Everything Was Green Today but I’m Still Looking Lower

Hot diggity dog, what a day.

The Nasdaq ripped almost 3%, Microsoft went up 16%, semis were on fire, and just about everything on your screen was green.

I'm still looking lower.

I know. People are like, why would you short when the market looks so strong today?

Because this works. This works until it doesn't, and right now it's still working.

Let me walk you through the channel we're in, the measured move we already got, and the two things that would tell me I'm wrong.

Let's talk shop.

Go back to July when we broke that pennant. I identified it as a straight up pennant and I think that was clear as day, though one could argue it was an M top because we had a lower high in there. Either way, it broke.

Here's what a broken pennant hands you. You take the mouth of the pennant, measure it against the initial breakout, and that gives you a target.

Ours was the 150 period moving average.

We went from 706.31 all the way down to 659 in the QQQ, and we called that in Trade to Close.

So I am not surprised we found a bounce, because we didn't only hit the measured move target.

We also hit the bottom side of the channel and that 150 period moving average at the same time, and three things converging in one spot is exactly what support looks like.

That's why we got the jump.

The measured move is over with now. We don't have to care about that pennant at all anymore. It gave us what we expected from it.

So what are we in

A channel, and this channel is easy to trade, everyone.

They are selling the rips, buying the dips, selling the rips, buying the dips. It's going to follow that channel until it doesn't.

We're sitting right on the edge of it, which is why shorting here makes sense even on a day that looks like this one.

If you want to be extra certain, wait until you're at the end of the channel. And date your options out a bit, two or three days if you have a little more risk tolerance, a week out if you want to be more comfortable with the trade.

When I'm wrong

Two things end this channel, and I want you watching for both.

One, we break out of the channel and gap up, and then we need two or three days outside of it to survive. Not one day. Two or three. Then we move higher and I'm wrong.

Or, da da da da, the capitulatory event.

Yes. We're back to that fun word.

A capitulatory event usually starts on a green day, and that's the part people miss.

You get a nice green session like this one, everybody exhales, and then the worse news shows up and you gap down. Then you gap down again.

That's what it looks like. Channel, gap down, gap down.

We have not seen that yet. We are still just looking at this channel.

One more thing

SPY is a totally different chart. Absolutely, totally different.

It was looking almost like an ascending triangle, which is very bearish, and it did start to break down, but nowhere near as strong a move as the QQQ. I'm not sure I'd even call it a channel.

To me SPY looks like it's almost making, dare I say, a broadening top.

Those two are my favorites to follow and they are trading very differently right now.

Look, I'm a technical trader. I'm a participant trader. I identify price action and that's what I trade off of, because my goal here is to give you market psychology, and that's what makes you a true trader.

Rock On,

Voz

P.S. Everything I just walked you through is what I'm doing live every day in Trade to Close, and it's free for the next 30 days. Sell the rips, buy the dips, and you watch me do it. Start here.