Week of July 10th, 2023
Gravestone doji daily close for $SPY, uptrend intact for now
Hi everyone! I hope you are all having a wonderful weekend! On Friday we saw a change in trend, with the first sell into close Friday we had seen in a while, we’ll discuss that later on in this newsletter. But first to recap…
In last weeks’ newsletter I gave the key level of 4450 on $SPX and mentioned how I was not a buyer at 4450 and instead preferred a pullback towards 4390 level.
Key Levels: 4450 will be the key level for the week.
Bearish Trajectory: If bears can hold below 4450 level then a pullback will start, more accelerated than the first time to fill the gap at 4390-4398 and if that does not hold then a retest of that 4350 level that was lost last week.
Bears took control of 4450 early in the week and we only went up as far as 4456 before a sharp pullback to 4385 and closing the week at 4398 managing a close below 4400. Most of this action was actually done on Thursday & Friday, contrary to the prior 4-6 weeks where Thursday & Friday were rally days. This is important to note as it’s a change in trend to what we have been seeing for quite some time.
SPY 0.00%↑ in last weeks’ newsletter I warned that RSI was giving a warning and we closed at the top of the BB and left a significant a significant gap below at 438.28. I also mentioned that we noticed a large amount of call selling and put layering activity out to August, September & October strikes amid increased bullish sentiment. This past week SPY we see SPY sharply rejected at the top of the BB as mentioned and filled that gap below at 438.28. It has now taken care of all the immediate gaps here and now only has one below at 422.92 which is my next target on the short.
We’ve noted several times that it’s our stance that this continues to be a bear market rally and the fundamentals and macros do not support the current valuations and prices. That does not mean you cannot trade upside like we did with the 440C, it means to keep your sentiment and emotions in check as this can quickly unravel when the majority becomes too comfortable and likely in the most inconvenient way. If you are a daytrader, you shouldn’t really care much about the longer-term picture as your basis for trading is always going to revolve around the current short-term trend.
Back at 3850 we outlined a path to 4500 by summer and then a reversion and drop for the last half of the year. It seems that so far we are doing just that. At 3850, the majority did not believe that we could see 4500 or ATH. Now, it seems the majority now believes that 4500+ is likely and that there will not be a drop because the rest of the year is “seasonally bullish.” This market scenario meets all the definitions of “complacency.”
Bullish sentiment continues to increase & we remain in extreme greed.
WHAT TO LOOK OUT FOR THIS WEEK:
Economic Calendar (High Volatility Events):
For this upcoming week I will be watching the following setups and levels:
SPX Analysis:
SPX continues to be in a bullish trend for the current wave. However there are multiple warnings now at this 4450 level indicating a possible large pullback. Even with that pullback the trend remains bullish until 4200 level is breached and all dips likely get bought until then. I think even if the dip gets bought again here at 4400, it may push towards 4500 and that would be the next large reshort area if the wave down has not already started.
Key Levels: 4450 will continue to be the key level for the week. Chop between 4390-4450.
Bullish Trajectory: If bulls can push over and hold 4450 then the breakout continues to 4475-4500 and then to it’s measured move at 4534.63 which is also the 78.6% fib extension.
Bearish Trajectory: If bears can hold under 4390 then a retest of that 4350 level comes. If 4350 falls then the next move is towards the 61.8 fib extension at 4311.69 and to the 8ema around 4270.
Our Stance: VIX has started to breakout in an IHS, SPX/SPY put in a gravestone doji on Friday, AAII shows bullish sentiment is increasing, we remain in extreme greed for an extended amount of time, and we have also noticed the short interest in market declining all at the same time. I lean towards a pullback to retest the breakout at 4270-4285 as long as we are not closing above 4450. If we are holding above 4450 the next reshort opportunity will be near 4475-4540.
SPY 0.00%↑
All eyes on that gravestone doji from Friday. If we get a gap down on Monday and the gravestone doji level at 438 holds as resistance, we are likely in a pullback mode towards 422.94 for the breakout retest and gap fill.
444 will be my upside key level for the week. 437 will be my downside key level for the week.
CHOP ZONE BETWEEN 437-444 WITH CPI WEEK
Bull case: If breakout above 444 then target 448-451.76.
Bear case: If bears maintain below 437.44 then target 432.85 and 429.61. Big drop and double top plays out if 429.61 falls, which would target 422.23-422.94 (gapfill)
Note: Gravestone doji from Friday must be confirmed on Monday. If invalidated Monday, then likely more chop until CPI.
