5/23: Market Recap, Outlook, and Trading Plan
Today's Recap
The failed breakdown, my primary setup, and how it leads to profitable trades are all covered in this newsletter. Along with providing the day's workable trade plan, I also discuss how I've been managing my long since last week.
Market cycles between Trend and Chop are common. Our 105-point rally last week was an extreme Trend, and it was followed by an untidy Chop as a base was being built. It's crucial to keep in mind that nobody can forecast intraday price movement, especially in Chop. When a setup triggers, a trader's responsibility is to respond and manage the trade using a predetermined procedure.
Debt Ceiling Crisis
Bond Yield Rates
Key Structures
Key market structures I'm tracking include:
Due to ongoing debt ceiling negotiations, there is increased headline risk and risk of large, bi-directional moves out of nowhere.
The Week-Long Triangle Structure
This structure triggered the recent breakout. The market dynamics can be summarized as follows:
The back-test level is now 4140-42.
The Yellow Uptrend Channel
This structure, connecting the May 4th low and this week's low, is a crucial support area at around 4140-42. Bulls will want to hold this structure.
Supports and resistances are listed, and I discuss potential bids and trade scenarios for both bull and bear cases. In summary, 4195-4220 is chop, and there is a heavy headline risk due to the debt ceiling.
Support Levels
As long as 4147 holds, we continue our upward trajectory.
The 4140-42 area, derived from the triangle structure and the yellow uptrend channel, is an obvious structure bulls want to hold.
4205, 4195-97 (major), 4191, 4180, 4167-71 (major), 4155 (major), 4144, 4130-35 (major), 4123, 4112, 4097-4100 (major), 4092, 4077-80 (major), 4069, 4061, 4053 (major), 4041 (major), 4015-20 (major), 3995 (major)
Resistance Levels
Initial resistance was at 4192, acting as a magnet, as previously identified.
According to the blue broadening formation, the next major resistance level is now at 4242.
4217-20 (major), 4231, 4240-42, 4248 (major), 4261 (major), 4268, 4280 (major), 4288, 4306 (major), 4319, 4325-30 (major), 4342.
Trading Plan
As long as 4195 holds, we keep filling out the triangle, targeting 4231, 4242+. If 4195 fails, we start the sell and I'd be looking to go short.
Wrap Up
Never fight the trend. Stay patient and adhere to your trading plan. Follow the key structures, resistance, and support levels closely.
Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decisions.
The failed breakdown, my primary setup, and how it leads to profitable trades are all covered in this newsletter. Along with providing the day's workable trade plan, I also discuss how I've been managing my long since last week.
Market cycles between Trend and Chop are common. Our 105-point rally last week was an extreme Trend, and it was followed by an untidy Chop as a base was being built. It's crucial to keep in mind that nobody can forecast intraday price movement, especially in Chop. When a setup triggers, a trader's responsibility is to respond and manage the trade using a predetermined procedure.
Debt Ceiling Crisis
- The United States government is facing a debt ceiling crisis. The debt ceiling is a limit on the amount of money the government can borrow to pay its bills. The government is currently about $28 trillion in debt, and the debt ceiling is set to be reached on June 1.
- If the government does not raise the debt ceiling, it will be unable to pay its bills and will default on its debt. This would have a devastating impact on the economy, leading to a recession and a loss of jobs.
- Congress is currently negotiating a deal to raise the debt ceiling, but there is no agreement yet. The Republicans are demanding spending cuts in exchange for raising the debt ceiling, while the Democrats are refusing to make any cuts.
- The debt ceiling crisis is a major threat to the economy. It is important for Congress to reach a deal to raise the debt ceiling as soon as possible.
Bond Yield Rates
- The yield on the 10-year Treasury note opened at 3.717% today. The rise in bond yields is due to concerns about the debt ceiling crisis and the prospect of higher inflation.
- Higher bond yields make it more expensive for businesses to borrow money, which can slow down economic growth. They can also make it more expensive for consumers to borrow money, which can lead to a decline in spending.
- The rise in bond yields is a sign that investors are worried about the future of the economy. It is important to watch bond yields closely, as they can provide early warning signs of a recession.
Key Structures
Key market structures I'm tracking include:
- The pink triangle that contained all of last week's action pre-breakout
- A 2-day triangle since Friday
- The 4166-71 area
- The large broadening formation pattern in blue
Due to ongoing debt ceiling negotiations, there is increased headline risk and risk of large, bi-directional moves out of nowhere.
The Week-Long Triangle Structure
This structure triggered the recent breakout. The market dynamics can be summarized as follows:
- Bulls control above the structure
- Bears control below the structure
The back-test level is now 4140-42.
The Yellow Uptrend Channel
This structure, connecting the May 4th low and this week's low, is a crucial support area at around 4140-42. Bulls will want to hold this structure.
Supports and resistances are listed, and I discuss potential bids and trade scenarios for both bull and bear cases. In summary, 4195-4220 is chop, and there is a heavy headline risk due to the debt ceiling.
Support Levels
As long as 4147 holds, we continue our upward trajectory.
The 4140-42 area, derived from the triangle structure and the yellow uptrend channel, is an obvious structure bulls want to hold.
4205, 4195-97 (major), 4191, 4180, 4167-71 (major), 4155 (major), 4144, 4130-35 (major), 4123, 4112, 4097-4100 (major), 4092, 4077-80 (major), 4069, 4061, 4053 (major), 4041 (major), 4015-20 (major), 3995 (major)
Resistance Levels
Initial resistance was at 4192, acting as a magnet, as previously identified.
According to the blue broadening formation, the next major resistance level is now at 4242.
4217-20 (major), 4231, 4240-42, 4248 (major), 4261 (major), 4268, 4280 (major), 4288, 4306 (major), 4319, 4325-30 (major), 4342.
Trading Plan
As long as 4195 holds, we keep filling out the triangle, targeting 4231, 4242+. If 4195 fails, we start the sell and I'd be looking to go short.
Wrap Up
Never fight the trend. Stay patient and adhere to your trading plan. Follow the key structures, resistance, and support levels closely.
Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decisions.
