August 5, S&P500 Premarket Plan and Missal
Bad circuits
Image 1. King of the 70s. Paul Volcker
There are circuit breakers, and then bad circuits. Futures are in panic mode, as 5+ sigma moves across Asian markets are well out of the bounds of my weekend publication which - while I warn of tail events - cannot plan around moves of this magnitude. My weekly extremes straddle 2.5 standard deviations as a guide.
My best advice is to let the dust settle a little bit, although it will be a wild week regardless of what happens. I don’t rule out worst-case scenarios but for now focus on what’s in front of you. Perhaps the image I posted in this weekend of the burning house from Tarkovsky’s last film was a little ‘too’ real.
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Crow’s Nest
As of writing at 8h30EST we have traded as low as 5130. This is already a 4+ sigma event as the VIX is now trading over 64, levels not seen since covid.
On such a day, it is advisable to let others do the trading (finding support), or to lean with the trend at defined areas of resistance. It is advisable to wait for the IB close to gauge the day type.
Image 2. Monday RTH to Tuesday ETH as of 8h30EST
Addendum to the levels below. I do not suggest catching a falling knife. These levels are major thresholds which should be used as a guide of potential areas of support.
5215 - weekly plan extreme
5185 - HVN
5149 - 10% sell level, daily close
5135 - 200 DMA
5122 - NPOC
5103 - buying tail
5079 - sellside liquidity
5049 - poor low
Monday Plan and Levels
Pivot 5135. This is the 200DMA, something I haven’t pulled out of the shed since last year. The volatility model estimates a range of 120 points with possible 40 point extension (!).
a) Buyers want to see the ONL defended. Consecutive closes above the pivot look to establish some traction over 5149, the 10% sell level, an area of likely selling. Any relief above targets 5185-90, 5215 at an extreme. Weekly levels apply above, as support becomes resistance.
b) Defense of 5150, Pressure below pivot looks to break the ONL on volume. The 5100 level is a natural psych level, as well as the February POC. This could offer a responsive bid if tempo slows. Below 5090 are 5079 and finally 5049 where longer-term buyers may again show interest.
c) The VIX is at extremes, consider 50 as a gauge, over 70 can see more panic selling.
d) Don’t lose your head! Let the market tell you what it wants to do next, not the other way around.
Image 3. Oof! ES daily levels
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