Sunday Scaries

It's Sunday night, the weekend has been filled with geopolitical noise as expected. This has once again flipped the market temperature in comparison to how it closed on Friday. We all expect it to be in the red on Monday, the reasons being: no peace deals achieved between Iran and the US; Trump blockades the strait [source].

This is the second time I get proven on why you shouldn't jump on a ride that's already up the first hill, you'll immediately get whiplash at the first drop. This weekend I played around with a prediction using the news, and while it will not be exact, the prediction can still be used.

Using the last 10 days worth of data, and more so the observations on Friday pinned with the weekend news, I've predicted an estimated -3.5% opening for Amazon tomorrow Monday.

Here are the things considered for this prediction:

• RSI over 70 for 3 days, which means a forced pull back is expected
• Volume dropped from ~60M to ~38M on Friday while having a $4 gain. Indicating buyers have stopped driving up the price
• VIX closing above 20 while NDX also was up on Friday. This changes the volatility where investors may be purchasing calls and puts to protect themselves
• Weekend news may force the market to pull back from its previous rally. Tonight, SPY is already down -0.76% and while it is not guaranteed to open low, it is a good indicator of where everyone's mind is.

I do believe Amazon will continue to drop throughout the day, I think monitoring the RSI, VIX, and trading Volume will allow me to determine if it's worth opening a contract. My prediction is, it won't go below 10% but tomorrow will be a good day for entering call contracts. This is after all, a sale, it is simply a matter of entering at the right moment.

Some people are speculating that the gap down won't be as aggressive, and I almost agree with them. I think for the most part, most investors who are paying attention will see it as an opportunity to seize up good contracts. As usual, I will not be opening any contracts for the first 45-60 minutes, I'm not sure how strong the pull back will be after all. Once it settles, I will see where the RSI is, where the options ratio is at, the volume, and the VIX.

The weekends are starting to become boring without something to monitor in real time, but I am glad I am learning a prediction model, and I cannot wait to see how it plays out in real time tomorrow morning.