Weekend Update - June 11, 2022

Hello traders.


First part of this Weekend Update was Weekly Review.

Here, there will be large time frame charts for the bigger picture, comparing setups and market environments, things about news driven moves and data for the next week.


Let's start top to bottom, with DAX Monthly chart.


Although it is not the end of the month, it is worth observing that below ~13800 - previous ATH from February 2020, AND ~13600 - previous ATHs from 2017/2018, we didn't had a MONTHLY CLOSE, just tails were below these previous ATHs. This is important area, and losing it can lead lower, toward March lows.


Since the week ended, let's zoom in on this same chart, now on Weekly timeframe.


Strong weekly candle of almost 1,000 points. We can see more clearly here the 13,600-800 area.


Worth reminding HOW we got this weekly candle, and what was the price action before this week, and for that, we will observe this on Daily timeframe, both on Cash, and on Futures.


DAX CASH INDEX DAILY



DAX FUTURES DAILY



VISIBLE Bearish Divergence for days before last week, and momentum slowdown.

April/May highs at ~14,600 as Resistance.


Last week:

Monday - up day on Whit Monday holiday - experience is telling us that most of the holidays are up days, since it is easier to push market higher when the liquidity is lower, also a breakout over April/May highs, at 14,600.

Tuesday - breakout failed, gap down open, balancing UNDER 14,600... waiting for catalysts (ECB + US CPI on Thursday and Friday)

Wednesday - OPEN at 14,600 and down, head and shoulders formation was made out of previous Friday June 3rd high, Monday high as head and Wednesday PMKT H as right shoulder

Thursday - down on ECB

Friday - gap down open, open drive lower, continuation down on US CPI


For all the possible comments like "easy to say now, when everything is over"... I have warned people publicly on Twitter, and EARLY in the sessions, not only in the Subscribers material.

With more than just these 4 tweets below:


Monday and 14,600

Tuesday and Bearish Divergence | Tuesday and Gaps stacking behind

Wednesday and potential Head and Shoulders + INABILITY to hold above 14,600


ALL of that was bearish, and BEFORE Thursday and news driven move on ECB, so nobody should be surprised with the down move. It started as technical pullback, and continuation down was on NEWS DRIVEN MOVES.


Given the size of the daily candles and direction after the ECB / US CPI - it should not be a surprise that market test swing low from May 9th - where the cash gap at 13,381 is.


Let's briefly observe SPX and NDX charts.


Bounce from -20% from the ATH level (tweet was about that BEFORE it happened, just sayin' )

Then lower low with bullish divergence, as spring below the balance and 38.2 fib retrace of March 2020 low - ATH move. Now, who said Fibs don't work?

Notable gap down and go on Friday.



Similar to SPX, but bounces from -30% from ATH and HALFBACK of the Mar 2020 - ATH move. Like on SPX, notable gap down and go on Friday.


Next catalyst is on Wednesday, with FOMC DAY.

Federal Funds Rate - expected raise is 0.50%; and Press Conference will be important.

This is the data of the week. Besides this, BoE is expected to raise rates in the UK for 0.25% on Thursday, and Powell will speak on Friday.


So, more pain is possible, and I would observe will previous lows HOLD or not.

Will market consolidate in front of the FOMC? More info we will get from Monday session, and we must IMO - go day-by-day here.



SETUPS

As said before (tweeted, written in M. Notes, spoken in Recap videos): buying dips in the WEAK environment is NOT the same like in neutral or strong environment. ESPECIALLY when we get downside continuation on the news driven move. Buying dips THEN, especially in the early phases of the move, is a bad idea.


Remember those Trump tweets? Here is one to refresh our memory, from Dec 2, 2019

Shallow pullbacks, breakdowns, bear flags, no reaction or limited reaction on Support zones.

Range AND volatility EXPANSION.


What is also different in the WEAK, NEWS DRIVEN ENVIRONMENT, and how to trade that?

Also to note that these days are RARE, and require traders ADJUSTING and moving from conservative to aggressive trading, in order to not be left in the dust.




Open drives:

Open drive lower in the weak environment vs. the opening spikes without a follow-through, that were so common in that 10-month range, while the price was above 14,800. Those were for fading, while these open drives lower NOW, are not. These can be high of the day, when market starts to be directional. On these, similar to news driven moves, we look to enter on the FIRST pullback, as continuation type trades. I have showed a few of those on my Twitter feed. Like this one on Friday.


Breakdowns:

Example would be Descending triangle breakdown that we had on Thursday, after the ECB news. Testing, testing, testing... it was just a matter of time, when they will break.

Chart is from Setups Gallery for this week, and setup #8.

News driven breakdown as #5.





Pullback of news driven moves:

Example would be 38.2 pullback of the CPI move across the board: SAME was on DAX, SPX, NDX... and probably some other indices. Showed the trade on NDX for this.


There are some other differences as well, but let's stop there...

We are NOT in the ranging environment to just FADE Main Zones, and better zones. Now, besides fades and false breaks, we have REAL breakdowns, news driven moves, news sensitive markets. Ranges and volatility expansions. This will happen again. Repetition and examples from the past are there to learn from them.


Have a nice weekend,

Relja