What a week! You survived the first week of Big Tech Earnings! Ready for a break?
Not so fast, it's time for FOMC and more big earnings, including Apple.
The good news is the market is finally moving, which should make for some great trading...err I should say "great trading conditions" to be more accurate. Every week I sit down to write this article and make a plan for myself; however, I'm still human and a great plan does not equal great results. Longtime readers know I never shy away from talking about my ups and downs as a trader...I'll be honest with you: Last week I had a great plan and traded it like crap.
At this stage of my journey, making a good plan and fumbling the execution honestly feels worse than losing money. Before I get into the charts and my plan for the week, allow me a few moments to expand on this topic. Here's a basic matrix to guide this discussion:
Trading is hard. I find it humorous whenever I see scammy shot-calling services try to make it look easy by only posting their good results and ignoring the bad results. It's not just the market we battle against, it's also ourselves. I'm not sure about you, but I'm definitely my own worst enemy when it comes to having a good week versus a bad week trading. Last week was a good example of when market conditions were easy (i.e. low VIX, persistent Buy-the-Dip price action, a well-established trading range, a strong area of confluence for a rebid, etc.) yet I made it way harder on myself by not trusting my own process. It's safe to say I spent last week in this quadrant:
My goal this week is to not do that again. I've always considered myself pretty good at recognizing when we flip from "Sell the Rip" to "Buy the Dip" (and vice versa) but last week I battled against what was plain to see on the trading screens: This market wants to go up.
It's not for me to question why Wall Street wants higher prices...it's my job to stay on the right side of price. So the plan this week is to keep it simple and respect the bullish breakouts as long as they hold (more on that in a moment). Without further ado lets look at the charts.
I'm going to start off a little differently this week by looking at the ES Range I've been talking about for the last 2 weeks instead of the normal Daily Candlestick view. At this point, I think this range is incredibly important for the S&P500. The range spans from 4100 to 4172 (in my opinion) and breakouts with legs are likely on either side. The S&P500 futures have used 4140 as a pivot so many times during the last 2 weeks so I'm planning to do the same this week.
While ES has technically broken out to the high-side, it's important to me to see a little more continuation before we're out of the woods:
I'd really like to see a trip to 4200 (at least) to rule out a potential Head & Shoulders pattern on this 2hr chart above. We can see the bullish volume shelves created near 4180 over the past 2 weeks, which is a likely area of defense for the buyers now. If sellers push back through, I'll be watching 4131 for a rebid off the 50% retracement of the wild Thursday-Friday pump.
It's worth noting the Traderade VIX3M Model is still long, and I maintain the view that flipping short doesn't make sense until this model does.
When we look at a SPY Daily Chart we can also see a likely magnet for price if we get more upside continuation this week. (Tease me all you want, I love my parallel lines for the S&P)
The 1hr ES Range Chart above shows another important indicator hanging out at my Pivot for the week: The 20 Daily Moving Average (blue line). Truthfully, I hope we don't return back to this trading range because it's choppy and violent, but if we do I'll favor longs above 4140 and shorts below, but won't consider swing trades short until we lose 4100 again.
Note: The most recent breakout from this range was on somewhat high Relative Volume, which historically has a little more validity for breakouts. You can see on the chart the last attempt to breakout above 4172 was on very low volume...and it didn't last.
Speaking of breakouts, we also have NQ finally breaking back out above the critical 13250 level. I don't love the RSI divergence here though, so some caution is still warranted.
Same story above on The Dow...another bullish breakout with slight RSI divergence.
Fun Fact: Did you know you can trade The Dow without an AARP Card?
The momentum indicator from nextSignals on Twitter also flipped back to long at the end of last week.
Needless to say, the theme presented by the charts this week is quite bullish. However, the Fed's Interest Rate Decision on Wednesday and Apple earnings on Thursday are two very significant catalysts for violent price moves. Even with the VIX in the 15s (which I still can't believe) I expect serious volatility Wed-Thurs and will be trading very lightly if at all...especially considering Apple is at a very interesting crossroads from a technical perspective:
I wouldn't fight Apple or the overall market if it breaks out over 170 as all-time highs would be dangerously close at that point. While the chart looks insanely bullish, it's hard to ignore the RSI divergence here as it's more prominent than the Nasdaq or Dow chart.
In my opinion, this isn't a week to be a hero. It's a great week to trade small and stack up the base hits while not fighting against intraday momentum. In fairness, it's always a great week to do that...I just needed to remind myself one more time. :)
Happy Trading,
Horse