Hi everyone! Happy Friday!
In our previous newsletter, I highlighted the significant level of 4514 on the $SPX and mentioned that if the bulls managed to maintain this level, we could expect a notable upward movement towards the measured move target of 4566.
Key Levels: 4514 will be the key level for the week
Bullish Trajectory: The current bullish momentum suggests that if the bulls can successfully surpass and maintain a hold above the 4514 level, it sets the stage for a potential advance towards the 4534 Fibonacci level, with further upside potential towards the upper boundary of the channel at 4566.
The range for the week was 4504 to 4578 and we hit that high on Wednesday, again reconfirming the new Thursday/Friday down trend days. Wednesday’s candle typically is a reversal candle seen at tops of trends. It was confirmed on Thursday with the solid red bar and Friday was the bull’s chance to invalidate it and they failed forming an inside candle but below the uptrend line on the 4hr.
In our Discord community, we experienced an exceptional week filled with numerous winning trades that were highlighted in our previous newsletter. We did great on TSLA 0.00%↑ , NVDA 0.00%↑, SPY 0.00%↑ shorts and GDX 0.00%↑ , SLV 0.00%↑, XLE 0.00%↑ ZION 0.00%↑, QQQ 0.00%↑ longs.
The synergy within our Discord group enables us to share valuable insights, exchange ideas, and identify compelling trading opportunities. We continue to foster a supportive environment where members can learn, grow, and benefit from each other's expertise.
You can signup for our discord here at: https://jmoptiontrading.com/collections/membership-plans
Throughout our communications, we have consistently expressed our viewpoint that the current market rally should be approached with caution, as we believe it to be a bear market rally driven by factors that do not align with fundamental and macroeconomic realities. However, it's essential to note that this perspective doesn't imply that one cannot engage in upside trades, such as the 440C on SPY or the $380C on QQQ, or the 190C on IWM (all things we have called in the Discord), for example. Rather, it serves as a reminder to remain mindful of market sentiment and emotions, as market dynamics can swiftly shift when the majority becomes overly comfortable, often leading to inconvenient outcomes.
For day traders, the focus primarily revolves around short-term trends and may not require extensive consideration of the broader, long-term picture. However, it remains crucial to exercise diligence and adaptability in response to evolving market conditions.
Previously, when the market stood at 3850, we outlined a trajectory that anticipated a rise to 4500 by summer, followed by a subsequent reversion and decline in the latter half of the year. It appears that the market has adhered to this projected path thus far. Initially, many doubted the feasibility of reaching 4500 or all-time highs at 3850. However, the prevailing sentiment has now shifted, with the majority expecting all time high levels and dismissing the possibility of a significant market drop due to the perceived "seasonal bullishness" of the remaining year. This prevailing sentiment of unwavering optimism can be seen as a classic case of complacency.
It is important to remain vigilant and aware of these market dynamics, as they have the potential to impact trading decisions and risk management strategies.
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:
The SPX is persistently displaying a strong bullish trend in the current wave. However, it has started to show initial signs of weakness and formed a reversal pattern near the upper portion of the weekly channel as we highlighted last week.
Key Levels: 4545 will be the key level for the week.
Bullish Trajectory: If the bulls can successfully surpass and maintain a hold above the 4545 level, it sets the stage for another potential short squeeze and a retest of the highs at 4580. If somehow it does surpass 4580 it can run to March 2022 highs at 4637.
Bearish Trajectory: Conversely, if the bears manage to keep the price below the 4515 level, a pullback towards 4500 becomes likely and if that psychological level fails then a retracement to the support of the ascending triangle around 4456 becomes likely. Should the 4456 level fail to hold, further downside movement towards 4414 could come into play.
Our Stance: Regardless of whether the market exhibits a bullish or bearish bias, both scenarios suggest the possibility of a pullback. For the bulls, this would create a higher low, potentially paving the way for a continuation of the upward trajectory. On the other hand, for the bears, a failed breakout could materialize. Personally, I am inclined towards anticipating a pullback to retest the breakout level at 4456, as long as the market does not close above 4545 this upcoming week.
SPY 0.00%↑
SPY has a parabolic step curve pattern on the daily chart. This is an extreme red flag to see this on a major index. While mania can continue to push the price up, it’s very likely that the parabolic top for this round is between 456-469 and it will end up revisiting 424 very soon thereafter.
