The Bottom Line:
- Analyzing the recent market reversal and its impact on the QQQ and IWM ETFs
- Considering the upcoming PCE (Personal Consumption Expenditure) report and its potential influence on the trades
- Identifying potential credit trade setups on the QQQ and IWM, including strike prices and risk profiles
- Emphasizing the importance of waiting for the initial market reaction to the PCE report before executing the trades
- Highlighting the potential returns of 20-25% on the proposed credit trade setups
Examining the Recent Market Reversal
Market Reversal Presents Opportunities in QQQ and IWM
The recent market reversal has created potential credit trade opportunities in the QQQ and IWM ETFs. However, before entering these trades, it’s essential to consider the upcoming Personal Consumption and Expenditure (PCE) report, which is the Fed’s preferred economic indicator. The report, scheduled for release at 8:30 AM tomorrow, is expected to show a decline in headline, core, and core services less housing numbers on a month-over-month basis, according to forecasts from major banks like Bank of America, Citi, Goldman Sachs, and JPMorgan. While this may not prompt the Fed to lower rates immediately, it suggests that inflation is under control and trending downward in the long term.
Technical Analysis of QQQ and IWM
The SPY has come off its mid-July high, touched the 50-day simple moving average, and is currently holding above the 50% retracement level. The QQQ, representing the technology sector, has been hit harder, breaking through the 50-day moving average and briefly touching the 200-day moving average before reversing. It is now sitting at the 50% retracement level from its low to high. The IWM, on the other hand, has shown more bullish momentum, with four gap-ups followed by a topping tail and a bounce just above the third gap at around the $210 to $222 level.
Potential Credit Trades on IWM and QQQ
For the IWM, a potential credit trade involves selling the 215 strike and buying the 210 strike for approximately $1 of value. This setup has a 75% probability of keeping all the credit as long as the IWM stays above $214. In the QQQ, the flush recovery reversal back to the 50% retracement level sets up a potential move back into the consolidation area around $475, with solid support around $450. The trade involves selling credit on the underside by selling the 445 strike and buying the 440 strike for about $0.65, and selling credit on the upside by selling the 490 strike and capping it off with the 495 strike for about $0.40. This trade offers a potential 25% return on a $5 spread, with problems arising if the QQQ moves above $491 or below $444.
Anticipating the Upcoming PCE Report
Anticipating Market Reaction to PCE Data
The upcoming Personal Consumption and Expenditure (PCE) report, set to be released tomorrow morning at 8:30 AM, is a crucial factor to consider before entering any trades. As the Fed’s preferred economic indicator, the PCE report is expected to show a decline in headline, core, and core services less housing numbers on a month-over-month basis, according to forecasts from major banks such as Bank of America, Citi, Goldman Sachs, and JPMorgan. While these numbers may not prompt the Fed to lower rates immediately, they suggest that inflation is under control and trending downward in the long term. The market’s reaction to these numbers will play a significant role in determining the viability of the proposed trades on the QQQ and IWM ETFs.
Analyzing the QQQ and IWM ETFs
The recent market reversal has affected the QQQ and IWM ETFs differently. The QQQ, representing the technology sector, has experienced a more significant hit, breaking through the 50-day moving average and briefly touching the 200-day moving average before reversing. It is now sitting at the 50% retracement level from its low to high. In contrast, the IWM has shown more bullish momentum, with four gap-ups followed by a topping tail and a bounce just above the third gap at around the $210 to $222 level. These technical indicators suggest potential credit trade opportunities in both ETFs, depending on the market’s reaction to the PCE report.
Potential Credit Trade Setups
For the IWM, a potential credit trade involves selling the 215 strike and buying the 210 strike for approximately $1 of value. This setup has a 75% probability of keeping all the credit as long as the IWM stays above $214. In the QQQ, the flush recovery reversal back to the 50% retracement level sets up a potential move back into the consolidation area around $475, with solid support around $450. The trade involves selling credit on the underside by selling the 445 strike and buying the 440 strike for about $0.65, and selling credit on the upside by selling the 490 strike and capping it off with the 495 strike for about $0.40. This trade offers a potential 25% return on a $5 spread, with problems arising if the QQQ moves above $491 or below $444. It is essential to wait for the first rotation after the PCE report’s release and assess if these setups still offer a 20-25% return before entering the trades.
Identifying Potential Credit Trade Setups
Analyzing the Market Reversal and PCE Report
The recent market reversal has created potential credit trade opportunities in the QQQ and IWM ETFs. However, before entering these trades, it’s crucial to consider the upcoming Personal Consumption and Expenditure (PCE) report, which is the Fed’s preferred economic indicator. The report, scheduled for release at 8:30 AM tomorrow, is expected to show a decline in headline, core, and core services less housing numbers on a month-over-month basis, according to forecasts from major banks like Bank of America, Citi, Goldman Sachs, and JPMorgan. While this may not prompt the Fed to lower rates immediately, it suggests that inflation is under control and trending downward in the long term. The market’s reaction to these numbers will play a significant role in determining the viability of the proposed trades on the QQQ and IWM ETFs.
