Charting 101, Trailing Stops, Bond Yields, and the Debt Ceiling
Introduction
In this newsletter, we'll recap the recent market action, discuss the power of holding runners, talk about strategies for trailing stops, and provide an update on bond yields and the debt ceiling. We'll also provide an actionable plan for the upcoming trading day.
Market Recap
Last week saw a tight trading range, with the market eventually breaking out and reaching 4228. Friday was OPEX day, which led to choppy trading conditions and the market mostly pinned around 4200. This week's market action demonstrated many foundational charting concepts, such as the transition between Chop and Trend.
Trailing Stops
Trailing stops are an essential part of a trading system, helping to lock in profits and minimize losses. The strategy involves dragging the stop up behind the most significant swing low on the 30-minute chart, usually once or twice a day. The goal is to eventually get stopped out, with the stop tightened as the trade progresses.
Actionable Plan
For the upcoming trading day, keep an eye on the following structures:
Blue broadening formation: Resistance is at 4245, while support is at 4040. A breakout has a bullish bias, with the next major magnet at 4305.
Support and resistance levels, as well as potential entry points for long and short positions, are detailed below:
Support Levels
4200-4197 (major), 4192, 4176, 4166-70 (major), 4155, 4145-48 (major), 4135(major - triangle backtest), 4128 (broadening formation support), 4114, 4105, 4092 (major), 4078 (major), 4067, 4061, 4055 (major), 4040-43 (major), 4033, 4015-20 (major).
Resistance Levels
4216-4221, 4228, 4239, 4246 (major - broadening formation), 4255-60 (major), 4275-80 (major), 4289, 4300 (major), 4305-08 (major), 4320-23 (major), 4342-45 (major), 4360, 4368 (major).
Summary
After a clean, easy rally leg, expect some complex, messy trading as the market transitions back into Chop. React to the market action using the provided plan, with a loose lean towards a bullish bias as long as 4200 holds. If 4200-4197 fails, a pullback is likely, and short positions may be taken.
Bond Yields
The yield on the 10-year Treasury note rose to 2.95% on Friday, the highest level since May 2019. The rise in bond yields was driven by concerns about inflation and the Federal Reserve's plans to raise interest rates.
Debt Ceiling
The US debt ceiling is currently set at $28.9 trillion. The Treasury Department has said that it will run out of money to pay its bills on October 18, 2023. If Congress does not raise the debt ceiling by then, the US government will be unable to pay its bills and could default on its debt.
Conclusion
The market is facing a number of headwinds, including rising inflation, rising interest rates, and the looming debt ceiling deadline. You should be prepared for a volatile market in the coming days and weeks ahead.
Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decisions.
Introduction
In this newsletter, we'll recap the recent market action, discuss the power of holding runners, talk about strategies for trailing stops, and provide an update on bond yields and the debt ceiling. We'll also provide an actionable plan for the upcoming trading day.
Market Recap
Last week saw a tight trading range, with the market eventually breaking out and reaching 4228. Friday was OPEX day, which led to choppy trading conditions and the market mostly pinned around 4200. This week's market action demonstrated many foundational charting concepts, such as the transition between Chop and Trend.
Trailing Stops
Trailing stops are an essential part of a trading system, helping to lock in profits and minimize losses. The strategy involves dragging the stop up behind the most significant swing low on the 30-minute chart, usually once or twice a day. The goal is to eventually get stopped out, with the stop tightened as the trade progresses.
Actionable Plan
For the upcoming trading day, keep an eye on the following structures:
Blue broadening formation: Resistance is at 4245, while support is at 4040. A breakout has a bullish bias, with the next major magnet at 4305.
- White broadening formation: We broke out on Thursday, with a backtest at 4200.
- Purple rising channel: Support is at 4148, controlling the short-term uptrend.
- Triangle structure: The measured move target is in the high 4260s.
Support and resistance levels, as well as potential entry points for long and short positions, are detailed below:
Support Levels
4200-4197 (major), 4192, 4176, 4166-70 (major), 4155, 4145-48 (major), 4135(major - triangle backtest), 4128 (broadening formation support), 4114, 4105, 4092 (major), 4078 (major), 4067, 4061, 4055 (major), 4040-43 (major), 4033, 4015-20 (major).
Resistance Levels
4216-4221, 4228, 4239, 4246 (major - broadening formation), 4255-60 (major), 4275-80 (major), 4289, 4300 (major), 4305-08 (major), 4320-23 (major), 4342-45 (major), 4360, 4368 (major).
Summary
After a clean, easy rally leg, expect some complex, messy trading as the market transitions back into Chop. React to the market action using the provided plan, with a loose lean towards a bullish bias as long as 4200 holds. If 4200-4197 fails, a pullback is likely, and short positions may be taken.
Bond Yields
The yield on the 10-year Treasury note rose to 2.95% on Friday, the highest level since May 2019. The rise in bond yields was driven by concerns about inflation and the Federal Reserve's plans to raise interest rates.
Debt Ceiling
The US debt ceiling is currently set at $28.9 trillion. The Treasury Department has said that it will run out of money to pay its bills on October 18, 2023. If Congress does not raise the debt ceiling by then, the US government will be unable to pay its bills and could default on its debt.
Conclusion
The market is facing a number of headwinds, including rising inflation, rising interest rates, and the looming debt ceiling deadline. You should be prepared for a volatile market in the coming days and weeks ahead.
Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decisions.