Key level for the week is 453.46
Bull case: If above 453.46 then we may get another short squeeze to target recent highs at 456 with an overshoot of 459 and 464 to finalize a parabolic step curve formation
Bear case: If below 449.56 then target 447.45 then 444.61 with an overshoot of 442.97 (gap fill) and 441. Bears would need to take out 441 for any break of the bullish trends. If they do, then target 436.21 and ultimately 424.
QQQ 0.00%↑
QQQ, 5 entire days above the upper BB, treating it as a support, something not seen in over 6 years. On Thursday it finally gave in leading to a sharp pullback towards the 8ema and ultimately closing the week at that 78.6% retracement fib level at 375.23
Key level for the week is: 375.23
Bull case: If holding above 375.66 a retest of the highs at 387 is likely with a possible overshoot towards 394.
Bear case: If 375.23 falls, then an 21ema retracement at 371.89 and breakout retest at 367-370 is likely. If there is downside acceleration we can target the 50SMA at 356.95.
TSLA 0.00%↑ As an ER lotto we took the 7/28 $260P at 3.45 entry. This went ITM and we sent a take profit signal at 8.55 for a 148% gain. We think this can continue to head lower into 233-240.
Key level: 269
Bull case: Above 269 can see a retracement to the 8ema at 274 and attempt to stage a gap fill move.
Bear case: Below 269 can see an attempt to take out the 258 level and if that falls head toward 50sma at 235 and fib level at 233.36.
Our Stance on TSLA: I went long on TSLA at 111 when no one wanted it and at 300 posted that it was too crowded and a pullback seemed imminent. Even now at 260 I am not a buyer and I think the stock has a long way down to go unless 269 is taken out by the bulls ASAP.
GOOGL 0.00%↑
Moment of truth for GOOGL. This one has been stopped by that 125.49 resistance since May, and now that it had a breakout and retest, it’s decision time for GOOGL on whether a rally to 140 or a drop to 100 is next.
Key level remains 125.49.
Bull case: If bulls hold 125.39 then can push to 129 and 136.95.
Bear case: Short to $99.44 for retest of the weekly breakout is valid below 125.49
I am in the 100P for JAN 2024. LIS is 127. I think as long as GOOGL does not overcome 127, it will target that fib at $99.44 for the overall weekly retest.
AMZN 0.00%↑
Longs intact with a 124 LIS. Can drop as low as 124 with broader market and still hold uptrend for continuation into 147.69 once it clears 135.04
Key level for the week: 135.04
Bull case: If holding 135.04 bulls can push towards next target at 143.66 and 147.69
Bear case: If 135.04 fails to hold then possible 50SMA retest at 124.43.
Our Stance on AMZN: Bullish bias remains as of the breakout at 104 with our initial target of 135. Add/Raise trail stops now to a 124 LIS.
BA 0.00%↑
Moving averages stacked together, 8ema has just crossed over the 200sma on the weekly chart. This can cause a massive move
Bull case: Over 225 is breakout to 267.51 but the breakout can have legs to 294-300.
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 204 (raised from 202) to target 240.
/GCQ23 (GOLD)
Wedge breakout is holding and continues to make higher highs. The 8/50 cross is set to happen next week which can lead to an explosive move. If overcomes 1977, target 2001.
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.
BABA 0.00%↑
Continued consolidation inside this wedge. It’s getting very close to a large breakout ($60+) and deserves a spot on your watch list.
Key level for breakout is $100.
Bull case: Over $100 target 119.68 and then $157.83
Bear case: Under $75.87 target $58.01.
XLE 0.00%↑
Inside candle on weekly this week. Technically it retested and held the breakout, but we want to see it take out that 85.04 level for a convincing run into 87.32 and 90.57. Still was a good dip buy at 80$ as we called on the discord some leaps. I sold early due to seeing some excessive put side flow, however, watching next weeks’ candle closely to evaluate for re-entry
Key level is 82.68.
Bull case: Over 82.68 will mark start of sustained breakout towards 87.35 and 93.91, this would be a good candidate for leap calls if over 82.68.
Bear case: Under $82 can continue down to 79.85, 79.40.
Our stance on XLE: Can take a long leap if holding 82.68, using 79 as a LIS to target 87.35
Last but not least….. charts may not apply much to this one, but either way seeing some familiar patterns…
NVDA 0.00%↑
Dark cloud cover reversal last week was confirmed this week IMO, it failed to make a higher high and rejected sharply now almost at the bottom of this channel.
Using 456 as a LIS can take a short to revisit 437.98 and 426.72.
We took the $410P for AUG 18 with a 4.86 entry.
Have a wonderful weekend!
Wishing you a successful and profitable trading week ahead!
Best regards, Jovan