Opportunity Awaits
Weekend Market Update August 18, 2023
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Schedule Update
Starting next week Trading Adventures will be delivered on a slightly different schedule. The Wednesday, Friday, and Saturday rhythm has been feeling a bit compressed. So next week we will go to Monday, Thursday, and Saturday delivery.
Monday’s article may be a morning or mid-day report, depending on time, and will take a look at the futures opening, the calendar for the week, and lay out some of the items to watch for.
Thursday will be a recap of the week to that point.
What were the reactions to the things we laid out on Monday?
Were there any surprises?
How can we adapt and be ready for next week?
Saturday will remain the same; we’ll take a step back and examine the bigger, macro picture with a Weekly Chart chart thread on Twitter/X, with the possibility that it gets delivered here on Substack as well.
As always, feedback is welcome. So feel free to share comments, questions, or suggestions by hitting the “comment” button or by simply replying to this email.
The Markets
Selling accelerated this week and is causing pain for some. Hopefully, the comments here have helped you all prepare and be ready for this seasonal slump.
From Pumping The Brakes, published July 14, 2023
… in the near term, there is a seasonal tendency for a decline over the next two to four weeks. Today’s charts indicate the potential beginning of that decline.
Also from that article:
… it may be a good idea to slow down, take our foot off the gas, and maybe even pump the brakes.
Be ready. Maybe we get some better buying opportunities in the coming weeks.
And from Right On Time, published August 9, 2023
Is it time to buy the dip?
Maybe not. There’s no evidence yet to support the case that the bottom of this dip is in. For the last three days, SPY has rallied back up to the declining 5-day moving average and then gotten sold.
So what’s good about this action?
We saw it coming and had time to prepare
Seasonality and history are important factors. That’s why they are continually pointed out here. Stocks don’t always follow the road map so precisely. But so far this year they are playing out very well.
Corrections are normal
On average the stock market sees a 10% correction (decline) about once a year. So in a year when QQQ was up 45% by July, it’s very normal to see a selloff. In fact, it may be more surprising if it stays contained to the usual 10%.
This is how opportunities are generated and re-generated
Who knows when the selling stops? We can only label a ‘bottom’ after the fact. But we can watch the signs and signals along the way and use them to formulate trade ideas with good risk/reward.
For now, the indexes are below the short and medium-term moving averages. They are testing, or in some cases passing below previous pivots and potential support and resistance levels. When the turn happens we’ll see this action start to reverse.
Watch for potential support to become actual support.
Watch for prices to recapture their 5-day moving averages by getting and staying above them.
Watch the intraday and week-to-date anchored VWAPs.
When more of the action is taking place above those levels we will have the first hints that maybe a bottom has been found.
The Charts
Note: these are not end-of-day prices
SPY is getting a relief bounce today. But it’s still in a middle ground. The $431.73 pivot could still get tested, as well as the 100-day MA, $428.61
QQQ opened below the $357.50 pivot and is trying to recapture it. The gap down and subsequent recovery of that level could be an indication of a turn.
IWM opened below the confluence of the 100 and 200-day MAs, which has been a target buy area for many traders. So no surprise to see the bounce from there.
DIA is trading back into the congestion zone today. Now it’s important to see if this ends up being a successful retest of the breakout level, or a failed breakout that leads to further selling.
TLT put in a hammer Thursday and got confirmation today. This rally needs to continue in order to reduce some pressure on stocks.
BTC Bitcoin finally woke up and cascaded quickly to the $25,300 pivot area.
DXY continues to wrestle with the 200-day MA. More time above leads to an increased probability that the rally continues, further pressuring stocks.
The Closing Bell
Next week is the Federal Reserve Economic Symposium in Jackson Hole, Wyoming. Last year Jerome Powell spooked markets with some very hawkish comments.
You can revisit that here - Bears Party In Jackson Hole
Is he cautionary again this year. Or does he take a more friendly tone?
Weekly charts tomorrow (Saturday) morning. We’ll have some doozies. Don’t miss them.
https://twitter.com/Andy__Moss
And why not tell a friend by reposting the thread and forwarding this email?
Many thanks!
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The Disclosures
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors prior to making any investment decision.
POSITION DISCLOSURE
August 18, 2023, 4:00 PM
Long: AMZN0915C140, CAVA0915C50, IWM, QQQ, RIVN
Short:
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike