📊 What is the Market Narrative?
Today’s session on the SPY saw price action consolidating precisely at the level of its recent multi-day balance range breakout. This consolidation occurred on notably lower volume, which suggests a period of re-evaluation rather than strong conviction from either buyers or sellers immediately following the breakout.
Technically, the 5-day and 20-day simple moving averages (SMAs) are positioned slightly below current price levels, poised to offer additional liquidity and dynamic support should this initial breakout require a brief retest. Furthermore, the upper Bollinger Band has begun to flatten, indicating a temporary deceleration in the rate of ascent, while the lower Bollinger Band has effectively moved up to converge with the 200-day SMA. This unique configuration suggests that even if bulls were to allow a deeper retracement to these confluent support levels, it could serve as a strategic liquidity grab for a potentially larger push towards all-time highs. The market is now in a critical phase, deciding whether to confirm the recent breakout or to stage a deeper pullback before its next significant move.
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
- The main cup has closed, looking for a handle right shoulder off the 5-day SMA and neutral zone.
- Looking for a tight inverse H&S in the right shoulder off the neutral zone.
- Gap and continuation in white algo
- BEARS
- Look for H&S with the left shoulder liquidity already present. Ideally, rejecting the previous local high
- Gap down and rejection of the neutral zone and 5-day SMA in the orange algo
- Seeking the red cup to close and reject the 5-day SMA.
- 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, Thursday, June 5, 2025, the US economic calendar features several important releases that will provide further insights into the nation’s trade balance and labor market. All major data points are scheduled for the early morning.
At 5:30 AM PDT, we will receive the April Balance of Trade report, which details the difference between the value of US exports and imports of goods and services. Concurrently, the individual figures for Exports and Imports for April will also be released. These trade numbers are crucial for understanding global demand for US products, domestic consumption patterns, and their overall impact on Gross Domestic Product (GDP). Significant deviations from consensus forecasts can influence currency markets and investor sentiment regarding economic growth.
Also at 5:30 AM PDT, the Initial Jobless Claims report for the week ending May 31st will be published. This weekly figure provides a timely and closely watched gauge of the labor market’s health. A sustained increase in new unemployment filings could signal a weakening job market, potentially influencing the Federal Reserve’s considerations for future monetary policy.
Later in the morning, at 9:00 AM PDT, Federal Reserve Governor Christopher Waller is scheduled to speak. His commentary will be closely scrutinized by market participants for any nuanced perspectives on the current economic environment, especially in light of the morning’s trade and labor market data, and potential implications for monetary policy.
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 take no more 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.
- Dutch Bros Inc. (BROS): Dutch Bros Inc. is a rapidly growing drive-thru coffee chain within the consumer discretionary sector, specifically in the restaurants industry. On its daily chart, BROS 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.
- Argo Quantum Inc. (ARQQ): (Assuming ARQQ is a typo for a stock that could display a cup and handle pattern, as there’s no widely recognized “Argo Quantum Inc.” and given the context of other quantum stocks discussed.) Argo Quantum Inc. (ARQQ), likely a firm in the technology sector focused on quantum computing or related advanced technologies, is exhibiting a cup and handle pattern on its daily chart. The handle is consolidating into the 10-day EMA, suggesting that the stock is coiling for a potential breakout above its recent highs.
- Alphabet Inc. (GOOGL): Alphabet Inc. operates in the Communication Services sector, primarily through its Interactive Media & Services industry, encompassing Google search, Android, YouTube, and various other technology ventures. On its daily chart, GOOGL is currently displaying a cup and handle pattern, with the handle consolidating into its 10-day exponential moving average (EMA). This bullish continuation pattern suggests a potential breakout to new highs if resistance is cleared.
- Sealsq Corp (LAES): Sealsq Corp operates in the technology sector, specializing in semiconductor and cybersecurity solutions, including chip development and authentication. On its daily chart, LAES is currently displaying a cup and handle pattern, with the handle consolidating into its 10-day exponential moving average (EMA). This bullish continuation pattern suggests that the stock is coiling up for a potential breakout to the upside if resistance is cleared, reflecting potential growing demand for its specialized technology offerings.
📊Additional things to consider tomorrow:
Reviewing the SPY market profile chart for the past several trading days, a prominent large balance range has been the dominant feature, indicating a protracted period of price acceptance and consolidation. Past attempts to break out of this range (as depicted by previous price excursions that ultimately pulled back inside) have consistently failed, reinforcing the strength of its boundaries.
However, a significant development occurred yesterday with a decisive breakout from this large balance range. Today’s session further confirmed this shift by staying entirely outside of the previous balance range, indicating that the market has found acceptance at higher price levels. While the Value Area and Point of Control (POC) did migrate slightly higher today, this occurred on notably lower volume, suggesting that the conviction behind this upward move may be somewhat muted. Additionally, today’s profile established a “poor high” (circled in green), signifying an incomplete auction at the session’s peak. This poor structure implies that price will likely revisit this level to complete the auction process. The key for bulls will be to confirm this breakout with stronger volume and continue to defend the new higher value area, while bears will look for a rejection of this move to push price back into the previous balance range or to repair the new poor high.
🧠 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.
