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Crosscurrents Give Stock Pickers Advantage- May 12, 2021


MARKET COMMENTARY
– Outlook – BULLISH STANCE weakens as the overnight move dips into deeper support levels noted on our charts near 4114 after the recent break to new highs on Friday. Holding 4100 will be key into the end of the week. Shift of trend noted-potential sideways action ahead but bullish action at deep support stays dominant. Now we look to 4130 – 4150 as resistance and 4104 as the support zone of contention. In the ES, option call sellers peak at 4281.5 while option put sellers peak above 4172- a much tighter range than last week, and option put sellers are on the hook today to lift us above 4172 before the week ends.

Observations

  • Metastock slips to a neutral pattern once more – sideways time series moving average alerts us to this possibility
  • Israel and Hamas in continued conflict
  • EIA report today
  • East Coast supplier of oil, Colonial Pipeline, enters 6th day in a ransomeware cyberattack
  • Many small eastern counties continue without gasoline
  • Bitcoin enters the gap from the mining offline incident but not breaching 60K resistance
  • USDollar rolls backward after a poor jobs report suggesting more money printing ahead
  • India still in the throes of the pandemic – affecting fuel demand
  • Gold holding support of 1750 and up into 1830 for a second day
  • Commodities continue to hold with the broad market though a broad sell off is now engaged
  • Fed balance sheet released today
  • Fed continuing to spend more at the repo (repurchasing) window to aid liquidity

The pressure for buyers to hold support zones is high here as key levels of weekly support continue to be tested. Sellers have pushed traders well below 4176 – forcing us to look at the range that gives us tests of deep support below.

When we see news about the bond markets, we need to keep on high alert. And there is quite a bit of news here, though currently subdued as the dollar fades (this is what the Fed wants). Remember that credit rules the world; however, the media shapes the narrative of what is happening, so pay attention to price action first- not what the media is painting.

As always, we will listen but not assume the news will do something- it remains important to follow quickly and not predict.

If you are newer, read The OODA loop. If used properly, it will confirm you are seeing things the right way. It is far better to be out of a trade you wish you were in than being in a trade you wish you were not. Stay present and in the near term, and pay attention to the players before you decide on a plan. BE PATIENT AND WAIT FOR YOUR PRICES to give you the edge. Intraday formations are the ones governing the charts – so use them.

Remember your OODA loop – OBSERVE, ORIENT, DECIDE, ACT

  • What do you see?
    • This means -what is the current battle at play?
  • Where were the buyers last engaged if they were value buyers?
    • This means -where do we see the congestion that leads to a bounce?
  • Where were the sellers last engaged if they were value sellers?
    • This means – -where do we see the congestion that leads to a fade?
  • Who won the last strategic price battle- buyers or sellers?
  • Have we tested significant levels of support or resistance?
  • What is the relative trend?
    • This means – relative to the day at hand, who is forcing the most pressure on price?
  • Have you established risk relative to –
    • 1) the last battle won and
    • 2) the relative trend?

PAY ATTENTION TO YOUR STOPS.

Watch the VWAP to help you with the strength of pressure. The loss of the VWAP will force some selling action, and the breach above the VWAP that holds will bring buyers to attempt stronger positioning.

INTRADAY -Keep an eye on the daily resistance and support that we discussed and expect battles at these regions as buyers have a lot to prove to maintain bullish price flow on monthly formations- technical damage is present but likely to be repaired on this larger timeframe. BIG time frames will help you position with the wind at your back.

Deep dips remain staging grounds for buyers- quick strikes to support and back to resistance appear to be the highest probability for success today- dips could certainly get deeper and spikes could get higher as price action shifts.

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This week’s calendar

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Econoday Calendar for this week

********If you feel you need some help understanding how price moves, remember you have the COACH’S CORNER for video review.

THINKORSWIM USERS –

Chart share links for ES_F , NQ_F , YM_F , CL_F , GC_F– levels here for download to the Thinkorswim platform

LINK FOR THE TRADING DATA EXCEL SPREADSHEET

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TRADING LEVELS-

If you find yourself being chopped up, widen your time frame or take time away from your screens. This is a time when less is more.

TRADING VIEW & ACTION PLAN
Pullbacks can be deep-once support lines get lost – the lines will shift. Buyers have resumed some dominance.

Intraday LONG trading from support edges like ABOVE the RISING VWAP or tight moving averages will give you the least risk event for engaging – removing your trade at resistance will allow you to participate in level-to-level trading – understanding that countertrend bounces can be swift and sharp but will likely fail under the broken structure of the market.

Intraday SHORT trading from resistance edges like BELOW the FALLING VWAP, the old highs or bigger moving averages will give you the least risk event for engaging. Follow the candle trend until candles stop breaking lower. Removing your trade at visible support levels will allow you to participate in level-to-level trading – understanding that countertrend bounces can be swift and sharp but will likely fail under the broken structure of the market.

Here’s a link to the METASTOCK software– you can have your own copy of Metastock to run these tests and setups using Target Rich Trades.

DAILY CHART

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