Week of September 9th, 2024
Volatility returns, first week in September SPX loses 200 points.
Hi everyone!
September kicked off with a bang, living up to its reputation as the toughest month for both stocks and crypto. The first week saw consistent losses, marking the first time since April that we’ve had four consecutive red candles. The SPX fell -4.40%, while the NDX dropped -6.03%. Volatility surged as the VIX spiked 60%, jumping from 14 to 24. The price has now broken down from the wedge for the second time, suggesting this could be the real move lower. In recent weeks, I highlighted the potential for a 2B or double-top pattern, a scenario we needed to keep an eye on. This setup presented an ideal short trade, where the proximity of the stop loss made it easy to determine quickly if the trade was wrong, while offering substantial upside if correct.
It's worth noting that during both the early August decline and the subsequent recovery through the end of the month, the Nasdaq significantly lagged behind the S&P. While the S&P managed to recover nearly all of its losses, the Nasdaq only retraced about 70% of the drop and now hovers just a few points above its recent August lows.
You can read last weeks’ newsletter outlining this short setup and the 2b top scenario here:
I've mentioned this many times before, but the "Buy the Dip" (BTD) strategy remains viable as long as crucial support levels hold. However, if support crumbles, it triggers the initiation of a short trade, which should be maintained until a resistance level is successfully reclaimed. This underscores the importance of adaptability. For those accustomed to habitually buying every dip, swift pivoting is essential when support levels start to erode. Failing to do so might result in surrendering hard-earned gains by persistently attempting to buy dips amidst a multi-day, multi-support downturn. “The trend is your friend.”
SPX Analysis:
Key Levels: 5394 & 5551
Same exact levels from last two weeks will apply.
Bullish Trajectory: We are in falling knife mode. 5394 level sits right below and may offer support; however, this is not the spot to buy dips blindly (especially with size) until a major resistance is cleared. We got a decisive close below the 50dsma and bulls have to reclaim 5551 for the ATH scenario to be back on the table. Bulls should watch for failed breakdowns of key levels as entry opportunities but keep in mind that breakdowns tend to happen more often in downtrends, and they should keep tight stops and not fight the trend.
Bear Trajectory: Bears are currently in control with price moving below the 50dsma after a couple of days consolidation on it. This 50dsma lines up with a key level at 5505-5508. As long as we are below this, we could see further downside pressure into 5320 & possibly 5265. The 200dsma sits at 5147 would be the next target below that.
Summary:
A lower high on the daily chart has formed. Price is now searching for a low. It came up to test the recent high and failed, now it is likely heading to the recent low to see if it will be a higher low or a lower low. 5320-5265 a decent area to see if a higher low gets put in.
IWM 0.00%↑
Same situation where a lower high was put in and price is now searching for a low.
There is a confluence of important levels and indicators at this 197-200 zone and this will continue to be a deciding pivot in the months to come.
QQQ 0.00%↑
Severely lagging SPY. I warned that this got very bearish below 472 and as you can see, we sold over almost $30 from there in just one week once that level was taken out. Unlike SPY, this never took out that island top gap you can see we began the selloff with a bearish divergence on the daily and we have never revisited that zone meaning bears have the upper hand here in QQQ for now. Watching the 200dsma below at 441 as price tries to find a low to see if we slice right through it or if we can find some support there again.
TRADE ALERTS:
For those of you not in the Discord (www.jr28trading.com) I highly encourage it as we cover a lot of the setups given here but we also alert LIVE trade ENTRIES and EXITS on Stocks, Options, Crypto & Futures.
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A separate newsletter will be sent with individual trade setups for next week to paid subscribers.
Have a wonderful weekend!
Wishing you a successful and profitable trading week ahead!
Best regards,
Jovan