The first official week of post summer trading appears to have a bearish technical outlook, says Trevor Smith.
A Pack of Bears, walking quietly and complacently down a hillside path, are headed for world markets. There are many reasons exist for this, but it is mostly technical conditions for sideways-down price action.
Another reason the bears have a chance to emerge next week is both scheduled and daily unexpected economic news in a news-reactive market environment. Trading psychology could be a separate article, but market indecision sometimes creates a need for traders/investors to have something to hang their hat on or to create a sense of a handle in reality to grab. News provides this temporary sense of grounding stability amidst random market activity.
Unfortunately, news can become a technical indicator when good news no longer makes indecisive markets go up, and computer algorithms could be written to initiate small bear positions when news does not move markets as it should, and if other technical conditions emerge, like volume spikes. Inverted hammer candlesticks are the most common reversal pattern that computers and humans may see next week.
Last week, all option spread trades worked and markets hit 9/10 projected range numbers.
Next Week’s Predicted Ranges
E-mini S&P 500
High Range 2981-2967; Low Range 2905-2870
Buy 2930/2935 weekly put spread; aggressive traders buy same call spread for week’s highs made early, reverse position to buy put spread at weekly highs; Rationale: $ADVN, $TICK internals dropped today
Japanese Yen
High Range 9490-9460; Low Range: 9360-9281
Sell weekly & monthly call spreads 9400/9425; Rationale: 3-day Chart candlesticks
Euro FX
High Range 1.106-1.100; Low Range 1.085-1.1033
Buy 1.1/1.1025 weekly call spread; Rationale: weekly pivot above in sideways pivots
Gold
High Range $1560-$1540; Low Range $1511-$1587
Buy $1525/$1520 weekly & monthly put spreads; Rationale: three-day candlesticks
Crude Oil
High Range $5743-$5615; Low Range $5429-$5356
Buy weekly call spreads 5500/5550; Rationale: Weekly pivot/range midpoint/weekly 50-MA supports; reverse position if trending breakout lower.
Last Week’s Projected Ranges Versus Actuals
E-mini S&P 500
High Range 2825-2890; Low Range 2874-2860
Actual: 2946-2810
Buy 2875/2880 weekly call spread (rationale: weekly pivot area overhead 2888); sell call spread 2865/60 (rationale: downward momentum into early next week, low retest likely of 2857-50)
Japanese Yen
High Range 9552-9500; Low Range 9460-9440
Actual: 9589-9382
Sell small weekly put spread 9500/9525; overall technically bearish for high reversal to 9485, but trending math prevails here as does recent breakout upside history toward recent highs.
Euro FX
High Range 1.125-1.118 Low Range 1.114-1.110
Actual: 1118-1097
Buy 1117 straight call, 1117//11195 call spread (rationale: bull engulf low candle Daily chart, volume surged)
Gold
High Range $1569-$1552 Low Range $1490-$1470
Actual: $1565-$1526
Sell $1535/$1540 weekly put spread to reverse position selling call spreads if high of week made early by buying back short put spread, selling call spread near highs as down is likely true direction to $1528 (62% approx. chance) the weekly pivot or $1510 extended range midpoint.
Crude Oil
High Range $56.09-$54.76; Low Range $54.26-$53.08
Actual: $56.89-$52.96
Buy long call spreads weekly near $5450/$5475 (rationale: weekly pivot/range midpoint between the strikes; near 80% chance $5475 but must be exceeded for spread to profit).
See More analysis from Trevor here
Note: Nothing herein shall be construed to be specific financial advice. While reflecting my best good-faith efforts to forecast markets, no guarantees of accuracy are made from my range statistics, aggregate statistics, frequentist interpretations, and pivot math from hand calculations. I am a registered newsletter CTA, and all required disclaimers apply. Trade at your own risk with money you could discard/not miss.
