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Option Sellers Win as Earnings Continue & Traders Hold Support – Jul 23, 2020

MARKET COMMENTARY– Traders finally edged over 3274 but are holding 3259 as their early morning support. TSLA, WHR, MSFT and others reported after the close yesterday and options sellers have won. By and large, option buyers for earnings have been left holding the bag and option sellers are banking profits (that would be us =) for these earnings trades. Leading stocks will lead us all the way up and they will lead us on the way down. Sector rotations into financials and continued interest in the healthcare stocks and out of tech – keep watching the leaders. Retracing to higher lows once more implies the grind higher is intact. Highs seen early last week have not been breached. The Nasdaq continues to be weaker than the rest of late. When leaders lag, we also see a cautionary tone.

The NQ_F worked hard to recover but it is still underperforming (compared to its normal behavior). The VIX is still rising. Divergent undercurrents still exist. We have slipped into a trending cycle without a good retrace during the trading day. This makes for a bit of a messy situation. As far as the broad market indices go, we remain in a day trading cycle with no swings setting up just yet. We will have intraday longs and intraday shorts and we will continue to take profit rather than wait for continued upside pressure. BE CAREFUL shorting between major targets – the markets are still bullish.

Gold is now in full breakout, volatility readings are still below the 30 region- making bullish action much more likely in the broad market. The dollar remains depressed and is breaking lower. There is a MONSTER battle occurring in the world of currency.

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This week’s calendar

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Econoday Calendar

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TRADING LEVELS-levels hold steady

If you find yourself being chopped up, widen your time frame or take time away from your screens. This is a time when less is more.

TRADING VIEW & ACTION PLAN
We are in trending breakout but without a signal of strength. This is a cautious long grind. As long as we hold or recover the area near 3246.5 after any fades, we remain in a path that shifts us north and we are much more likely to trend back into 3300 and beyond, else we slip back into the shorting zones and supports in our range near 3158 and lower. Though we have moved into trending formations, we should be careful adding to positions or holding positions that do not move properly into targets.

Intraday LONG trading from support edges like ABOVE the VWAP or tight moving averages will give you the least risk event for engaging – removing your trade at resistance will allow you to participate – understanding that countertrend bounces can be swift and sharp but will likely fail under the broken structure of the market.

Intraday SHORT trading from resistance edges like the old highs or bigger moving averages will give you the least risk event for engaging. Follow the candle trend until candles stop breaking higher.

Here’s a link to the METASTOCK software– you can have your own copy of Metastock to run these tests and setups using Target Rich Trades.

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Target Rich Trades from MetaStock

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