📊 What is the Market Narrative?
Today’s session saw the SPY close precisely at the upper Bollinger Band and a significant overhead trendline, indicating a potential short-term exhaustion of bullish momentum. This occurred with the formation of a low-volume doji candle, positioned just above the 5-day simple moving average (SMA). The doji, characterized by its small real body, signifies indecision between buyers and sellers, and the diminished volume suggests a lack of strong conviction behind the recent upward push.
The price action appears to be forming a “wedge” pattern, where the trading range is narrowing, often preceding a more decisive move. This technical setup is occurring just ahead of a packed economic calendar, with the highly anticipated CPI report on Wednesday and PPI/Initial Jobless Claims on Thursday, both pre-market releases. While the market has been “melting higher,” characterized by a steady, almost effortless ascent, the current positioning near overhead resistance, coupled with the low-volume doji and the looming economic catalysts, suggests that the risk-to-reward ratio for initiating new long positions is becoming increasingly unfavorable. The market’s inability to push higher with conviction at these levels, especially before key inflation data, calls for heightened caution.
We don’t tell the market what types of setups it provides us. Rather, we observe, orient and decide what opportunities/setups it provides, then act accordingly using our trading toolbox – Signal Bars, Tactical Longs, ORBs, Tactical Shorts. This will ebb and flow on a day-to-day basis and week-to-week basis. Adapting to this is of upmost importance from an identifying setups and trade management perspective.
Heading into the session, I don’t see any high-quality setup in a high-quality stock that has formed a signal candle, I think warrants being targeted via a BSLO. It’s a market better suited to a tactical approach ORBs and Intraday Swings. Often the leader of the day is the first one in it’s group/theme to power through HOD with constructive price/volume action. Little details, but they matter. Of course, vice versa for the short side.
Here is my daily process:
- Are we in an ideal Swing Trading environment? This means leading stocks ‘calmly’ tightening along key daily MAs. If yes, look for signal bars to form, which I could target via BLSOs or ORBs Setup.
- If no, are we short-term extended to the upside? Wait for leading stocks to pull back towards key daily MAs (especially if overbought 20-day MA breadth readings), then tactical short setups or non-correlated groups/themes like commodities are an option.
- If no, are we short-term extended to the downside? Wait for leading stocks/themes with relative strength to reclaim key daily MAs via Wycoff Phase C Spring (especially if oversold 20/50/200 day MA breadth readings), then tactical long setups to overhead resistance (sell 7/8th LOC, swing 1/8th & possibly 5 Min ORB next day) and/or tactical shorts at key levels and Daily MAs.
🔍 Developing Setups:
- BULLS
- Looking for a tight inverse H&S to close the gap and bounce off the 5-day SMA.
- Gap and continuation in white algo or off pink algo.
- BEARS
- Look for larger yellow cup to close. Ideally, rejecting the 20-day SMA with the handle.
- Smaller cup to close and reject off 5-day SMA.
- We can create an H&S, with push higher to form head and right shoulder below resistance.
- SCALP RULES ( Two very, very simple principles)
- Set out the trading framework for the day. So, you take trades only based on the rules you established based on the context for the day. For the morning moves, if the market is kind, it’s looking for continuation structure. Identify the control algos, and the precision algos for the breakouts.
- NO REVERSALS UNLESS: Head and shoulders or for Cups to close and handles form. The principle behind waiting for cups closing to soak up the sellers before confirmation of going long. If unclear. Wait for break/retest.
- An advance move is called a ZOMI (Zone of Mutual Interest). A big part of understanding ZOMI is to not call the absolute bottom/top. You want price to minimum move back into algo and to know where the liquidity is that both bears and bulls want to gravitate toward. 5day MA is often a usual suspect. If we lack continuation structure and get a stop hunt – you are prepared. Use engulfing candles as stop hunts at lows for a head of a HS formation.
- Example below of a great ZOMI trade waiting for the handle off the magenta as resistance R:R yes? It will help you get in position for both the IHS handle and the H&S. Enter puts at green candle off magenta as stop loss target
💥 Earnings / News Movers:
Tomorrow, Tuesday, June 10, 2025, the US economic calendar presents a mix of business sentiment, retail sales, and energy inventory data. The day begins early at 3:00 AM PDT with the NFIB Business Optimism Index for May. This report, compiled from a survey of small businesses, offers a crucial gauge of their confidence levels regarding sales, hiring plans, and economic outlook. As small businesses are a significant driver of the economy, this index can provide early signals of broader economic trends.
Following this, at 5:55 AM PDT, the Redbook YoY sales data for the week ending June 7th will be released. This weekly retail sales index provides an early look into consumer spending patterns and retail sector performance.
Later in the morning, the Treasury will conduct its 52-Week Bill Auction at 8:30 AM PDT and a 3-Year Note Auction at 10:00 AM PDT. The results of these auctions, particularly the yields, will be closely watched by bond market participants for insights into short-term and medium-term borrowing costs for the US government.
Finally, at 1:30 PM PDT, the API Crude Oil Stock Change for the week ending June 6th will be published. This report from the American Petroleum Institute offers an early estimate of US commercial crude oil inventories, which can influence energy market sentiment and crude oil futures (/CL). Any significant deviation from expectations in these inventory levels could lead to price volatility in energy-related assets.
