The past week of price action has been typical of a shakeout. Fear has been prevalent, the AAII Sentiment Survey showed the lowest number of bulls since August of last year. The market is down more than 7% since the highs in early May. However, as the market continues to threaten to sell-off further, buyers have continued to step in over the past week to prevent a continued slide. Slightly lower lows following each sell-off have managed to shakeout the weak-handed longs. At the same time, the previous two days have seen capitulation-type volume. Odds suggest a strong reversal is imminent. If it does not begin today, I expect a significant rally within the next week.
I am currently long. Unless the S&P 500 breaks down below the March lows, I am a very confident bull. The markets may remain choppy until there is confirmed resolution on raising the US Debt ceiling (deadline is August 2), but regardless, we could see at least a 50 point rally (ES) in the near-term.
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Hello Verde - Take a look at your 60 min es chart starting at around 1:00p on the 15th and draw trendlines from tops to bottoms to now. It is the start of a megaphone and we know how they generally turn out(bearish)... And what's interesting is a potential end to it Mon/Tues next week is around the March low ... FED speaks on Wednesday so resolution one way or the other should come by then... Whether it materializes or not remains to be seen but it's just something to keep in mind...
ReplyDeleteHope you're doing well...
Vis
Doing well Vis thx,
ReplyDeleteI don't see a significant megaphone pattern on the 60 min chart.
Check your email...
ReplyDeleteVis
Gotcha. Before I comment I will say that, personally, I don't put too much weight on chart pattern indicators in my trading decisions. But that being said, if I were to analyze this one, I would say that it is a more bullish pattern given the fact that it is forming after a decline. If this had formed at the top, I would say it was bearish. Another test of the top trend of this megaphone pattern will more than likely result in a breakout to the upside. This seems more likely to me than a continuation down. But we will have to wait and see...
ReplyDeleteAnd you are right, if ES touches the bottom trend of this pattern in the coming day or two, it will put price right around the March lows. That would present a second case for a rally, just a little lower. It could get ugly if those lows are breached...
Just wanted to bring that up because I know that you are down about $3000.00 right now and have been tied up in your trade since the beginning of May... Not really a great way to make $$ but whatever works for you... This megaphone just caught my eye because of where the bottom trendline met the March lows... And definitely, we break much below that and things could get bad quick. FED speak next week should put true trend back in motion... I'm still cautiously in the bull camp but my absolute line in the sand is SPX 1200...
ReplyDeleteVis
I certainly would not like it if the market continues lower, however, my confidence remains high and my conviction is unwavering.
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