QQQ 0.00%↑
QQQ lagged SPY last week. While SPY and ES took out the 52 week highs, the Q’s did not. It does seem to be forming a head & shoulders here approaching a neckline.
Bull case: If breakout above 370, will target 375.66
Bear case: If breakdown below 364 will target 354.84
Our Stance on QQQ: Needs breakout retest at 349.71-352 for a sustainable breakout. It’s extended on weekly and very far from the 8ema on weekly. If it retests breakout and bounces, we are likely headed higher to 400. For now, it does not seem like a good RR at 370 as upside appears to be minimal while downside can be much larger. A sustainable market cannot depend on 8 stocks, and that is what is fueling this market right now. I am not a buyer at these levels.
TSLA 0.00%↑ I’ve started to see a shift in the flow from overwhelmingly bullish to some sneaky 220p and 200p for later in the year. TSLA is at the cusp of retesting the trendline going back to ATH and near that 61.8% fib at 295.05. It’s above the upper BB so use caution ahead.
Key level: 280
Bull case: Above 280 target 285, 294, 295.05
Bear case: Below 272 target 264.45, 258.15, 256
Our Stance on TSLA: I went long on TSLA at 111 and no changes to the longer term bullish outlook so far, TSLA is in a clear uptrend and on uptrends, dips end up being bought. Nothing to do but set TSL’s if long and ride it up as far as it goes.
AAPL 0.00%↑
Bull case: Continues to be bullish over 182.94. While above this, can continue higher towards 220 on a larger picture monthly breakout. Now that it has clipped the 3T tag at $194, it will continue to be an area of interest similar to $405 was for NVDA when it hit it’s 1T tag.
Bear case: Can reject at top of the channel at 194-195 area and pullback to lower part of channel and fib at 182.94. Bearish move starts below 182.94 to target 174. A drop below 174 would start a bearish trend down to 153.77.
Our Stance on AAPL: From an investment perspective, the RR does not make much sense going long on AAPL here at 3T valuation as company reports declines in earnings. It appears that the 3T valuation tag has become a magnet, and could see some euphoria around it, however the upside does appear to becoming more and more limited by the day. It is premature to be short on it here, however it’s something we should keep our eyes on every week as this may unravel shortly after the 3T tag. The RSI is overheated and it is at the top of a channel.
GOOGL 0.00%↑
GOOGL on the brink of it’s next large move. Using 117 and 121 as key levels.
Bull case: H&S failure if above 121 which can retarget 125-130
Bear case: H&S breakdown if below 117 which can target 50sma at 116 and gap fill at 112.94
Our Stance on GOOGL: Originally short on GOOGL with a 127 LIS to target 114. Will maintain same LIS as the shorts are longer dated out to January.
AMZN 0.00%↑
Bull case: Continuation towards 200sma on weekly at 132.55 and 50% fib at 135.04. Stock has significantly lagged behind the other big 7 and the flow continues to support the bullish move. Using 122 as a LIS, uptrend in tact towards 135.
Bear case: If 122.39 is lost, can revisit 106. Not alot of supporting flow or technicals for the bear case on AMZN.
Our Stance on AMZN: Bullish bias remains as of the breakout at 104 to target 135. No changes.
BA 0.00%↑
Breakout retest happened on BA as it completely retraced and retested the breakout. It has bounced and held for the past two weeks but has a shorter term H&S to overcome.
Bull case: Over 215 can see revisit of 220. Over 220 is breakout to $240.
Bear case: Under 204.36 can see breakdown to 193.89. Below 193.89 can see failure to 183.81.
Our Stance on BA: Long with a LIS at 202 to target 240. Change to short if 202 falls.
/GCQ23 (GOLD)
The setup here is just too beautiful to ignore. It has undergone a test of the bottom of the wedge, + the 200SMA and looks almost ready for a large breakout into 2150+/
Bull case: Above 1948 breakout begins to 1977, 2000, 2025, 2059, 2102 and 2156.
Our Stance on GOLD: Long with a LIS at 1894 to target 2156.
TLT 0.00%↑
Massive divergence between stocks and bonds, TLT is approaching a good spot imo for a long, it’s tapping on the lower BB and the upper BB is curling up. Pay close attention to this one as long as it holds 95.76 should be setting up for a move to 109-110.
XLE 0.00%↑
Eyes on energy, it looks almost ready for a breakout. 8ema has just crossed over the 50sma and the moving averages are all STACKED. Explosive move coming if over 200sma at $84.06 to target 87.35-93.31
Have a wonderful rest of your weekend!
-Jovan