Technical Overview of QQQ and IWM
The SPY has come off its mid-July high, touched the 50-day simple moving average, and is currently holding above the 50% retracement level. The QQQ, representing the technology sector, has been hit harder, breaking through the 50-day moving average and briefly touching the 200-day moving average before reversing. It is now sitting at the 50% retracement level from its low to high. In contrast, the IWM has shown more bullish momentum, with four gap-ups followed by a topping tail and a bounce just above the third gap at around the $210 to $222 level. These technical indicators suggest potential credit trade opportunities in both ETFs, depending on the market’s reaction to the PCE report.
Setting Up Credit Trades on IWM and QQQ
For the IWM, a potential credit trade involves selling the 215 strike and buying the 210 strike for approximately $1 of value. This setup has a 75% probability of keeping all the credit as long as the IWM stays above $214. In the QQQ, the flush recovery reversal back to the 50% retracement level sets up a potential move back into the consolidation area around $475, with solid support around $450. The trade involves selling credit on the underside by selling the 445 strike and buying the 440 strike for about $0.65, and selling credit on the upside by selling the 490 strike and capping it off with the 495 strike for about $0.40. This trade offers a potential 25% return on a $5 spread, with problems arising if the QQQ moves above $491 or below $444. It is essential to wait for the first rotation after the PCE report’s release and assess if these setups still offer a 20-25% return before entering the trades.
Timing the Trades Around the PCE Report
Assessing the Market’s Reaction to PCE Data
The upcoming Personal Consumption and Expenditure (PCE) report, set to be released tomorrow morning at 8:30 AM, is a crucial factor to consider before entering any trades. As the Fed’s preferred economic indicator, the PCE report is expected to show a decline in headline, core, and core services less housing numbers on a month-over-month basis. While these numbers may not prompt the Fed to lower rates immediately, they suggest that inflation is under control and trending downward in the long term. The market’s reaction to these numbers will play a significant role in determining the viability of the proposed trades on the QQQ and IWM ETFs.
Examining Technical Indicators for QQQ and IWM
The recent market reversal has affected the QQQ and IWM ETFs differently. The QQQ, representing the technology sector, has experienced a more significant hit, breaking through key moving averages before reversing and sitting at the 50% retracement level. In contrast, the IWM has shown more bullish momentum, with multiple gap-ups and a bounce just above a crucial level. These technical indicators suggest potential credit trade opportunities in both ETFs, depending on the market’s reaction to the PCE report.
Structuring Credit Trades Based on Market Conditions
For the IWM, a potential credit trade involves selling the 215 strike and buying the 210 strike for approximately $1 of value, with a high probability of success if the ETF stays above a certain level. In the QQQ, the recent price action sets up a potential move back into a consolidation area, with solid support at a lower level. The trade involves selling credit on both the underside and upside, offering a potential 25% return on a $5 spread, with risks associated with specific price levels. It is essential to wait for the first rotation after the PCE report’s release and assess if these setups still offer a desirable return before entering the trades.
Exploring the Potential Returns of Credit Trades
Potential Returns and Risk Profiles
The recent market reversal has created opportunities for credit trades in the QQQ and IWM ETFs. For the IWM, selling the 215 strike and buying the 210 strike for approximately $1 of value offers a 75% probability of keeping all the credit, as long as the ETF stays above $214. In the QQQ, selling credit on the underside by selling the 445 strike and buying the 440 strike for about $0.65, and selling credit on the upside by selling the 490 strike and capping it off with the 495 strike for about $0.40, presents a potential 25% return on a $5 spread. However, problems may arise if the QQQ moves above $491 or below $444.
Impact of the PCE Report on Trade Setups
Before entering these trades, it’s crucial to consider the upcoming Personal Consumption and Expenditure (PCE) report, scheduled for release at 8:30 AM tomorrow. The report is expected to show a decline in headline, core, and core services less housing numbers on a month-over-month basis, according to forecasts from major banks. While this may not prompt the Fed to lower rates immediately, it suggests that inflation is under control and trending downward in the long term. The market’s reaction to these numbers will play a significant role in determining the viability of the proposed trades on the QQQ and IWM ETFs.
Timing and Adjustments Based on Market Conditions
It is essential to wait for the first rotation after the PCE report’s release and assess if these setups still offer a 20-25% return before entering the trades. The SPY has come off its mid-July high, touched the 50-day simple moving average, and is currently holding above the 50% retracement level. The QQQ has been hit harder, breaking through the 50-day moving average and briefly touching the 200-day moving average before reversing, while the IWM has shown more bullish momentum. These technical indicators should be taken into account when considering the potential credit trades and adjusting the setups based on the market’s reaction to the PCE report.
