#202428 - priceactiontds - weekly update - sp500 e-mini futures

Good Evening and I hope you are well.

tl;dr
sp500: 3 Best looking bull bars very late in the trend, breaking above two strong resistance lines. 75% that this is a bull trap and we break down Mo/Tu below 5580 and be on our way to test the daily 20ema and the lower bull wedge/channel line. Will short this on weakness on Monday. Next 500-1000 points are made to the downside. Can I be wrong? Absolutely and everything can and will happen in the markets. Markets can remain irrational longer than you can stay solvent. Yadayadayada.


Quote from last week:

comment: Bulls got their retest as written and now market is technically free to have a major trend reversal. June was a perfect bull trend from the beginning of the month. Market had 3 legs up with a two legged correction completed now. We could spend more time at the highs in a trading range or have a deeper pullback from here, which is my preferred path forward. The bull trend line will probably be tested around 5460 and there market will decide if it wants to stay above 5400 or get down to 5320/5350.

comment: Market tested 5500 twice and since it found no sellers down there, bears stepped aside and bulls printed 3 climactic bull bars very very late in this trend. The odds that this is a legit breakout above multiple resistance lines is very low. Much more likely is a bull trap and market will reverse over the next 1-5 days.

current market cycle: Bull trap and the end of this trend is near. Will soon see a deeper pullback and we will form a trading range where the low is 5000.

key levels: 5500 - 5630

bull case: Bulls see this AI bubble as legit and markets can only go up. Breaking above the bull trend line from 2023-01 is ok bc Daddy Jensen is signing breasts. That the markets are only held by 7 stocks is also a big buy signal since most eco indicators are puking.

Don’t know what to tell you here. Market can obviously go much higher for longer and we can print a couple of higher highs. But I will never join the “this time it’s different” crowd. The only sure thing before bubbles popping is that markets print more and more ridiculous highs while more and more people say “it’s really different this time” and they always popped and always will. That’s the nature of the game. Am I saying you should short this right now? No. Do you want to buy this at 5621? If your answer is yes, I do hope you make money, enjoy my letter and take something from it.
Invalidation is below 5580.

bear case: 16 Month old bull trend line and couple of more where market want’s to break above on low volume and declining economic activity across the board. Good luck with that. Will never buy into the frenzy. Bull trap most likely and I want to see strong selling before joining. Bears first target is 5500 and shortly after probably the gap close to 5430.
Invalidation is above 5630.

outlook last week:

short term: Neutral until bears get follow through and print lower lows below 5500. I’d short to 5490 and see how market reacts to the daily ema. If the support is weak, more shorting to 5450ish. Absolutely no interest in buying here.

→ Last Sunday we traded 5521 and now we are at 5621. Meh outlook. Was bearish if market would go below 5500 but it never did, so nothing lost or gained here.

short term: Most likely outcome for me is a bull trap above 5600 and we will see a correction over the next weeks. I wait for bear strength before shorting. I will only continue to buy quick momentum scalps if we continue upwards.

medium-long term: Bearish if the latest climactic top turns out to be a trap and we trade below 5580 again. If so, we will see a bigger correction down to at least 5450 in the near term and likely also 5300. Still think 5000 will be hit in 2024.

current swing trade: None

Chart update: Removed the smaller two legged correction and added another bull gap highlighter. Double top did obviously not hold but I still think this is a bull trap and a bigger two legged move sideways to down is more likely.