Weekly Readings for 10/23 - 10/27
What levels are you watching?
How’s last week?
Last week, things didn't quite go as planned. The levels we were watching did work, but the market's sequence of moves threw us a curveball. Instead of the expected downward move, we had to go long first and then switch to a short position on Wednesday.
The Russell 2000 index remained on a downward path, continuing its breakdown.
FOMC members did their part to push the market down, but interestingly, the US Dollar ($USD) also managed to close the week in the red.
If you've been diligently following my newsletter and daily X posts, you'll have likely noticed the critical role that Flag levels play in our analysis. For instance, when the price approaches the Green flag level, which holds particular significance for the bullish case on a daily basis, bulls need to be cautious. If this level is touched and subsequently sees a red close that same day or the following day, it often serves as an indication that the short-term bearish trend is poised to continue. This precise scenario played out just this past Tuesday, offering a tangible illustration of this concept in action.
Week Ahead (10/16 – 10/20)
The Fintwit world is in a bearish mood these days. I've noticed fewer posts about October seasonality or new market highs on my timeline, and more chatter about an impending crash, reminiscent of the ones we saw in 1987 or 2008.
But you know what they say, time will tell. It's often the case that if most people are expecting a crash, the market tends to have a way of surprising us. 😊
From my observations, it does seem like there's been a systematic and orderly sell-off since July, with the charts showing some well-defined lower highs and lower lows.
Events Calendar for next week:
Peeking at the events calendar, next week's shaping up to be another interesting week! With JPow set to grace us with his words on Wednesday after the market closes, and the core PCE report dropping in on Friday, the market gets to continue playing the guessing game.
#ES_F / $SPX Futures: Bears look confident
📈 Weekly: 🐻 📊 Daily: Cautious 🐻
Analysis:
Strong red close of the week and last three days of the week shows bears continue to control the market.
Bulls needed to close above 4310 to show they have taken over from the bears. They had that chance on Monday and Tuesday but failed and instead, quickly gave back reins to bears.
All the bullish move from 4th of October has been pretty much negated.
Since May 2022, I had been saying weekly close above 4303 is key for bulls to move forward. Last week’s close also negated move from June to July
The reason for cautious bearish on daily is only in case there’s oversold bounce, specifically Sunday/Monday when there are no FOMC speakers or major data being released
Monthly Viewpoint:
🐻 Bearish Goal: 4190
🐂 Bullish Goal: 4515
Weekly Perspective:
🐻 Bearish: Current potential targets to the downside include 4220 and 4190.
🐂 Bullish: If 4235 holds & 4250 claimed, 4267 & 4281 would be back test levels. Once 4181 claimed, 4304 and 4365 in play
Level by Level Bullish Play (on Daily):
If the support at 4235 holds, the potential for an advance towards 4267 and 4281 becomes viable.
Upon successfully claiming the 4280 level, the next target on the radar is 4304.
Should the market attain a close above 4304, the focus then shifts to the significant milestone of 4365.
Level by Level Bearish Play (on Daily):
If bears hold 4267 or 4281, and 4220 is not already tested, 4220 would be the target
If 4220 fails to hold, the next support levels to consider include 4190 & 4170.
Subsequently, should 4170 give way, 4120 emerges as the subsequent downside target.
Zoomed-out View:
No sustainable bullish bias until week closes above 4425 or at least 4365. Until then 4220 or 4190 remains the levels where bulls may have chance to lift it up. In fact based on last week’s close I would say until week closes above 4425, 4000/3920 in play
🔑 Key Levels:
Resistance: 4267, 4281, 4304, 4365, 4393
Support: 4235, 4220, 4190, 4170, 4120
Possible Trade Plans:
Considering the aforementioned analysis and key levels, here are some potential trade plans:
Long Trade:
If the market opens lower and hasn't reached 4220 yet, look for signs of 4235 holding on smaller timeframes, particularly after a brief drop below 4235 followed by a rapid recovery. This presents an opportunity to go long with a stop loss just below 4235 and an initial target of 4267, with a secondary target at 4380. This trade carries an estimated risk of 10 points for a potential profit of 30 points.
Short Trade:
If the market has not yet reached 4220 and bears reject the 4367/4381 levels, assess the setup at that point and consider a short position with a stop loss just above 4381 and a target of 4220/4190.
It is essential to note that these risk-to-reward calculations are approximations and subject to variation based on actual entry and market conditions.
Green Flags: Should the market experience a green day, watch for the following bullish reversal signals:
Lime Flag: A close above 4365 on a green day.
1st Green Flag: Attaining a close above 4410 on a green day could potentially challenge the short-term weekly downtrend bias.
