Week of May 6th, 2024
Sell in May & go away?
Hi everyone!
This past week I warned that a retest of 5056 or lower was likely while we were at 5120 and warned that if 5056 held after a retest, a throwover trap into 5150-5179 was a likely and typical scenario. Thanks to AAPL 0.00%↑ earnings report and the huge buyback authorization we gapped over 5056 and went straight to 5140, just a couple points off of my 5150-5175 throwover level. I’ve mentioned the past few weeks that while we trade below 5179 on $SPX we will see the return of volatility and that predictable repetitive price action that we’ve had for several months now has come to an end. Many went home very bullish on Friday, and many are calling for the bottom to be in. It’s important to note that in most corrections the majority are convinced a bottom is in before another deep leg down. For me it is simple, we are below 5179 and as long as we are below 5179 rallies are likely to be sold.
Last week I mentioned in our analysis of SPX:
“Bears in control below 5056. Bulls in control above 5179. Expecting a retest of 5056 next week, if it does not hold, a sell off leg into 4818 begins. If 5056 holds, we could get a throwover trap into 5150-5179. A throwover trap is typical in these corrective phases as they would convince everyone that the bottom is in before a rug pull. Stay cautious next week.”
We started the week near 5120, retested the lows near 5012 and held, then we rallied into 5140 almost EXACTLY to our weekly plan
I will keep mentioning this because the risks are currently elevated: Crucial for the upcoming weeks: "Buy the Dip" (BTD) strategy remains viable as long as crucial support levels hold. However, if support crumbles, it triggers the initiation of a short trade, and this short position should be maintained until a resistance level is successfully reclaimed. This underscores the importance of adaptability. For those accustomed to habitually buying every dip, swift pivoting is essential when support levels start to erode. Failing to do so might result in surrendering hard-earned gains by persistently attempting to buy dips amidst a multi-day, multi-support downturn.
SPX Analysis:
Key Levels: 5014 & 5160
Potential bear flag formation setup
Bullish Trajectory: I don’t suggest any direct longs here, I would wait for a failed breakdown setup first. As long as above 5110 bulls have potential to continue this failed breakdown into 5145-5179. Major resistance at 5179 and bulls not in the clear unless 5179 is taken out. A gap has been left below at 5072 within the flag.
Bear Trajectory: A gap has been left below at 5072. I think if 5156 holds the line we could revisit and fill the gap at 5072. If 5072 falls, we would retest 5014 which at this point has been weakened and leads to a sell towards 4953 and 4919.
Summary:
Bears in control below 5072. Bulls in control above 5179. Expecting a retest of 5072 next week, if it does not hold, a sell off leg into 4818 begins. If 5072 holds we could continue in this bearish wedge into 5150-5179. A throwover trap is typical in these corrective phases as they would convince everyone that the bottom is in before a rug pull. Stay cautious next week.
IWM 0.00%↑
Two weeks ago at the orange circle below I mentioned that this was a critical spot and I expected the bulls to hold it otherwise the consequences of losing that level would be severe.
We got a nice bounce from that spot into my red box and POC of 199-200 and put in a failed breakdown towards the gap at 205.
We left a gap below at the POC at 200.12 and now will need to see if this holds next week as it appears to be forming a head and shoulders on the weekly.
QQQ 0.00%↑
Again mentioned last week that I expected a fight by bulls at this spot (orange circle) and indeed we put in a failed breakdown of 427 to retest 436.
436 is now the key for next week, if rejected the first stop is the unfilled gap at 427. If 427 were to fall next week, a large sell leg into 411 would follow.
Bulls need to get over 436 and do an S/R Flip there to keep the rally going.
This chart is from trend spider, also shows that we closed below the 50sma on both SPY and QQQ
TRADE ALERTS:
For those of you not in the Discord (www.jr28trading.com) I highly encourage it as we cover a lot of the setups given here but we also alert LIVE trade ENTRIES and EXITS.
FUTURES TRADING:
There is a current wave of futures trading with prop firms so I will start to post levels for ES instead of SPX as well as NQ but this will go out on the weekly newsletter on Sundays.
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Sentiment Check
Here is the economic calendar for next week:
A separate newsletter will be sent tomorrow with the setups I am watching for next week to paid subscribers.
Have a wonderful weekend!
Wishing you a successful and profitable trading week ahead!
Best regards,
Jovan