📊 What is the Market Narrative?
Today’s session on the SPY saw a notable rejection at the tapering purple trendline, leading to the formation of a bearish hammer candle. This particular candlestick, while having a small body, signals that sellers initially pushed the price down, but buying interest managed to recover some ground, though not enough to negate the bearish sentiment of the rejection at resistance. This bearish action occurred off the 5-day simple moving average (SMA), which typically acts as a short-term dynamic support in an uptrend.
Compounding this technical signal was the news of a poor bond auction today, which contributed to increased selling pressure on higher volume. Despite this, it’s crucial to acknowledge that the SPY remains in a daily uptrend. Therefore, attention now shifts to key technical support levels. The first significant level to watch is the 200-day SMA, which not only provides long-term trend support but would also represent the “cup” portion of a potential cup and handle pattern being formed, suggesting a retest of its base. Furthermore, using Fibonacci retracement levels from the recent bear market lows to the current highs, potential pullback support zones are identified at the 23.6%, 38.2%, and 50% levels, as visually highlighted by the white circles on the chart. A sustained break below these levels would indicate increasing bearish momentum.
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 deeper cup and handle structure off the 200-day SMA with right shoulder off the 5-day SMA
- Looking for a bullish structure with a look below and fail and recapture of the 5 SMA
- BEARS
- Look for continuation in the precision organe algo.
- Looking for Bear control channel and rejection off -da5y SMA
- 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, Thursday, May 22, 2025, the US economic calendar brings several key data releases that will offer further insights into the economy’s health. The morning will begin with the Chicago Fed National Activity Index for April at 5:30 AM PDT. This index is a weighted average of 85 existing economic indicators, providing a comprehensive measure of overall economic activity and inflationary pressures.
Concurrently at 5:30 AM PDT, the highly anticipated Initial Jobless Claims report will be released. This weekly figure offers a timely gauge of the labor market’s strength. A significant increase in claims could signal a cooling labor market, potentially influencing Federal Reserve policy discussions.
Also at 5:30 AM PDT, we’ll receive the S&P Global PMI Flash readings for May, covering Composite, Manufacturing, and Services sectors. These purchasing managers’ index reports provide an early look at business conditions and sentiment across various industries, offering a forward-looking perspective on economic growth.
Later in the morning, at 7:00 AM PDT, the Existing Home Sales for April, along with its month-over-month change, will be released. This report provides a crucial pulse on the housing market, reflecting demand and inventory levels. Finally, Fed Williams is scheduled to speak at 7:30 AM PDT, and his commentary will be closely watched for any signals regarding the Federal Reserve’s stance on the economy and monetary policy, especially in light of the day’s fresh economic data.
I will be looking at SNOW & ARQQ 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.
- Oddity Tech Ltd. (ODD): Oddity Tech operates in the consumer discretionary sector, focusing on beauty and wellness technology, including online platforms for personalized beauty products. On its daily chart, ODD is showing consolidation along the 10-day exponential moving average (EMA), accompanied by declining volume, which often signals a reduction in selling pressure. Notably, the stock has a gap above to the ~$70 level, suggesting an area of potential attraction or resistance to be filled.
- Fingerprint Cards AB (FNGR): Fingerprint Cards is a technology company specializing in biometric solutions for secure authentication. Operating in the technology sector, its products are used across various industries for enhanced security. The daily chart for FNGR indicates a period of consolidation along its 10-day EMA with declining volume, similar to ODD. This pattern, coupled with a pending break of a key trendline, suggests a potential build-up of energy for a directional move.
- Vivopower International (VVPR): Vivopower International operates in the electric utility sector, focusing on battery technology, electric vehicle charging solutions, and sustainable energy. On its daily chart, a cup and handle pattern is forming, with price action finding support at the 10-day exponential moving average (EMA). This bullish continuation pattern suggests that a decisive breakout above the handle’s resistance could lead to further upside, aligning with the growing interest in sustainable energy infrastructure
- Snowflake Inc. (SNOW): Snowflake is a cloud-based data warehousing company, a prominent player in the technology sector’s cloud computing and data analytics space. On its daily chart, SNOW is exhibiting a cup and handle pattern. Critically, the stock is gapping up significantly overnight due to positive earnings, with price action also resting near the 10-day EMA on the daily chart prior to the gap. This earnings-driven gap-up following a bullish technical pattern suggests strong momentum and potential for a “gap and go” scenario as the market reacts to the news
📊Additional things to consider tomorrow:
The market profile for the SPY ETF over the last few trading sessions reveals a fascinating interplay of price acceptance and potential directional catalysts. Both last Thursday and today’s session closed as prominent double distribution days, effectively dividing the market into two distinct areas of value, visually represented by the green and red shaded zones. This structure implies a fundamental disagreement between participants, creating significant liquidity at these levels.
The presence of substantial liquidity within both these distributions suggests ample overhead supply if the market were to head lower, as trapped buyers might look to exit. Conversely, if a swift rally were to materialize, the market’s structure indicates that short positions would likely be forced to cover, fueling a rapid ascent. This could lead to price acceptance within the higher distribution and a potential break to the upside, targeting the repair of any previous “poor high” formations. The resolution of these distinct value areas will be critical in determining the SPY’s next sustained directional move.
🧠 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.
