StrayDog's Weekly Analyses - May 24, 2020

Up week on Indices, Crude Oil pushing higher, and as always, let's start this blog with the scheduled news for the next, shortened trading week.

Spring Bank Holiday in UK, Memorial Day in US = lower liquidity on other markets on Monday. ECB President Lagarde on Wednesday and US Preliminary GDP q/q on Thursday, could be important out of this list.


Moving on to charts.


Chart #1 - ES_F and SPX Daily


On the right: SPX is balancing ABOVE the gap, with top edge of this gap serving as Support. Price REJECTED the gap - short term bullish. DMA200 around 3,000. NDX dragging higher.

On the left: Channels and bullflag on ES_F -> let's go down a notch.



Chart #2 - ES_F 240 min


#1 - Head and Shoulders... FAILURE - Bullish.

#2 - Market finds support as a spring of prior low and channel test... making a bull flag at the end... but let's go down another notch



Chart #3 - ES_F 120 min chart


Zooming on a 120 min. Friday Overnight session was news driven downside move.

Market SHRUGGED the bad news. When Futures comes from red to green, that's bullish. At least short term bullish.


Possible Scenarios - #1 and #2 Bullish, and #3 Bearish.


Bulls need a bull flag breakout, and to push price above DMA200, meaning above 3,000 and hold there. Bears need bull flag failure.



Moving on to Nasdaq, which is leading US indices higher.


Chart #4 - NDX Daily


Same thing as SPX, NDX is holding above the gap, prior large gap down from February is completely filled, price moving inside the channel. Every prior dip or liquidation break is bought. Main Resistance level currently is ATH.


No wonder that RUT now outperforming on Daily basis, showing relative strength, since this longs on Nasdaq 100 can be CROWDED now, with ATH close. Facebook, Amazon, Netflix, Nvidia - all of them having new ATHs. Bulls need to keep price inside the channel, bears need a breakdown.



Chart #5 - Google Weekly


Importance of horizontal support, right at 1,000 mark. Example of simple swing trading setup.



Chart #6 - Crude Oil, 240 min


Good follow through since last week blog, overshooting a resistance level, down move and dip bought. Approaching first major resistance, which is bottom of the large gap down.



Chart #7 - DAX Daily

Main hurdle to the upside remains 11,280 level and large gap down, with unfilled part 11,235-447. The close itself is on 11,542 (March 6th). Unlike SPX, DMA200 on DAX is not near.



Chart #8 - FDAX 120 min


Zooming a bit on FDAX, to observe the inflection points: Friday low, Breakout point, Mar/Aug 2019 lows level, and April 30th high. Like on ES_F, market is forming a potential bullish pattern. Not a classic flag, but sort of bull flag. Again - coming from red to green on Friday, by shrugging off bad news - bullish.


Generally on indices


For Bulls: short term bullish patterns, shrugged bad news, come from red to green on Friday, volatility going down, grinding higher in BTD manner, and premarket lows defended. (Subscribers of DAILY DOSE OF DAX, check Setups Gallery for previous week to observe this). Strong markets will defend premarket lows.


For Bears: Longs getting crowded and better Resistance is approaching on all indices. SPX 3000, NDX ATH, DAX Resistances from charts above.


SPX bearish below the channel, NDX bearish below the channel and especially below Axis line (Chart #4), DAX bearish below Friday low, and more below 10,770... otherwise - bulls in control and BTD market.


Note that from contraction we get expansion, and vice-versa. Ranging and consolidation can last more time than you think, be prepared for more false breaks, if we don't get decisive moves out of current ranges. PA is not just trending higher or trending lower. Majority of time, markets consolidate, preparing next directional legs, trapping breakout chasers. Best way to catch a breakout (or breakdown), is entering on a pullback.

 

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