📊 What is the Market Narrative?
We have still failed to decisively break out of the consolidation range defined by its short-term and intermediate-term moving averages. Price action remains bracketed by these key dynamic support and resistance levels, indicating continued indecision in the market’s immediate direction. Notably, trading volume has been in a declining trend, suggesting a lack of strong conviction from either buyers or sellers at these levels.
Currently, the SPY is calmly approaching a significant technical juncture: the descending red trendline that has characterized the ongoing bear market rally. This trendline represents a key resistance level that bulls will need to overcome to signal a potential continuation of the upward momentum. For the bullish scenario to maintain validity, the SPY must hold above the green 20-day simple moving average (SMA) and the green support zone highlighted on the chart. A breakdown below this confluence of support could indicate renewed bearish pressure and a potential retracement. Conversely, a decisive break above the red trendline, accompanied by a notable increase in volume, would provide a stronger signal that the bullish momentum may persist. Traders should closely monitor price action around these critical technical levels for directional clues in the coming sessions.
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
- Perhaps a Gap and Go with the strongest algo
- Looking for a cup & handle structure off the 5MA
- BEARS
- Looking for a bearish gap lower underneath 5MA/50 SMA
- Looking for the cup to close with handle rejection off 5MA/50 SMA
- Head and Shoulder with handle off 5SMA/50SMA
- 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:
The upcoming week’s US economic calendar is heavily weighted towards inflation data, which will be closely scrutinized for its implications on both fiscal and monetary policy. Tuesday brings the release of the April Consumer Price Index (CPI), including the Core Inflation Rate (MoM and YoY) and the broader Inflation Rate (MoM and YoY), all scheduled for 5:30 AM PDT. These figures offer a comprehensive look at price pressures from the consumer’s perspective. Higher-than-anticipated inflation could intensify calls for fiscal measures to alleviate cost burdens and, more significantly, reinforce the Federal Reserve’s commitment to maintaining a restrictive monetary policy stance through potential further interest rate hikes or a prolonged period of elevated rates. Conversely, moderating inflation could provide the Fed with greater flexibility.
Thursday will feature the April Producer Price Index (PPI) MoM at 5:30 AM PDT, providing insight into inflation at the wholesale level. This report can offer a leading indication of future consumer price pressures. Later on Thursday, Retail Sales MoM will be released at 5:30 AM PDT, reflecting consumer spending trends, which can be influenced by inflation levels and also contribute to inflationary pressures. Strong retail sales amidst high inflation could further embolden the Fed’s tightening bias.
Finally, Friday offers data on the housing sector with Building Permits Prel and Housing Starts, both at 5:30 AM PDT, followed by the preliminary Michigan Consumer Sentiment for May at 7:00 AM PDT. While these reports provide valuable economic context, the inflation data released earlier in the week will likely be the primary driver of market sentiment and expectations regarding future fiscal and, particularly, Federal Reserve actions. Persistently high inflation readings will likely keep the pressure on the Fed to maintain or even tighten its monetary policy.
I will be looking at MNDY in the morning to see if we have a Gap and Go or Gap and Fade play. RGTI and SE have my interest for earning butterfly lottos or double calendar plays for Tuesday.
🎯 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.
- Gas Equipment & Services (XES) – offers exposure to companies vital for oil and gas exploration and production, with major holdings in service and equipment providers like Schlumberger and Halliburton. XES’s performance is strongly linked to crude oil and natural gas prices; higher energy prices typically boost demand for the sector’s services. Monitoring crude oil trends and energy market fundamentals is key to gauging XES’s potential performance in the upcoming week.
- Cybersecurity (BUG) – focuses on companies at the forefront of the cybersecurity industry, providing solutions and services to protect digital assets and infrastructure. Key holdings within BUG typically include firms specializing in network security, endpoint protection, identity management, and data security, such as Palo Alto Networks (PANW), CrowdStrike (CRWD), and Cloudflare (NET), although these can change
- Gold/Gold Miners (GLD) – The largest gold mining companies, such as Newmont Corporation (NEM) and Barrick Gold Corporation (GOLD), are typically significant holdings within broader gold indices that GLD indirectly reflects. Additionally, South African gold mining stocks, including AngloGold Ashanti (AU), Harmony Gold (HMY), and Gold Fields (GFI), represent a substantial part of the global gold production landscape and can be influential in the overall gold market dynamics..
- The Defiance Quantum ETF (QTUM) – focuses on companies involved in quantum computing and other transformative computing technologies. This ETF taps into a sector with high growth potential, driven by advancements in quantum mechanics and its application to various industries like finance, healthcare, and artificial intelligence. As a thematic ETF focused on innovation, QTUM’s price action can exhibit significant momentum based on breakthroughs, adoption rates, and overall market sentiment towards disruptive technologies, making it a consideration for momentum-focused traders.
📊Additional things to consider tomorrow:
The upper chart displays the daily price action of the SPY ETF overlaid with Bollinger Bands. These bands, consisting of a 20-day simple moving average (SMA) and two standard deviations above and below it, provide a dynamic measure of price volatility. When the price approaches or exceeds the upper band, it suggests the market may be short-term overbought. Conversely, price action near or below the lower band can indicate a potentially oversold condition.
The lower chart presents the percentage of S&P 500 stocks trading above their 20-day simple moving average. This indicator offers a broader perspective on the short-term breadth and sentiment of the market. Readings above 75% typically suggest that a significant portion of stocks are extended to the upside, potentially increasing the risk of a pullback. Conversely, readings below 25% can indicate that a large number of stocks are oversold on a short-term basis, potentially presenting a contrarian buying opportunity as these stocks may be due for a reversion to their mean.
The strategy highlighted suggests exercising patience when the SPY approaches overbought conditions (upper Bollinger Band) and the percentage of stocks above their 20-day average is elevated. Instead of chasing extended prices, the approach advocates waiting for individual stocks to retrace to key support levels and moving averages. Conversely, periods where the percentage of stocks above their 20-day average falls below 25% can signal a potentially opportune time to selectively allocate risk into fundamentally sound stocks that have become short-term oversold. This approach combines a broad market sentiment indicator with individual stock analysis to identify potentially favorable risk-reward entry points.
🧠 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.
