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No one is safe when the floor falls out!UBS buys Credit Suisse, central banks liquidity provision, and a massive repricing in rates marked a significantly volatile week. As the storm of bank contagion continues to brew, one index in particular is trading unlike the others!
We’re talking about the Nasdaq here.
Trading higher while its peer indexes get beaten down in a somewhat unusual fashion.
Another way to look at it, since this February, S&P500, Dow Jones & Russell 2000 is down 5%, 7% & 13% respectively, while the Nasdaq is pretty much flat.
In one of our previous posts, we highlight how the ratio of Nasdaq/S&P500 topped higher than the 2000s Dot-com bubble.
While the ratio traded lower after we covered it, this recent move basically put the ratio back to the level when we first highlighted it. The ratio also traded cleanly off the .236 Fibonacci line and the trend support. With the ratio now at the previous resistance level, and extended from the trend line, this could present another opportunity to consider a short.
Interestingly if we use a Logarithm y-axis, the upward trend of the ratio becomes clearer.
Here, we see all 3 ratios at critical resistance levels and away from the long-term trend.
While it’s a bit challenging to pinpoint the exact reason, we think the chorus of lower target rates and more cuts priced in has propelled the possibly interest rate-sensitive benchmark higher. But, when the floor falls out, it doesn’t matter if you can jump the highest! We think the current springboard for the Nasdaq Index can only take it so far and here’s why:
If a true contagion event does play out, then the sell-off is likely not going to discriminate. And looking at the 2000s period, Nasdaq continued to tumble while the fed paused and cut rates.
Of course, we’re not blind to the fact that the 2000s was a whole different era and the crisis was driven by a tech bubble, so the Nasdaq would of course, face a larger correction. Our point here is to highlight that in a true contagion event, sell-offs do not discriminate.
On the flip side, if a contagion event does not play out, the Fed is still faced with Inflation which has been way above its target. Not forgetting the Fed’s dot plot terminal rate at 5.1% and a hawkish Fed chair just days before the SVB bank collapse, if the coast is clear of any banking crisis then the path for further rate hikes or holding rates higher for longer could come back into play. Both of which could trigger a repricing in the Nasdaq.
Given the opportunistic setup in all 3 index ratios, it is possible to establish a short on any of them.
Using the Nasdaq Futures and S&P500 Futures as an example we could:
- Short 5 Nasdaq 100 Futures
- Long 2 S&P 500 Futures
In this trade set-up, the dollar value of the two legs of trade will remain equal, despite the direction in which the Nasdaq or S&P moves. If NQ future moves by 1 point, the short leg of the trade (5 lots of NQ futures) would change by 100 USD. So does the dollar value in the long leg of the set-up (2 lots of ES futures). The same setup is possible with the Micro Nasdaq and S&P500 Futures as well, whereas in the latter case, the 1-point move is equal to 10 USD instead of 100 USD. Trading this spread would be eligible for a margin offset of up to 70%, meaning that the capital required to set up this trade is much lower.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
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IWM rejection at the 18 monthlyAlthough there is support for IWM between 182-1, I think the real target will be the combination of the monthly BB and 100 ma, around 158-156. Structural trendline (purple) looks right and it's no surprise it showed up at the 18ma exactly to regect the advance.
IWM divided by SPY is a bull flag, so I expect IWM to sell off much more than spy once it breaks out - which looks to me like it could happen this month.
Good luck!
Elliott Wave Projects Russell (RTY) Should Resume HigherCycle from 12.20.2022 low in Russell (RTY) ended with wave 1 at 2016.97 as a 5 waves impulse structure. The Index then pullback in wave 2. Subdivision of wave 2 is unfolding as a zigzag Elliott Wave structure. Down from wave 1, wave (i) ended at 1986.3 and wave (ii) ended at 2015.60. Wave (iii) ended at 1938.8, wave (iv) ended at 1984.20, and final leg wave (v) ended at 1906.20 which completed wave ((a)).
Rally in wave ((b)) ended at 1970.30 with internal subdivision as a double three Elliott Wave structure Up from wave ((a)), wave (w) ended at 1964.1 and dips in wave (x) ended at 1921.30. Wave (y) higher ended at 1970.30 which completed wave ((b)). The Index has resumed lower in wave ((c)) with internal subdivision as an impulse. Down from wave ((b)), wave (i) ended at 1931.3 and wave (ii) ended at 1968.60. Wave (iii) ended at 1885.4, and wave (iv) ended at 1921. Expect the Index to resume lower within wave (v) of ((c)) to complete wave 2. Potential target lower is 100% – 161.8% Fibonacci extension of wave ((a)), which comes at 1791 – 1860.
