Futures Green even though we had drone strikes?
Fear is usually overpriced. With all the news on Thursday and Friday about Iran attacking Israel, everyone was hedged (meaning everyone that wanted to protect themselves from a big down day on Monday had bought puts). The VIX had shot up. The TRIN indicator was above 3.05.
So when the drone strikes happened, it was not as bad as what the market participants feared. And hence on Sunday when the futures opened, they are green. The TRIN suggested that there was a lot of demand for puts.
The right time to buy protection via buying puts should be done when the volatility has not yet spiked.
So, do we hold this green futures scenario on Monday when the market opens?
I am taking my clues from the Dollar index, and crude levels.
Before we start with the analysis of the indices, below is a snapshot of all the indices and Mag 8 stocks general trend and their expected moves for the week. I will be using this snapshot weekly to make my judgment as to how strong or weak the overall market is.
Now lets get to the indices:
Dollar: The dollar index has a gap fill at 106.586 on the daily chart. We are already outside the BB. I am looking for that gap fill and a reversal on the dollar index.
If we get a reversal after gap fill then in my opinion, SPY does not materially break below the 5000 level. And the dip is probably buyable.
Disclaimer: This is my trading plan on the indices. This is intended to be for educational and informational purposes only. Trading is risky and loss of capital is possible. Do your due diligence. In trading, there are no guarantees. So please be careful risking capital.
TLT : Bonds may find support with the war in the middle east taking a turn for the worst. Last weeks low of 89.51 is very important. As long as we are above 89.51, there is a chance that TLT can rally.
Dollar below 106 and TLT above 90, is a stabilizing factor for equities.
Bitcoin:
If we are to break below last week’s low and probably head towards SPX 5000 then Bitcoin will probably be below 62K.
I am getting these levels by drawing a Fib from the drop in Bitcoin when the drone strikes happened. Bitcoin above 64K-65K is good for the equities.
Crude futures:
Crude futures are red on Sunday. This again for now suggests that risk and fear was overpriced. But on the daily chart of crude, we are just showing a bull flag during these few days of sideways to down action. As long as crude futures are above 83.25, this is a bull flag and I am looking for higher crude levels. The breakout happens above 87.63
GLD:
GLD last week formed a high wave doji kind of a candle at a crucial fib level which was my target on GLD.
I would prefer some consolidation in GLD before it makes its next move. Some back and forth in this 210-220 level would be healthy for GLD bulls.
If GLD gets close to 210, it would be a buying opportunity in GLD.
Now to equity indices:
SPY:
We are at a crucial point in the indices. We got some pullback in the indices. Why we got the pullback is not that important. On the hourly chart, we are forming a H&S (Head and Shoulders pattern). A break below Friday’s low, would mean a break of the neckline of the H&S pattern. The measured move would almost perfectly line with us filling the big gap that was created by last quarters earnings by NVDA.
I do not think we break SPY 507 before NFLX earnings which is on Thursday April 18th after hours. If we do not break down this coming week then most likely the week of April 22nd when we have more tech earnings announcements, we can fill the gap to SPY 497.41.
I would consider that a buyable dip.
Trade Plan for SPY for this week:
The gap up we are having in futures will probably get sold. And I intend to short this gap up too. My plan is to wait for SPY to show signs for reversal at 514.49 so that I can short it for a target to 507.37
QQQ:
The Q’s are trading in a tight range. NFLX has the potential to break Q’s out of this tight range. But my plan is to wait for Q’s to break below 433.67 and then short for a possible target to 426.
The price action in Q’s is too tight and too choppy for me to look into day trading it.
DIA: The Dow is getting to a level where I am interested to go long. The downside expected move in DIA is 372.97. If we get close to this level then we would be gettign very close to 2024 lows of 371.34
My thinking:
There is no way we break 2024 lows in Dow and not break SPX 5000.
And hence I am thinking of selling put credit spreads in DIA. Taking advantage of the high IV we are having currently, selling put credit spreads at 370 or below makes sense to me for a trade.
In terms for Sectors of interest this week:
We already had some financials report last week including JP Morgan. We have many more financials reporting this week. I am looking at GS and SCHW post earnings trades.
NFLX is part of XLC sector. Hence this week after NFLX earnings it will interesting to see what kind of candle XLC has.
XLV: The healthcare sector is getting close to a buy point for me.
The low for 2024 is 135.97 for XLV. On Friday we tested the 78.6% retracement of 2024 move. The yearly value area is at the 136.04
UNH has earnings this week and hence a move in UNH can decide what kind of move we get in XLV. But a down move towards 136 will be ideal for me to try a long in XLV sector ETF.
Now Lets look at the Mag 8 charts and trade plan:
AAPL: AAPL on Thursday had news that they are introducing their AI chips for the mac line of products. This brought in buyers. A lot of institutional buyers got in. How do I know that? It is because the volume was huge on Thursday and Friday.
AAPL has bullish RSI divergence. But the moving averages are still pointing downwards. So, we may a get a day or two of conslidation before we find some more upside movement in AAPL.
With NFLX earnings after close on Thursday, we could easily have the sideways move in these mega cap names till NFLX gives us some direction.
But if I have to day trade any Mega cap stock right now, it would be AAPL and GOOGL.
GOOGL: Above 158.89, I am willing to day trade GOOGL long.
Below is a snapshot of important earnings worth tracking:
GS, SCHW are on Monday before open. I am looking to sell put spreads on GS.
Monday MTB reports and Tuesday PNC reports. These regional banks earnings are important to understand how CRE (Commerical Real Estate) is doing. I have seen some bullish flow in Citizens bank. But, trying a pre-earnings trade in any of these regionals banks is not for me.
ASML is the semi we all will have our eyes on. ASML is reporting before market opens on Wednesday. Wednesday is also VIX expiration. So, if ASML gaps up on earnings then we could easily have NVDA and AMD start a new leg up.
But there is so much uncertainity with earnings and the stock reaction. So, my plan is to write more during this earnings season. And also provide some pre-earnings and post earnings trade ideas.
So, for now this is it for weekly outlook!!
Disclaimer: This is my trading plan on the indices. This is intended to be for educational and informational purposes only. Trading is risky and loss of capital is possible. Do your due diligence. In trading, there are no guarantees. So please be careful risking capital.