This morning, we retested the Globex lows on both the NASDAQ 100 and S&P 500 500 indexes. The lows held, keeping our reversal pattern on the NASDAQ 100 intact. The S&P 500 tagged its 21-day EMA and reversed higher, also a confirming signal. These are good omens and support the bottoming of the nominal 20-day cycle thesis.
Of course, professionals all see the same things on their screens. What can be frustrating is that a bounce here would be due anyway from those of us applying the same theories, but it has to be enough of a consensus to turn the markets. Combined with our Algo buy signals, the scenario looks promising so far. Of course, we always set stops because regardless of the probabilities, the market has a mind of its own at times and could care less what I think.
As previously mentioned in these pages, today is quadruple witching – so there will be quite a few cross-currents as various options and futures expire for the week, month and quarter. While I would not day trade today, today is fine for establishing our Navigator Algorithm swing buys.
The stops I am communicating below require the set levels to be violated on the NYSE close. We will not worry about hourly closes. I will send out a signal if we are honoring any stops – as at least today, I am not on an airplane. I am just operating a half-day ahead time zone-wise.
Unless otherwise posted, here are the initial stop levels: (i) NQ (NASDAQ 100 FUTURES) is 12,680.50; (ii) QQQ stop level is 308.75; (iii) ES (S&P 500 FUTURES) is 3874.50; and (iv) SPY is 386.50. As communicated this morning, we are starting with 25% positions in each index. We will add to the positions as more confirmation of the turn establishes. In this regard, I am looking for a price on the 30-minute charts to rise above and successfully retest their 21-day Exponential Moving Averages.
While you can set these stops with futures and cash indexes, there is no way to set a stop on options. So the stop is mental in that sense, and something you just have to watch from day to day. That has been part of the frustration as the markets have gotten so choppy and volatile. it becomes very difficult to swing-trade options, but hopefully we have positions here that we can retain for a bit.
While the probabilities are in our favor at the moment, we must stay alert and keep an open mind as to other possibilities. Check your emails throughout the day. I will update our group if anything changes.
I hope that sharing our strategies, along with the commentary, is educational and beneficial. At the end of the day, however, I don’t know your personal circumstances so you have to make your own decisions as to how the knowledge and education applies to your own portfolio.
Have a great weekend!
A.F. Thornton