Tom’s Weekly Newsletter September 1st, 2022

Originally published via our newsletter previously. Subscribe for early access!

How Far Back can the Markets Slide Before Finding Support?

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Today, the three major indices traded higher on the day.

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This doesn’t necessarily mean the slide is over, but it may stall a bit, especially since everyone seems to be waiting with bated breath for what Fed Chair Powell is going to say in his remarks from the Jackson Hole economic symposium this week. He is scheduled to talk this Friday.

In the meantime, I want to look at the Fib Retracement zones on the corners of the market from the June lows to the recent highs to assess possible support price zones.

Tom Gentile
C1P: Chief 1-Percenter


Four Corners of the Market

SPY - SPDR S&P 500 
SPY – SPDR S&P 500 
TLT - iShares 20+ Year Treasury Bond ETF
TLT – iShares 20+ Year Treasury Bond ETF
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No need to slap on a Fibonacci view on the chart of TLT.

It has been sliding prior to equities peaking out and, even with the narrow candle ranges over the past 6-trading days, it looks like TLT can continue to slide.

The box range highlighted in the chart image above shows TLT may have a bit more to drop before it hits a technical price support.

There doesn’t appear to be too much of a price drop expected to see any meaningful return in a long-put option trade.

In checking a Call Credit Spread at the outside of the box range resistance we aren’t finding enough premium to generate even our 1% avg. ROI goal on that strategy.

We’ll see what happens at support if it gets there.

UUP - Invesco DB US Dollar Index Bullish Fund
UUP – Invesco DB US Dollar Index Bullish Fund

UUP did in fact move higher from last week’s newsletter.

It is now at a point where it looks like it may go higher.

July 14 was a high for UUP on July 14 and three-trading days back it broke above and closed above that high (resistance if you will).

The last two-trading days are technically bearish reversal days, but UUP is still trading at or slightly above that July 14 high point.

When securities break out we like to give it another trading day or two to see if it doesn’t have a false breakout.

Thus far, it looks promising for UUP bulls. If it does indeed trade higher, take the difference of the support and resistance of the range and add it to the breakout price for a possible price target higher.

USO - United States Oil Fund, LP
USO – United States Oil Fund, LP

Support at 70 did indeed hold.

Not only did price test support it bounced higher from it and broke out to the upside the descending resistance line (as we see it).

No false bar or candle breakout happened.

It has had two consecutive bullish reversal days and closes above that descending resistance line that one can look at this as a bullish sign for USO.

Look at last weeks image of the UUP and you will see a similar pattern.

UUP since last week has run up to the prior highs. Can this same situation happen for USO (oil and energy stocks).

It’s asking for a larger price point move on USO that UUP, but hey, anything is possible right?

GLD - SPDR Gold Shares
GLD – SPDR Gold Shares

The Darknet S signal emphasized last week didn’t just bring a pause to GLD, it saw GLD trade lower.

One expectation could have been GLD could retrace to its prior lows, (given we’ve seen charts prior retrace up to their prior highs why couldn’t the reverse happen?)

GLD may very well retrace to its prior lows, but right now its had a couple of bullish reversal days.

This has created a potential up channel in which higher lows may be accompanied by higher highs.

That hasn’t happened yet and one thing that can ruin that possibility is the overhead, horizontal resistance we see around 167.

Some may even look at that as a price target.

Morning Report Lists

With the pending commentary due from Fed Chair Powell this Friday, the markets are possibly going to trade in a narrow range like it did today, before breaking one way or the other post his comments and the pending dissecting of what his comments actually mean for the economy and the markets.

Take a look at the Morning Reports Lists to get a gauge on where the options activity is taking place to see where some traders are placing their orders based on their analysis and assessment of what may come our way with market prices.

To find these Log in (or once you are logged in) go Options > Rankers > Morning Report.

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Tom Gentile
C1P: Chief 1-Percenter


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