S&P Analysis Week of 10/24/2020: The Calm Before the Storm?
The week before the election. Will market's make a big move or wait until next week?
This week has a lot of information on the chart. I generally try to keep my chart's as simple as possible, focusing on major areas of support and resistance and trading based on price action/setup. I try my hardest to not let my bias drive my trading.
However, price is still in an uptrend but starting to show a lot of bearish patterns and breakdowns. Price has a lot of work to get above all time highs again.
Note: Price originally formed a bullish flag pattern/channel, but since has started building a more bearish wedge (consolidation zone). At this point, price is building energy (has been trapped in the consolidation zone for almost all of last week) and when it breaks, it will break hard to the upside or downside. It is impossible to know with certainty which way it will break (which is why I labeled this small consolidation area 'No Man's Land.'
My two main trade setups are a break above (with retest) ES 3535 or breakdown below (with retest) ES 3400.
I did include a trade within No Man's land that someone could technically take if it breaks above the consolidation zone (after a retest). However, I labeled this risky because of the multiple upper resistance trend lines and horizontal lines above this area. If you do take this, be sure to have a tight stop loss and move your stop loss to break even when you hit resistance. I think it's better to get stopped out at break even if you do get into this trade and it starts to print. A break even trade is better than a loss (especially taking it in a No Man's Land area).
I'm not really confident the markets will give any good trades this week. I am not anticipating any large moves outside No Man's Land prior to the elections in the U.S. next week. I could see further consolidation within the No Man's Land area.
I also don't think it matters who wins the election because the market is going to do whatever it has planned. The one thing that will impact the volatility is clarity in the results of the election. If it looks like it's going to be a battle to declare a winner, then you can definitely assume more volatility. However, the market is still going to go in the direction it would have regardless of results. Hope that makes sense.
Do not play the breakouts or breakdowns. Always wait for price to come back to test the breakout/breakdown area and resume off. This is just a general good trading principle.
Remember:
"When it feels really right, it's probably wrong. When it feels really wrong, it's probably right."
Good luck trading. Don't forget to support me by hitting the like button.
Note: I've switched from using the symbol SPX500 in my chart to using the ES futures contract because I trade off the ES and it makes my life easier putting my chart on this symbol. The trade setups should be the same, just different numbers. The ES tends to line up more closely with the numbers on SPY.
This week has a lot of information on the chart. I generally try to keep my chart's as simple as possible, focusing on major areas of support and resistance and trading based on price action/setup. I try my hardest to not let my bias drive my trading.
However, price is still in an uptrend but starting to show a lot of bearish patterns and breakdowns. Price has a lot of work to get above all time highs again.
Note: Price originally formed a bullish flag pattern/channel, but since has started building a more bearish wedge (consolidation zone). At this point, price is building energy (has been trapped in the consolidation zone for almost all of last week) and when it breaks, it will break hard to the upside or downside. It is impossible to know with certainty which way it will break (which is why I labeled this small consolidation area 'No Man's Land.'
My two main trade setups are a break above (with retest) ES 3535 or breakdown below (with retest) ES 3400.
I did include a trade within No Man's land that someone could technically take if it breaks above the consolidation zone (after a retest). However, I labeled this risky because of the multiple upper resistance trend lines and horizontal lines above this area. If you do take this, be sure to have a tight stop loss and move your stop loss to break even when you hit resistance. I think it's better to get stopped out at break even if you do get into this trade and it starts to print. A break even trade is better than a loss (especially taking it in a No Man's Land area).
I'm not really confident the markets will give any good trades this week. I am not anticipating any large moves outside No Man's Land prior to the elections in the U.S. next week. I could see further consolidation within the No Man's Land area.
I also don't think it matters who wins the election because the market is going to do whatever it has planned. The one thing that will impact the volatility is clarity in the results of the election. If it looks like it's going to be a battle to declare a winner, then you can definitely assume more volatility. However, the market is still going to go in the direction it would have regardless of results. Hope that makes sense.
Do not play the breakouts or breakdowns. Always wait for price to come back to test the breakout/breakdown area and resume off. This is just a general good trading principle.
Remember:
"When it feels really right, it's probably wrong. When it feels really wrong, it's probably right."
Good luck trading. Don't forget to support me by hitting the like button.
Note: I've switched from using the symbol SPX500 in my chart to using the ES futures contract because I trade off the ES and it makes my life easier putting my chart on this symbol. The trade setups should be the same, just different numbers. The ES tends to line up more closely with the numbers on SPY.
Trade active:
Trade Setup#2 signaled a short during the NY session today (Tue) after price retraced to 3400 overnight and started making a lower low on the 8 hour candle.
You can see from my chart, that this turned out to be a very good clean entry.
I entered short at 3392 ES. This could turn into a very profitable trade now that price has been rejected around 3400-3450 over and over again.
You can see from my chart, that this turned out to be a very good clean entry.
I entered short at 3392 ES. This could turn into a very profitable trade now that price has been rejected around 3400-3450 over and over again.
