Caution is in the air coming into this trading week. Friday closed at the low of the day below 4500 and now sits in the middle of the neutral zone. A test of the bottom of the neutral at 4424 in now likely. A break below 4424 could yield a move down to 4370 and possibly 4347 which would test the Sept 10th pivot low. If the ES/SPY rallies early on Monday watch for that move to be sold into aggressively. SPY option IV has increased with nervousness about an early taper and the fact that Dallas Fed chair Kaplin sold all his holdings. The bottom line is that market participants have gone from looking for a reason to buy to looking for a reason to sell. This makes sense in that the indexes are up 15/20 % this year and we are now into the weakest two months. All this needs to be confirmed by price, but I will be proceeding with caution this week.
Of note: CPI data on Tuesday & multiple option expiries on Friday
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Hourly look Monday AM. Getting a decent bounce from the overnight session. This may provide a chance for nervous people to get out. I see the red zone as key resistance until it is broken. A break of the last weeks close is obviously import to the down side.
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ES is threatening to test the bottom of the neutral box. So far controlled selling. May get a decent bounce from that level if it gets there.
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Of note 50sma sits at 4420.
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Tapped the bottom of the neutral (618) and the 50 SMA. Now I will be watching for a retest of that level and reversal higher. Price almost always retests key levels before reversing so no need to enter longs until confirmation occurs.
@WadeYendall, Yea I can enter with buy stop on august open if crosses down (in case next day gets bullish the trend will change quickly. Once I started to look at the opens I got better entries.
vik0q
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@WadeYendall, Another thing I like from the opens is that I dont have to draw the fib, looks like has the same precision. I dunno maybe not same precision but gets easier to spot a key area.
WadeYendall
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@vik0q, Yes what you describe can work very well. I mark out monthly & weekly (high/lows/open/closes) and look for confluence with the fibs. My key levels are build from these. If these levels line up with key MA even better. I don't have them on my posted charts b/c it can get to busy looking and confuse people. There is system called The Strat that uses only the candles like you describe. Check it out.
vik0q
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@WadeYendall, I'll check it out. After I started to use opens I got better in entries, sometimes might fail a monthly open, but most of cases after the second shot just crosses it. So applying 1% risk is a win strategy. Requires patience to get to the target that is the monthly low/high or a quarterly.