I will not be looking at pre-market earnings in the morning to see if we have a Gap and Go or Gap and Fade play. I will look at GME and CHWY earning butterfly lottos or double calendar plays for Friday.
🎯 Key Groups/Themes & Leading Stocks
These are some of the main groups/themes and what I deem are current leading stocks within them I’m watching for setup opportunities to form in coming sessions.
- Wheaton Precious Metals Corp. (WPM): Wheaton Precious Metals Corp. operates in the materials sector, specifically within the precious metals & minerals industry, engaging in the sale of precious metals. On its daily chart, WPM is currently showing a strong technical setup characterized by a break and retest of previous resistance that has now turned into support. This retest is occurring precisely off the 21-day exponential moving average (EMA), confirming the strength of the breakout and the underlying bullish trend.
- IonQ, Inc. (IONQ): IonQ, Inc. operates in the technology sector, specializing in quantum computing hardware and software. On its daily chart, IONQ is displaying a cup and handle pattern, with the handle consolidating into its 10-day EMA. This bullish continuation pattern suggests that the stock is coiling up for a potential breakout to the upside if resistance is cleared, aligning with the high-growth nature of the quantum computing space.
- Coinbase Global, Inc. (COIN): Coinbase Global, Inc. operates in the financials sector, serving as a leading cryptocurrency exchange platform. On its daily chart, COIN is also showing a cup and handle formation, with the handle consolidating into its 10-day EMA. This pattern indicates a potential for continued upward momentum if it breaks out from the handle’s resistance, often correlated with broader cryptocurrency market trends.
- Astera Labs, Inc. (ALAB): Astera Labs, Inc. operates in the technology sector, providing connectivity solutions for artificial intelligence (AI) and cloud infrastructure. On its daily chart, ALAB is exhibiting a cup and handle pattern, with the handle consolidating into its 10-day EMA. This technical formation suggests a period of accumulation preparing for a potential upward move, reflecting the strong demand in the AI infrastructure market.
📊Additional things to consider tomorrow:
Reviewing the SPY market profile chart for the past several trading days, a prominent large balance range (highlighted in green) has defined the market’s trading activity. For much of this period, price has auctioned within this broad zone of acceptance. Recently, the market has made slight excursions above this massive balance range, forming a smaller, “mini balance range” (highlighted in light blue) at elevated levels.
A key observation is that these moves above the large balance have occurred without strong conviction or significant volume, suggesting that while price is higher, underlying demand may not be robust enough for a sustained breakout. Despite this, the bulls are showing slight control, with both the Value Area and Point of Control (POC) for these recent sessions migrating higher, indicating a subtle shift in accepted value upwards. Notably, today’s price action has also established a significant “poor high” (circled in yellow), signifying an inefficient auction at the session’s peak. This poor structure, combined with the lack of conviction on the upward push, suggests that price will likely need to revisit this level to complete the auction process, either to confirm the higher value or to reject it and fall back into the larger balance range.
🧠 Get Your Mind Right
- With early candles, focus on identifying the algos. Do not force the trade. More candles and chop are great. It builds a structure for a larger move. Let the range spread itself out to reveal more imbalances.
- If you’re in any trade, protect aggressively early candles, please. Especially after large candles, protect.
- Who cares where the charts are going? So, if you cannot find a structure that will activate the precision algos, just stay out. Let the market present itself to you where it wants to go. No structure, no trade. If you end the day with ZERO trades. So be it. What’s the problem with that?
- Be patient with entries. 3 quality trades a day (Not 3 trades an hour). Be patient with setups. If you lose focus, take a breather or call it a day. If you missed anything, so be it. We miss trades daily. You have to get used to it. Second nature to a trader. The market is open every day. For the rest of your life.
- You’re a Winner. Act Like it! Be disciplined. Be victorious in your rules and discipline. No silly mistakes.
- You’re not gonna go wrong if you get a good fill (calls at support & red candles, puts at resistance & green candles) and protect aggressively. Getting a good fill is like starting the 100m race at the 50m line.
- If we don’t see tapering into a respected horizontal channel, we are still in a larger buying/selling channel. Tapering can be messy, take time and will generally lead to a cup. Wait for handle AND the cup completions. Be patient and find the liquidity zones the sellers/buyers can grab.
- Focus on isolating and compartmentalizing each trade setup. Use the 30min chart to find context, then identify the microstructure algos and structure for trade entry in the 1min chart. At the back of your mind, always look out for the liquidity wedge of doom (low volume, inside candles & no imbalances). Don’t force trades in the middle of the range. Do NOT overtrade a range you’ve already extracted profits from. When we lack continuation, that’s when the liquidity wedge will most likely control a big part of the action. Just set alerts and come back in power hour if there’s no new structure.
- The rule of thumb is simple – if it’s not in the strongest algo. You don’t want it. If it’s not in the strongest selling algo, then the selling is “controlled”. by whom? The bulls to build liquidity. So, why short this until more confirmation? Such as a stronger structure or closing inverse cups.
- Remember in trading, continuation is the easiest to trade. When we lack continuation, be more patient, and start scaling down. When the market builds liquidity but does not have continuation, that’s when you know it may be a tricky day (not that we are surprised by knowing the context of the week, and the 30min chart). A lack of continuation will turn into a reversal when we have confirmation – in this case, an inverse cup forming. So until then, just be more patient.
