📊 What is the Market Narrative?
Following today’s Federal Reserve Press Conference, the SPY exhibited a relatively muted reaction, failing 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 bullish structure off the 5MA/ 50 SMA
- 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:
Tomorrow’s US economic data releases will center on the labor market, with the Initial Jobless Claims report taking priority. Scheduled for release at 5:30 AM PDT, this weekly figure provides a timely gauge of the number of individuals filing for unemployment benefits for the first time. An unexpected increase in initial jobless claims can signal a weakening labor market, potentially prompting concerns about broader economic slowdown. Conversely, a lower-than-anticipated number suggests continued labor market strength.
The level of initial jobless claims is closely watched by both fiscal policymakers and the Federal Reserve, though it typically has a more direct and immediate influence on monetary policy considerations. A sustained rise in jobless claims could signal the need for fiscal stimulus measures, such as unemployment benefits extensions or job creation programs, although these actions often have a longer implementation lag. For the Federal Reserve, a weakening trend in jobless claims, alongside other labor market indicators, could lead to a more dovish monetary policy stance, potentially influencing decisions on interest rates and asset purchase programs aimed at supporting employment.
I will be looking at SHOP in the morning to see if we have a Gap and Go or Gap and Fade play. COIN and TTD have my interest for earning butterfly lottos or double calendar plays.
🎯 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.
- Uranium and Nuclear (NLR) – We have a large follow thru candle today through the local highs. Looking for continuation in the theme leaders e.g CEG, GEV, OKLO.
- Cybersecurity (BUG) – This is a Strong Theme to focus on. Nice Cup and Handle pattern with 52 RS highs while in the base. Individual stocks to have your watchlist are CYBR, FTNT & CRWD.
- Global Clean Energy (ICLN) – This a massive accumulation base that is consolidating at the top. Notice the Wychoff C-Spring off the recent lows. Something to have on the Watchlist.
- Crypto Stocks. Look at Bitcoin in the Daily Chart below. Potentially preparing to break out above the $100,000 level. Keep HOOD, COIN & MSTR on your Watchlist.
📊Additional things to consider tomorrow:
The attached SPY market profile chart visually represents the time-price opportunity (TPO) of trading activity, offering a unique perspective on market structure and liquidity. The overlapping red shaded areas across multiple daily distributions highlight a significant confluence of value areas. The Value Area, typically encompassing approximately 70% of the day’s trading volume, indicates the price range where the majority of participants found acceptance and agreement on fair value.
The overlapping nature of these value areas over several trading sessions signifies a period of sustained accumulation of liquidity. This congestion zone represents a battleground where both buyers and sellers have actively participated, building substantial positions. The Point of Control (POC), the price level with the highest traded volume within each distribution, further underscores areas of peak interest. The longer this overlapping value area persists, the greater the potential energy stored within the market.
According to market profile theory, this accumulated liquidity will eventually be utilized to fuel the next significant directional move. A decisive break above the upper boundary of this multi-day value area would likely attract buyers, potentially leading to a strong upward trend. Conversely, a break below the lower boundary would likely embolden sellers, potentially initiating a significant downward move. The market’s ability to sustain a move beyond this zone will be a key indicator of the prevailing market sentiment and the likely direction of the subsequent price action. Traders often watch for breakouts from such high-liquidity zones as potential high-probability trading opportunities.
🧠 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.