2nd Green Flag: A significant bullish confirmation may transpire if the green week closes above 4425, potentially negating the short-term weekly downtrend bias.
#NQ_F / #NDX Futures: No more rally?
📈 Weekly: 🐻 📊 Daily: Cautious 🐻
Analysis:
Last week's price action in the #NQ_F market reflected a struggle for bullish momentum. Despite an initial target set at 15375, the market could not surpass the 15340 level and instead reversed direction on Tuesday.
The bears made a decisive move, failing to maintain critical support levels at 15040 and 14965. Consequently, the week concluded with a substantial red close, close to the previous week's low.
As a result, the current trend leans toward a continuation of the bearish sentiment, with potential targets down to 14555 and eventually 14290.
It is important to note that any shift toward a sustainable bullish outlook would necessitate a green week closing above the prior week's high.
Given the current market conditions, it is advisable to consider taking swift profits on long trades, even if they fall just a few points below established resistance levels.
Monthly Viewpoint:
🐻 Bearish Target: 14290
🐂 Bullish Target: 15520 / 15725
Weekly Play:
🐂 Bullish: If the levels at 14595/14555 are maintained, it opens the possibility for a move toward 14780/14890.
🐻 Bearish: However, if 14555 fails to hold, it shifts the focus toward potential support at 14365/14290.
Level by Level Bullish Play (on Daily):
If the support at 14555 holds, it paves the way for a bullish move toward 14780.
Subsequently, if 14780 is successfully claimed, the next target becomes 14890.
With 14890 secured, the focus transitions to the 15140 level.
Level by Level Bearish Play (on Daily):
Should the support at 14555 be breached, the market may target 14435.
If 14435 fails to provide support, the next level of interest is 14365.
Further downside pressure could lead to a test of 14290/14245.
Zoomed-out View:
Until the week closes above 15340, the bearish pressure is expected to persist, with attention drawn to the potential support levels at 14555 and 14290.
🔑 Key Levels:
Support: 14555, 14435, 14460, 14365, 14290
Resistance: 14780, 14890, 15140, 15240, 15340
Green Flags: To signal a potential shift toward a bullish bias, watch for the following on a green day:
Lime Flag: A close above 14890 on a green day. Bears should raise caution.
1st Green Flag: Achieving a close above 15340 on a green day could challenge the prevailing short-term bearish trend.
2nd Green Flag: A notable bullish confirmation could materialize if the green week concludes above 15465, potentially negating the short-term bearish bias.
#YM_F / #DJI Futures: Bulls wasted their chance. Will Bears too?
📈 Weekly: 🐻 📊 Daily: Cautious 🐻
Analysis:
The past week dealt a blow to any lingering bullish sentiment, with a strong bearish close that left little room for optimism.
The week started with green days, briefly touching the 34295 resistance level (with a high at 34305), but this bullish momentum quickly reversed on Tuesday.
Monday played a pivotal role by holding the line at 33280 and closing above 33710, momentarily shifting the weekly bias toward the bullish side. However, this bullish trend was short-lived, as bears regained control later in the week.
Monthly Viewpoint:
🐻 Bearish Target: 32910
🐂 Bullish Target: 34650/34800
Weekly Play:
🐂 Bullish: If 33120/32910 holds, it opens the potential for a move to 33570.
🐻 Bearish: Conversely, if 32910 fails, the market may set its sights on 32615/32230.
Level by Level Bullish Play (on Daily):
If the support at 33120/32910 is maintained, it clears the path for a bullish move toward 33570.
Subsequently, with 33570 secured, the focus can shift to the 33990 level.
Once 33990 is claimed, the next target is 34300.
Level by Level Bearish Play (on Daily):
If the support at 33120 fails, the market may target 33000/32910.
Should 32910 fail to provide support, the next levels of interest become 32725/32615.
Further downside pressure could extend the market's focus to 32485/32230.
Zoomed-out View:
Until there's a close above 34300, it is prudent to assume that the bearish sentiment may continue to dominate the market.
🔑 Key Levels:
Resistance: 33390*, 33480, 33570*, 33810, 33990*
Support: 33120, 32910, 32615, 32485, 32230
Green Flags: To signal a potential shift toward a bullish bias, watch for the following on a green day:
Lime Flag: A close above 33570 on a green day. Bears raise caution.
1st Green Flag: Achieving a close above 33990 on a green day could challenge the prevailing short-term bearish trend.
2nd Green Flag: A significant bullish confirmation could materialize if the green week concludes above 34425, potentially negating the short-term bearish bias.
