breaking this flag's support line, and then expect things to fall apart. This flag is ascending in nature, which leads to an impulsive break down if we break the support.
30 minutes until the market closes, so we will get to see which way this thing goes pretty soon.
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On a small timeframe scale (5 min) we are getting nice High Volume... you know what that means...potential topping volume. Keep your eyes on this area to see if it does in fact exhaust here
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maybe so....
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Flag decomposing, Potential reversal.
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This area could be very significant in the long term. If we are in a bear market (which I believe) then this last 2 months has been its first rally, meaning this topping area will potentially be the highest point in a coming big bear market.
The specific area that we are at currently is the first lower high off of the highs put in from the first Bear market rally. You tell me if that is significant or not...
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Watch for a break of the red line for entry potential and managing risk..
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Plz observe Nasdaq QQQ Just broke its highs, while small caps IWM are incredibly unmoved by this bounce.
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QQQ's looking to break back below its highs. Other indexes looking like they don't have the follow through at this point, I expect downside from here.
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Let's see what Kind of Breakdowns we get from here to close... Tomorrow will likely be the real down movements as there are only 3 hours left in today's markets. If you are in mutual funds that only execute orders at the end of the day, then you may have a Lucky opportunity today for that.
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Please keep an eye on QQQ breaking back below its highs of this 2 month bounce at 175.80
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401k money or mutual fund orders-- that only execute at the close of the day ... Should strongly be considered today.
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GET READY!!!!
IWM ... QQQ and SPY all starting to break todays structures... Special attention on QQQ
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Selling for the next hour and possibly in the futures tonight as well
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SPY - just started breaking some structure as well
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As well as Small Caps
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Sorry---- That was SPY --- Here are the small caps..i cannot post this fast enough IWM- Russell
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Nasdaq retesting its that major horizontal level.... IMO Futures tonight will be down on all of the markets.. Expect large gap tomorrow morning.
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I am not convinced that this is impulsive with breakout volume breakout to the upside. It looks more like another stop hunt.
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Derisking shorts until a break back down below the top would be responsible. But you would need to be quick about the rebreak at 281.86 if it occurs things will drop quickly, as it would be a bull trap/throw-over
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Watch either green box territory for a break
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GG- Love that adrenaline >>> This thing is starting to break down its levels and will likely continue and accelerate. We didn't have a breakthrough volume on that break of resistance. Price was forced up there but it was not organic, everyone trying to jump in on that trade.. We will see how this develops, but usually, stop hunts / traps are followed through nicely.
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I have adjusted my "Rectangles of Risk Management" for the potential for a bull flag breakout to the upside, still not favored outcome IMO, but to keep it fresh.
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Care on the structural breakup.
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281.86 Very Small baby support broke.
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Be careful here we are attempting to break top of this Resistance
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This is NOT what you want to see for a breakout trade. Bad volume, and instant rejection below levels. The green box at 282 is where you would now want to watch.
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Although we wicked down, there was no signs of Bottoming Volume to show conviction in buying/supporting that wicks price level.
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In the sands of time, I believe these levels will be very historically important.
Once again great work and updates. QQQ breaking back below the earlier high is key.
vergun
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Great post and love the frequent updates. I agree with your analysis, what keeps me from fully accepting the bear market scenario is Dark Pools are buying up this dip, which is a roughly a 2 to 3 month precursor to seeing the same trend in the public markets. If this indicator is correct, we will see some back-and-forth consolidation over the next few months, then an eventual break up higher.
squeezemetrics.com/monitor/dix
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@vergun, Whoa, cool link... I need to look into this dark pool matter to figure out how to respond. But I am very grateful for you sharing this resource and Idea with me. I will get back to you shortly. But with what you say about seeing back and forth consolidation over the next few months, I agree. This is a distinct possibility and something that will take special care when using options. Looking at other bear markets there were times of extremely drawn out tops, that were consolidation in nature before they exponentially dropped after breakdowns in structure. We can almost look at the past 2 months as a miniature market cycle example: dec 26 we started a bull cycle, now we are starting the consolidation phase, and when that breaks.. we can expect the bear phase. (but on a miniature scale). Overall, I am very biased toward a bear market ensuing based off of how this country has managed its financial policies over the last 10 years, but there are still factors at work that could potentially get us out, but doubtful to me personally. Until we're making new highs SPY 300+ you won't see me posting bullishness.
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@PipMiesterStronger, right, I understand that. When I zoom out and look at the monthly on the indexes, on one hand one can see a topping pattern, on another hand one can see a bull pennant forming where the September Highs and December lows form the highs and lows of the pennant. Something similar to the Bull Flag that formed from 2014 - 2016 shape, which led to the 2017 rally. I am hoping for the bear market because the volatility will create some amazing trading opportunities, but I'm also equally open to the negative landscape changing incrementally toward the positive and leading to a third leg up in the market with a new bull flag and eventual topping formation years down the road. Every bull market climbs a wall of worry, after all. While things can seem negative now, there's a reason Dark Pools are buying up liquidity. If the U.S. starts to print downward revisions to GDP growth similar to ECB and China, that will make the bull argument more difficult.
PipMiesterStronger
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@vergun, I must say you haunted my dreams last night when you revealed your "Dark Pool" chart to me. I have not used dark pools to trade, but I will start including them in my regimen. So I want to thank you once again for sharing that. Observations from your chart (link): The dark pool buyers are typically on the right side of the trade most of the time, and very 'contrarian' in nature. Last year when the Jan 2017 top was being put in they were selling out. They then accumulated after it dropped hard and then sold out again during this years peak up until Sept 2018. Perfect timing these anonymous dealers have..... After our dump to Christmas, they accumulated. Once again, on the correct side of the trade. Now, just recently they had a spike up in buying, which is what initially scared me. But, it's different than most other times in the fact that price has recently gone up for 2 months so why are they buying. IMO, this is a change of behavior for them. Usually, they have been completely contrarian, up until now. This makes me very curious about one question, " can they accumulate in the dark pools, and then transfer shares into the real market, and sell them off, (one youtube source called this "the big reveal") revealing massive red volume and causing panic to ensue at the click of their mouse button? Or, are dark pool buyers confined to only dark pools and cannot enter the public market space?" Let me know if you have some insight into this because this dark pool analysis is still very new to me. I could understand a big reveal strategy at these levels, especially if they were waiting for some random bad news event to happen and then they liquidate the market and start the panic, but I am still not sure if they have access to do this.
vergun
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@PipMiesterStronger, Dark Pools transact buy/sell orders on public exchanges all the time, they just have the added privilege of being able to transact shares within their dark pool that public exchange participants cannot access. I'm biased toward the drop scenario and that this is a triple top. Today/tomorrow will let us know.
PipMiesterStronger
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@vergun, So essentially the dark pool users can move back and forth between the two exchanges, at will. Awesome! Thank you Vergun, glad to meet you on here! Yes we will see very soon.