Page menu

Tuesday, August 31, 2021

Market Update 8/31/21 - Breakout or Fakeout?!

This week can be considered holiday trading, since many traders have already left for vacation, and certainly taking Friday off. That makes things very unpredictable, but I'm going to give it my best shot... 

 We saw the $SPX and the NASDAQ, both breakout to new highs, but what's more significant, is that  the NASDAQ broke out of top of the range it's been trading in for the past several months. Note: The public charts have been updated, and annotated, and I'm adding them below - with further explanation - as well. 

 $COMPQ (NASDAQ): Breaks out above resistance, which actually started on Friday. 

 $QQQ - 10 min chart - added to the public charts area, because all that matters is the NASDAQ!  Support looks like 375 - trend remains up (obviously), and I'm calling this wave "5", based on the fact that wave 4 looked like a triangle pattern. I think we'll probably see a little pullback, followed by another retest of the highs, as soon as Friday. Adding this chart to the public charts area, until it breaks. 

$SPX - Daily Candlestick Chart - You'll see what looks like a breakout on the chart which is located in the public charts area, but I have another shorter term view - I'll add below - which doesn't show a breakout. This explain the question mark on my "breakout" annotation. 

$SPX - DCS - Shorted term.  Not seeing a breakout here, although we certainly could.... The market makers can do whatever they please on light holiday trading. 

Typically, you need to see a breakout, in order to facilitate short covering, before the bulls will take profits. This is how things work, a washout below support is bullish, while a breakout to new highs is usually bearish. This is why you always hear traders say, "I'd like to see a washout of the weak hands, before I buy the dip, and also why so many traders buy false breakouts, only to end up being bag holders. Just look at the new all time high in gold ( sold in 2020), for an example... 

  After all, if all traders had to do, in order to consistently make money, was to buy every breakout, then everyone would be a winner. On the contrary, some of the most devastating topping patterns end with false breakouts, called "throw-overs". Meaning that the price action throws-over the top of the pattern, only to suddenly reverse to the downside, so next time you hear the fake news reporting all time highs, as if that's a bullish indicators, you'll know that's all a lot of hype. Look at the "all time highs in lumber", they were all excited about? Again, if watching the fake financial news made you rich, I'd  be a billionaire! The news is a contrarian indicator. 

Lumber breaks out/ bullish reversal  

Remember, we were also watching the 60 min chart views? These charts continue to work. 

$SPX - 60 min. view - Self explanatory  

I've also added a $VIX chart to the public charts area, because I believe the geniuses who have been shorting the $VIX for the past several months, are about to be caught in the pool swimming naked. 

$VXX - This chart dedicated to Andrew Ross @andrewross11

who turned me on to this index. No doubt 1000 greedy bulls are short this index. Definitely follow Andrew Ross, if you need trading guidance 

More next time, AA 


No comments:

Post a Comment