5/25: Market Recap, Outlook, and Trading Plan
SPDR S&P 500 FUTURES ESM2023 & SPY ETF - Market Update - 5/25/23
Today's Recap
This week has been a mirror image of last week, with the ES building a smaller triangle and breaking down, triggering a nearly 100-point sell. Although this seems dramatic, similar dips have occurred in the past month and have been bought. The question now is whether this dip will also be bought.
Debt Ceiling Crisis
The current market environment is complex and headline-driven, with the debt ceiling debate making the next few days of trading potentially difficult. Traders need to be flexible and prepared to react to price movements, rather than trying to predict or forecast the market.
Bond Yield Rates
Bond yields have been fluctuating due to the uncertainty surrounding the debt ceiling crisis. This has led to increased volatility in the market, making it more challenging for traders to navigate.
Key Structures
The Flat Bottom
You can see the flat bottom pattern failed to hold and triggered the sell-off at 4190.
The Yellow Uptrend Channel
The yellow uptrend channel, which connects the May lows, broke down yesterday. In order to end the immediate move down, the level of 4165-75 needs to be recovered.
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
The bull case would look something like yesterday lows continue holding, and from there we push up the levels to 4147, 4156, then 4166-75 where ES can try another sell.
4123, 4116 (major), 4100-05 (major), 4087, 4075 (major), 4061, 4053 (major), 4040, 4020-25 (major), 4013, 4000 (major), 3977-83 (major).
Resistance Levels
Starts on the failure of yesterday’s low. Ideally, one more bounce attempt at 4116-23 before trying a short. After this bounce though, consider a short 4115 or so for a move to 4100-05 where gains should be locked in.
4135 (major), 4147, 4157, 4166 (major), 4175 (major), 4191-95 (major), 4204 (major), 4212, 4221 (major), 4235, 4242-45 (major), 4253, 4259, 4270-75 (major).
Trading Plan
If buying big red candles, these are “knife catch trades”. Size them down. 4123-4116 is major support still, one could bid it direct again or wait for a decisive failed breakdown. In terms of spots to try knife catches, 4100-05 and 4075 would be possible regions.
Wrap Up
In conclusion, the market is currently in a complex and headline-driven environment due to the debt ceiling crisis. Traders need to be flexible and prepared to react to price movements, rather than trying to predict or forecast the market. Keep an eye on key structures, support and resistance levels, and have a solid trading plan in place to navigate the market successfully.
Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decisions.
Today's Recap
This week has been a mirror image of last week, with the ES building a smaller triangle and breaking down, triggering a nearly 100-point sell. Although this seems dramatic, similar dips have occurred in the past month and have been bought. The question now is whether this dip will also be bought.
Debt Ceiling Crisis
The current market environment is complex and headline-driven, with the debt ceiling debate making the next few days of trading potentially difficult. Traders need to be flexible and prepared to react to price movements, rather than trying to predict or forecast the market.
Bond Yield Rates
Bond yields have been fluctuating due to the uncertainty surrounding the debt ceiling crisis. This has led to increased volatility in the market, making it more challenging for traders to navigate.
Key Structures
- The latest rally of this bull leg started because we broke out a triangle structure shown in blue below. It is currently at 4123-4116 and represents an important back-test, which we managed to defend.
- The yellow rising channel connecting the May lows. This broke down yesterday. As always, when price breaks down any sort of significant level that level needs to be recovered in order to “end” the immediate move (down). Currently, this is 4165-75 and I would say a “bottom is in” when that is recovered.
- While this is very far away - note the lowest white trendline. This connects the October low with the March low and is currently 3980. I consider this the driving trendline controlling the multi-month bull market we are currently in. We remain in a clear uptrend by every definable measure.
The Flat Bottom
You can see the flat bottom pattern failed to hold and triggered the sell-off at 4190.
The Yellow Uptrend Channel
The yellow uptrend channel, which connects the May lows, broke down yesterday. In order to end the immediate move down, the level of 4165-75 needs to be recovered.
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.
- Bulls control above the structure
- Bears control below the structure
- The back-test level is now 4140-42.
Support Levels
The bull case would look something like yesterday lows continue holding, and from there we push up the levels to 4147, 4156, then 4166-75 where ES can try another sell.
4123, 4116 (major), 4100-05 (major), 4087, 4075 (major), 4061, 4053 (major), 4040, 4020-25 (major), 4013, 4000 (major), 3977-83 (major).
Resistance Levels
Starts on the failure of yesterday’s low. Ideally, one more bounce attempt at 4116-23 before trying a short. After this bounce though, consider a short 4115 or so for a move to 4100-05 where gains should be locked in.
4135 (major), 4147, 4157, 4166 (major), 4175 (major), 4191-95 (major), 4204 (major), 4212, 4221 (major), 4235, 4242-45 (major), 4253, 4259, 4270-75 (major).
Trading Plan
If buying big red candles, these are “knife catch trades”. Size them down. 4123-4116 is major support still, one could bid it direct again or wait for a decisive failed breakdown. In terms of spots to try knife catches, 4100-05 and 4075 would be possible regions.
Wrap Up
In conclusion, the market is currently in a complex and headline-driven environment due to the debt ceiling crisis. Traders need to be flexible and prepared to react to price movements, rather than trying to predict or forecast the market. Keep an eye on key structures, support and resistance levels, and have a solid trading plan in place to navigate the market successfully.
Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decisions.