RTY is on the way to the Fakeout targetI was expecting this move, it came on time for the Fed day catalysis.
If you look at smart vs Dumb money as well as overbought conditions and negative divergences, you can see that this is a fakeout move, which happened many times in history.
I had a very important update last night, and will be doing a follow-up tonight.
RTY chart, held support where it had toRTY chart, held support where it had to, at the must-hold resistance now
There is a pathway for the overshoot/fake-out move I mentioned before; there is time till the Fed meeting.
Its at a perfect r/r for a swing short.
I might post one more chart tomorrow.
Good night
Feels like the market is coiled up like a spring Bulls take a position, get trapped; bears jump in and get trapped as well. A coil.
Stops are placed. As they should.
If the coil breaks out, half the crowd will quickly be wrong and bail.
The market will eventually pick a way, discover price. Up down, cant do sideways forever.
Crypto is rising, cpi is slowing. gasoline is cheaper.
Cnn sentiment index is at 'greed".
Percentage of stocks above moving averages is elevated. Vix is in downtrend and low end of range.
Valuation is still above historical 15 PE and shiller PE is near 29.
Many stocks are at 20 plus PEs, especially large caps, despite analyst show slower growth.
old trader sayings:
"from failed moves come fast moves"
"stocks move in the direction that hurts the most people"
"stocks always go up"
"buy high and sell higher"
Sound financial guidance recommends you only invest money you wont need for 5 years or more.
Good luck and dont risk money you can't afford to lose.
QQQ RTY IWM
RTY partial update for the next Jan 16th week I hope everyone is having a great weekend.
RTY is in the bull channel all week, similar to NQ’s rising wedge.
As you can clearly see, RTY is way oversold on the 4h chart (MACD, RSI); this will get a strong rejection of the next resistance zone imo
Looking at the cycle,s we still can push into Tuesday am open to test the major trendline around 1915-18 (depending on landing time). At the same time, it can fall apart straight from the open.
I think we extend on Sunday (gap up?) or into Monday (Futures will be trading open till noon)
- The primary support and target for the next week is 1847-52, from where (if it holds by the 20th) we should see a last push up into the Jan 24th high.
If that support is broken, it should test the 1800 level and below next.
- The target box for the final move-up is at 1542.5-1952.5RTY.
........
SPX and NQ will be updated on the site
Enjoy your weekend
RTY is setting up for a strong move downIm not currently trading RTY, but it has the weakest structure out of 4 bog indexes.
With the today's rally, RTY rallied the lest compare to the ES and NQ, where ES was leading on the upside, while NQ gave up less when it started to sell
For those who trade RTY, there is a great short setup is setting up
RTY updated chart from yesterday's postThe price is above Monday's high, which suggests one more push going into the CPI numbers
I have mentioned also in my SPX , NQ and ES updates about the possible inverted OCT 13th CPi release move tomorrow.
A Gap and Crap full report was posted last night and updated today
RTY Short IdeaThe RTY one hour time frame is in a channel. The
market is near the top of the channel. As long as
the market stays below the top of the channel. It
is expected the market to push bearish towards
the bottom of the channel.
Entry: counter trend line break bearish
below the top of the channel.
STOP: In the buy zone above the entry.
LIMIT: 1756.7
Once or if the one hour time frame gives the
entry. As long as the market stays below the
top of the channel. It will be a good idea to
turn to the five minute time frame and look for
tunnel trader short, chandelier trader short,
and or destination trader short ideas towards
the one hour price target.
Stocks can go higher, but how much higher?I will start by sharing a Twitter poll, which shows the sentiment we are seeing now. Most think we are going lower. Therefore, the market could go higher in the short term. twitter.com
I believe our target is the critical breakdown level that was never retested on the chart above. The maximum upside is the R3 Monthly Pivot + Yearly Pivot, which will most likely reject the price. Recession or no recession, the market has room to the upside for reasons different from what most people think. Won't get into these things here, as I want to keep this idea simply about the key targets I have for stocks.
For Nasdaq, it is hard to tell how high we will go as there is more than one target. For the S&P500 and the Russell below, the targets are very clear. However, for QQQ - NDX - NQ, more than one gap must be filled.
Based on the above, I expect the market to top about 6% higher from here, and potentially as much as 10% for the Nasdaq 100.
RTY is at 200MA max resitance level is from 1900-19005Should not get above 1905 on any test for much lower numbers to be seen next year.
If it holds, might get below 1500 early next year.
