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Week of Jan 7


What a great start to the New Year!


NQ has sold off for 5 straight days, and we closed on Friday with a daily Doji. For this week, I am looking for a decent bounce on the indexes into some key levels that I will outline below. Once we can confirm this market structure shift on the daily chart - I will start to short the market in size.



DXY:  Last week, DXY bottomed right where it needed to and bounced off a weekly fair value gap. This is important, as for NOW - it confirms the weekly breakout move in the DXY has now corrected, and we can march higher from here. The next Draw on Liquidity I see for the DXY daily is higher at those relative equal highs around 104.186. I would like to see us reach for those, than correct again into a internal range liquidity pool such as a weekly FVG.


Seeing that the weekly has hit a key PDA, dropping to the 4h you can see that we are starting so reverse and shift market structure higher - with plenty of PDAs overhead to reach for :





The Macro side of DXY - is that as we continue to slip into recession - DXY will continue to rise and basically eat the world. This is mostly due to the EuroDollar system where dollar denominated debt is originated outside the US - but the net result is a giant sucking sound of DXY and its power over the entire globe. For more insights - check out Brent Johnson and his "Dollar Milkshake Theory" here - https://www.youtube.com/watch?v=da6hMy5sp1M



Energies:   I don't have a real clear picture on Oil at this point - and its hard to have a bullish bias on Oil when DXY is rising. A rising DXY will continue to put pressure on commodities so I just don't have the clarity I demand in order to initiate a position. I started my trading career in Oil and Natural Gas so you can reset assured that once we see a clear setup - I will keep yall updated.




Interest Rates:  I am going to focusing LESS on the benchmark 10 year, and more on the yield curve as a whole as it has bigger implications.


Yields across the curve are rising, (which follows DXY, as bonds are just Dollars with return)


This is why the individual yields themselves aren't as important as the entirety of the curve.

As I outlined in our Q1 Targets Post , I am looking for the 2/10 yield curve to finally un-invert from its RECORD levels and RECORD duration. This will has MASSIVE implications, as the bond market is starting to price in lots of issues. I don't have a clear view on if its the long end of the curve that rises, the short end drops - or somewhere in the middle - but the curve itself is signaling the largest recession we have seen in the past 40 years.





--NOTE--

For the next two sections covering the VIX and the Nasdaq, I will be focusing on the daily charts. It looks as though we are at a change in trend on BOTH the VIX and the Nasdaq, and the weekly charts won't see it for another week or two. Thus, we need to drop down into a daily and 4h timeframe to see what is happening.



VIX:  The VIX has bottomed on the weekly - and this past week of market pressure is a clear indication of this.


You need to drop down to the daily and the 4h to see what is really happening. Market turns start on lower time frames and then translate into the higher time frame charts.


Back in Mid December - VIX bottomed after filling its final gap as covered in our December 17th post - which meant we were looking for some upside targets to confirm the trend change.


This past week - we did exactly that by sweeping the December VIX highs. From HERE - we need to correct lower to fill in some lower time frame inefficiencies. Luckily, we have the prefect setup as the VIX gapped higher and sat there all last week.


For this week, I am looking for the VIX to begin its march lower to fill in that big liquidity void down to around 12.7 before resuming higher. This will provide fuel for indexes to rally (which we need to) before the next meaningful move lower.




Nasdaq - This week we sold off every single day on the /NQ into a very logical area- but you had to be on the daily or lower time frame to see what they were shooting for.


For starters - Once the NQ showed that it had topped last Friday, we wanted to see a continuation to the downside to permit price to get into the discount zone of the entire swing, before any bounces - which took until Thursday to do so.


Along the way, we filled a daily volume imbalance on Wed, and a TINY one on Thursday as well.


Friday printed a Doji - but if you look closely - you will see that they also filled the LAST daily imbalance on the March contract by sweeping that daily FVG.


The market has now shifted structure to a BEARISH order flow on the daily chart (we wont see a bearish weekly chart for another 2-3 weeks). From here. I am looking for NQ to rise for a back-test & respect the daily FVG, along with the daily Breaker Box before going to lower targets. The cleanest part of all of this - is that the daily FVG and breaker box is just into the premium zone of the daily swing range on NQ from here.







So here is the setup for this week;

  • NQ has corrected into discount and filled inefficiencies on the daily chart via volume imbalances and daily FVGs.

  • The VIX is ready to correct lower to fill its gap

  • NQ needs to rise to back-test some of the inefficiencies it's left behind - I want to see the daily FVG and Daily Breaker respected for the next move down.

  • DXY should top and VIX should bottom right about the same time.





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---1/8 Update--


Well Monday sure was exciting!


Markets SCREAMED higher today right into our target zone. I have closed my longs and have began to build a small short position. We REQUIRE confirmation on the 15min and 1hr charts of a reversal to really take on a full sized position - so I will be waiting to add shorts.


From HERE - we are waiting on a lower time frame confirmation that this was the high for the week - and I really hope it was. Mondays tend to mark the high or low of the weekly candle, so the fact they ran NQ up 500 points from the overnight lows to me - smells like they wanted to ge…





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