#RTY_F / #RUT Futures: The bounce that never came
📈 Weekly: 🐻 📊 Daily: Cautious 🐻
Analysis:
The #RTY market experienced another week of caution, with a persistently bearish outlook and the lowest weekly close observed in the last 52 weeks.
The broken Russell 2000 index continued its descent, further amplifying the bearish sentiment.
Among the major indices, the RTY stands out as the most oversold, making it a focal point for market participants.
Last week, the market displayed a brief glimmer of hope as it held the line at 1723 on Sunday night. This led to the achievement of bullish targets at 1757 and 1769 in the first two trading days. However, the bullish momentum was short-lived.
The failure to maintain support at 1723 has brought the market close to the first bearish target of 1685 (with a low at 1688.1) from last week.
Long plays may find it challenging to hold ground until the week concludes above 1804. This cautious approach stems from the market's oversold conditions and its proximity to multi-month support.
Monthly Viewpoint:
🐻 Bearish Target: 1752 (already below)
🐂 Bullish Target: 1865/1905
Weekly Play:
🐂 Bullish: If 1685 holds, it opens the possibility of a move to 1710/1748.
🐻 Bearish: Conversely, if 1685 fails, the market may set its sights on 1648.5/1643.5.
Level by Level Bullish Play (on Daily):
If the support at 1685 holds, it paves the way for a bullish move toward 1710.
Subsequently, with 1715 claimed, the focus can shift to 1740.
Once 1748 is secured, the next target becomes 1780.
Level by Level Bearish Play (on Daily):
Should the support at 1685 fail, the market may target 1667.
If 1667 fails to provide support, the next levels of interest become 1657.
Further downside pressure could extend the market's focus to 1648.5/1437.
Zoomed-out View:
Until there's a green week close above 1804, it is prudent to assume that the bearish pressure may continue to influence the market.
🔑 Key Levels:
Resistance: 1710/1715, 1748, 1780, 1804, 1825
Support: 1685, 1667, 1657, 1648.5*, 1643.5
Green Flags: To signal a potential shift toward a bullish bias, watch for the following on a green day:
Lime Flag: A close above 1749 on a green day.
1st Green Flag: Achieving a close above 1804 on a green day could challenge the prevailing short-term bearish trend.
2nd Green Flag: A significant bullish confirmation may materialize if the green week concludes above 1825, potentially negating the short-term bearish bias.
#DXY / $USD: Should Bears be hopeful?
📈 Weekly: Cautious 🐂 📊 Daily: Cautious 🐻
Analysis:
The previous week was marked by a sense of caution as the #DXY market hovered around the 106.670 range. It's essential to note that the market broke its upward channel that had persisted for over 12+ weeks and closed week in red.
However, it's premature to declare that bears have taken control. This could very well be a period of consolidation following 12-13 weeks of a robust bullish run.
As of now, the bias leans toward sideways consolidation with potential for an upside move, unless the market closes below at least 105.515.
A close below 105.515 on Monday could potentially trigger a market bounce, which might, in turn, stabilize the equity market. If not, #DXY could regain strength.
The level at 107.060 remains a point where bears could still assert themselves. If not, the market could aim for 107.275 and potentially reach a new 52-week high.
It's noteworthy that the previous week's weakness in the USD did not correspond with strength in equities. The inverse correlation between the two may have momentarily ceased, but another week is needed to confirm this shift.
Red Flags: To indicate a potential change toward a bearish bias, watch for the following on a red day:
Orange Flag: A close below 105.515 could raise questions about current uptrend.
1st Red Flag: If the market closes below 104.420 on a red day, it might challenge current bullish trend.
2nd Red Flag: A close below 104.025 on a red day could further negates the short-term bullish bias.
Note about Terminology:
In my weekly reports and X (Twitter) posts, I often refer to terms like "must hold," "claim," or "fail." Here's a quick explanation of what these terms mean:
For intraday analysis: I consider the 15-minute or 1-hour candle close.
For trades spanning overnight to two days: I focus on the 4-hour candle close.
For a weekly or longer-term outlook: I rely on the daily candle close.
close above: claimed / close below: failed
These references are also available in the pinned thread on my X profile. I strongly recommend reading that thread for a deeper understanding of my chart analysis. While I plan to elaborate on my methodology in a separate Substack post in the future, the pinned thread on my X profile offers valuable insights for now.
Stay vigilant and adapt your trading strategies based on the changing market conditions and the key support and resistance levels outlined above. Keep a close watch on the flag levels as early indicators of potential shifts in bias. If you aren’t already following me on X @trdnvestor , consider it for daily/intra day updates.
May my reading and levels bring you profits!
Disclaimer: This is NOT financial advice. I am NOT a financial advisor.