Will short 1900-02 zone with a 10-15 points stop.
ideally we see a good move down to at minimum revisit pre CPI day close
SPY / ES / SPX - Market Structure & PostureWeekly Engulfing Charts are clearly not a preferred look for the Buy Side and those
riding the Bullish Tilt-O-Whirl - Bodies are being flung everywhere.
The Dollar is doing its thing, it ran to our PO at 107.65 with a 107.67 print and
reversed yet again. it's been a pattern as the EuroDollar continues the ties that
bind, Dollar shortages create demand until the Dollar is dethroned.
Sell Side has lifted the CBOE P/C to (.82).
Please note after the brutal June 17th 4X - we reversed very hard the following Monday.
For Roll out the Options Curve - it's muted Frankly. Traders took their Bags, packed up, and headed
off to parts unknown.
That said... Bulls may have a chance to hold and to have... "may" - as horrific as it looks,
Wall Street may surprise with a short Countertrend to shake off the Late chasers. Again it
is "may" not will - It is, however, exactly what I would do.
There simply isn't enough Capital to transfer in the leveraged deep end of the Pool. It
seems there is another attraction elsewhere for now - unaware of any real contests outside
of the Lounge, but the lizards are somewhere, for certain.
Sentiment everywhere is pure doom, gloom, and kaboom. Understandably so after Teton
Jerry and CPI - it's been a brutal month for Buyers. Wrecked and Raked at every turn.
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Here's O/I for SPY into Month End by Expiry:
SPY 9/19 Exp - Very Low Participation
SPY 9/21 Exp - Moderate Participation (FOMC) / VIX Roll/Settle Complete 4 PN EST on 9/20)
SPY 9/23 Exp - 360 Participation @ ~70K
SPY 9/26 Exp - Very Low Participation
SPY 9/28 Exp - Very Low Participation
SPY 9/30 Exp - Very High Participation @ 390 @ 102K / 385 @ 134K / 370 @ 143K / 350 @ 120K
October Monthly Expiry needs those traveling to parts unknown, requiring some time to re-engage.
It is important to note the early & largest entry for October was 372 Puts.
On to the Chart
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Charts are simple messy, mixed, and have the appearance of that "double bottom" in trade
and quickly... which may be why it doesn't happen.
The KEY Line in the Sand is not the Lows, it is the dip in below 3588 - that is a number
so please commit it to memory, breaking it.. assure a return to far lower lows, but
over time.
We completed Day 21 of this downside Crush from Wall Street. The Financial Media has been
abuzz about multiple contractions after spending weeks supporting "Pivot Chatter" and, surprise,
"Multiple Expansion" - remarkable anyone listens.
For "Time" we need a breather... soon. it's important to remember the ES defended the
FHWB - all-time highs to lows @ 3849.50 @ 3853.
Structurally - it looks bleak. I mean look at it... it's terrible. Longer Term, even worse - but
that is for later, for now, it's interesting... and it is quite possible we get a larger counter-trend
Squeeze developing this week. A very nasty one... quite possibly.
RSI STO supports its development near term. Best to be agile and not be caught offsides, as
fear is grinding lower - currently @ 36 as the September Vix settles on - Powell the 21st.
Jerry's arrival Wednesday with 75BPS most likely, as 100BPS I was looking for may be split to
the November FOMC as it appears to be 75BPS as well. The Ministry of Financial Truth was
out early in the week touting100 only to hear JPM quash that with "The Fed isn't going to raise
100BPS, but 75BPS".
We will see, I'm non-plussed with Forward Rates trading @ 4.5%. Yields have gone vertical... never
a good thing, not ever. Institutions apparently now consider the 1 & 2-year pristine collateral.
I had to laugh when Bloomberg touted - "Yes but the 30/90 Day are not inverted~!" Oh, Hooray
for this - perhaps it's the fact Yellen curtailed issuance to non-existent and the Market for the
very short end of the Curve... is not trading any real liquidity.
Something is going to give - but in a most unusual way. Yes, valuations will be corrected further.
Of this there is little doubt, it's how it occurs that traders seize.
Wall Street enjoys a nice lift ahead of EPS Season... with Powell stuck squarely in the middle.
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S&P500, ES, NQ, QQQ, SPX, SPY Nasdaq about to go up for big falli dont know how SEO for tradingview works... I posted about the buying before the friday close when nq had dropped to 11800 and everyone was extremely bearish... i posted this idea which you can see here
but its not ranking; hence I am posting this again
we have broken below sept 7 low....
the sentiment is extremely bearish
but the evil plan is to take the price up and squeeze every short before dumping...
already the friday ended up in green daily pin bar and we look good to go