📊 What is the Market Narrative?
Today’s trading session on the SPY saw price action fail to gain acceptance below yesterday’s low of day, indicating some underlying support. However, the day concluded with a bearish candle, positioning the price below a now-declining 5-day simple moving average (SMA). This suggests that short-term momentum has shifted to the downside.
For the bullish narrative to reassert itself, a calm retracement towards the 200-day SMA would be ideal. Such a move would allow the 20-day SMA to potentially cross above the 200-day SMA, forming a “golden cross” – a long-term bullish signal. Technically, the SPY could find further downside towards the gap around the 570 level. A more significant pullback could see price action extending down to the 50% Fibonacci retracement level on the daily chart, a common area for trend reversals or consolidation.
Looking ahead, the market is entering a short trading week due to the upcoming Memorial Day holiday. Given this abbreviated schedule and the holiday context, it is generally anticipated that significant directional moves or major market events will be muted in the interim. This quiet period could either allow for a technical bounce to support levels or provide a slow drift towards the downside targets mentioned.
Heading into the session I don’t see a high enough quality setup in a high enough 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 construcive price/volume action. Little details, but they matter. Of course, vice versa for the short-side.
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.
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
- If a IHS or deeper cup and handle structure off the 200-day SMA with right shoulder off the 5-day SMA
- Looking for a smaller cup to close and right shoulder over 5-day SMA.
- BEARS
- Look for continuation in the precision orange algo.
- Looking for a quicker H&S before the 5-Day SMA and precision orange algo.
- Looking for a bearish structure off the 5-day SMA and the green resistance zone.
- 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, Friday, May 23, 2025, the US economic calendar features a couple of key reports that will offer further insights into the housing sector. The morning begins with the release of New Home Sales for April at 7:00 AM PDT. This report measures the sales of newly constructed single-family homes, providing a crucial indicator of the health of the housing market and broader consumer confidence. Concurrently, the month-over-month change in New Home Sales will also be published, offering a look at the short-term trend in new home purchases.
Following this, at 7:30 AM PDT, Federal Reserve Governor Lisa Cook is scheduled to speak. Her commentary will be closely watched by market participants for any nuanced perspectives on the current economic environment, inflation outlook, and potential implications for future monetary policy. Given the absence of major inflation or labor market data, these housing figures and Fed commentary will likely guide market sentiment as the week concludes.
I will not be looking at any pre-market earnings in the morning to see if we have a Gap and Go or Gap and Fade play. I will not play 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.
- The Boeing Company (BA): Boeing operates in the aerospace and defense sector, designing, manufacturing, and selling commercial jetliners, military aircraft, satellites, and missile defense systems. On its daily chart, BA is displaying a cup and handle pattern, with the handle consolidating into the 10-day exponential moving average (EMA). A confirmed breakout above the handle’s resistance would signal renewed bullish momentum for this industrial giant.
- Corcept Therapeutics (CORT): Corcept Therapeutics is a pharmaceutical company within the healthcare sector, primarily focused on discovering and developing drugs for severe metabolic, oncologic, and psychiatric disorders. On its daily chart, CORT is also showing a cup and handle formation, with the handle retesting and consolidating around the 10-day EMA. This pattern suggests a potential continuation of its upward trend if it can break out.
- The Trade Desk (TTD): The Trade Desk is a technology company in the interactive media and services industry, providing a self-service cloud-based platform that allows buyers to create, manage, and optimize data-driven digital advertising campaigns. On its daily chart, TTD is forming a cup and handle pattern, with the handle consolidating into the 10-day EMA. Notably, the chart shows thin structure with gaps both above and below, suggesting that a decisive break from this pattern could lead to quick price movement in either direction as the market efficiently fills these liquidity vacuums.
- Meta Platforms (META): Meta Platforms is a dominant player in the Communication Services sector, known for its social media platforms and investments in virtual reality. On its daily chart, META continues to exhibit a cup and handle formation, with its handle consolidating into the 10-day EMA. This persistent pattern, coupled with the stock’s market leadership, indicates that a clean breakout above the handle’s resistance could propel it higher, continuing its strong performance.
📊Additional things to consider tomorrow:
Reviewing the SPY market profile chart for the last two trading sessions, yesterday concluded with a clear double distribution day, indicating a strong divergence in market participants’ perceived value. Today’s market profile subsequently developed entirely within the boundaries of yesterday’s lower distribution, suggesting a shift in accepted value to a lower range.
Today’s session is also marked by both a “poor high” and a “poor low.” These formations, lacking sufficient time and volume at their extremes, suggest that price will likely revisit these levels to complete the auction process. Furthermore, if the market finds acceptance below today’s range, there appears to be substantial overhead supply from the previous distributions, which could exert selling pressure. Conversely, the market’s tendency to repair poor structures means a move higher to address the poor high could also be in play. The resolution of these unfilled auction points and the acceptance within or rejection of the current distribution will dictate the market’s conviction in the coming sessions.
🧠 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.
