Broken Levels

Good morning!

I hope your capital survived yesterday’s tape, and you are ready to tackle today’s action. As mentioned yesterday, on Friday the $SPY and $QQQ did not manage to break the upward barrier in order to bring the bulls back to the table. The morning futures were down and the news in Facebook combined with a strong oil and high yields the tech was sold. Now we find ourselves under all the lines and therefore cash is a position. I got out for a loss out of my leaps for $AMZN and $AAPL, but I managed to rescue some capital there. The idea is to take paper cuts but not to burn through your capital until you have none left to trade with. I am waiting patiently now to see if the indices break down further, and if they do I will start to add some leaps in call options for $SPY and $QQQ, for January 2022. I am going to do this incrementally and not jump with both feet into this downward action, because the bearish tape may last for a while.

$SPY Chart

The summer low in $SPY is at $421.97 and we did not get there yet, it was a quite sharp down move and then it went side ways for the whole day, which made life difficult for everyone, we did not get a squeeze for an up move, we did not break down further. This makes me weary, as we do not have a clear direction. We can gap up today, or not. Stay away and wait.

$QQQ Chart

We have the same story in the $QQQ, due to $FB bringing the whole sector down. However, since it is below the 100 day EMA, like the $SPY, stay away. Wait to see if we have a reversal today, if not, we could drift lower. There is a big day in congress today for $FB and this will matter for the whole sector.

I want to do just these two charts today because when we have the big indices under the 100 day we should stay with money in our pocket, not invested, trying to catch a falling knife. If we have a reversal Tuesday the correct move would be for you to wait and see if the $SPY can get and stay above $434.49 and the $QQQ at $361.44. If not, this will be a bearish signal which can bring the whole market into correction mode. There is no need for hair pulling, you just need to respect the rules and the trend. Be patient and don’t try to make up a big loss in one day, you’ll lose even more.

Good luck!

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