Five weeks of consolidation on indices - and trying to forecast the next big move is not easier than before. If you are reading my blog for the first time - here you can see charts, read opinions, get some educational stuff and setups from the point of view of a short-term trader - check blog from May 3 and the previous one, from May 10 as well.
Scheduled data for the next week:
We will see A LOT OF POWELL next week, since he will have a gig three days in a row. Lot's of Flash Manufacturing and Flash Services PMIs - this time divided into two days, due to Ascension Day on Thursday.
Markets shrugged bad Earnings from Q1, and everybody already know that Q2 is going to be bad as well, probably worse than Q1. So, again - gigantic forces of massive liquidity pump from one side and economic reality from the other side, with "forward looking" market, that often is not in the same "time zone" as economy. In order to not get brain damage trying to understand market movements through headlines of "Recession around the corner" or "Worst economic data from the 150 B.C." and market still not going down, but on the contrary, up / sideways - we will do / trade better by sticking to the charts, and lets try to see what is going on there.
PART ONE - CHARTS
Chart #1 - SPX, NDX, RUT and German DAX Weekly
Weekly SMA200 on charts. SPX in 2725-2955 range for five weeks, NDX strongest, RUT sideways and under WMA200 - same as DAX, which is in the range, you can even make an argument of a megaphone pattern, and with the bearish engulfing weekly candle. Now, we already know - especially if you are a regular reader - that ONE candle doesn't mean all that much, and that PA must confirm the possible movement, by breaking S/R levels.
Going down one notch, to Daily and to the mighty SnP 500 first.
Chart #2 - SPX Daily
SPX under DMA200, rejected two times from 61.8 fib retrace of the entire down move. Multiple tests of R level weakens the level. We could make varios trendlines, and after breaks of #1 and #2 sellers hopes of lower prices were high - only to get absolutely NO FOLLOW THROUGH and now we could make trendline #3. We can throw away now all that trendlines, since price is basically in the range, with SPX as shown on first chart - just in one wide range.
Chart #3 - SPX possible scenarios
#1 - one of the many possible bullish scenarios, with market first shake everybody by making false breaks of the range up and down, and moves higher
#2 - bearish scenario of false break above the range but JUST to tag SMA200 and lower lows. Best would be marginally lower low with bullish divergence and lower read on VIX than on March lows (we can dream of it at least), and recovery starts there.
#3 - several weeks of more sideways, day trading setups, false breaks up and down, while we observe constant fight on Fintweet between permabears and permabulls making victory laps but nothing decisive happens until everybody goes loco... and THEN market makes a directional move.
Voice from the background: Haha funny shit StrayDog, but which one will be IT? Where can I put my money without a risk and sleep like baby waiting for my target to get hit?
Unfortunately, I don't know, and all I know is that there are no trading (or investing) that comes without risk. We are here to gauge where the risk is smaller day by day, and to enter the market when conditions are favorable for us.
Chart #4 - NDX Daily
NDX leading US indices and dragging SPX with it. Liquidation breaks bought, bad structure of dojis - overnight ramps and gaps - repaired. Bad structure as written last time, when we had that candles in the circle:
Remember that on one strong down day, many gaps can be filled, and moving higher like this, does not make a strong supports below.Support found again on Axis line / zone. Former large gap down is partially filled, majority of it is filled, leaving just a 52 pts hole. Only resistance above that is ATH.
Chart #5 - DAX Daily with DMA50 / DMA200
Low of range #4 tested on last Thursday, following by the bounce and a ranging, sideways activity on Friday, where buyers were - just like on SPX - holding premarket low.
From Morning notes of Friday, May 15th First zone of interest is Premarket S /10,375-395/, where Premarket low is. Can THEY hold above Premarket low or not?
Main inflection points now, on Daily chart are 11,280 Mar/Aug 2019 lows and Thursday low. Decisive breaks of this points can give directional legs. Market is behaving technically very well, and that is our job then - in short term trading - to exploit such a behaviour, more in next segments.
PART TWO - MARKET BEHAVIOUR
>> Examples of Strong and Weak market behaviour
Chart #6 - Crude Oil 240 min chart
STRONG
While SPX was doing nothing, Crude Oil was in the beast mode, breaking Resistances that turned later to serve as Supports, and making a classic Bullish Ascending triangle, many tests of the Resistance level, and a breakout. Usable pattern and behaviour that you can find on many other markets.
Tradeable, if you can see that triangle developing. Tweet about that on Thursday, before Xetra open:
Chart #7 - FDAX 30 min
WEAK
DAX last weak - Weak market behaviour in first four days - down, range, breakdown, range, breakdown, range, down INTO larger time frame support (bottom of the range from Chart #5).
Ranges and Axis lines / zones. Behaviour that was favouring sellers, until the LTF Support was hit, when we got a bounce.
PART THREE - SIMPLE TRADING SETUPS
Chart #8 - ES_F 15 min
Just one this time, from last Friday, BUT - a true classic. A setup that will never die. Again and again and again. Strong market, small dip - spring - under ONL (Overnight Low) and higher. In this example - additional reference is halfback of the move from previous day low to Overnight high.
Same day on German DAX - also a up move from the premarket low S zone.
That would be it, for this Weekly blog.
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Cheers!
In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.
Cheers, StrayDog