XYZ-Trader-

S&P Analysis Week of 11/08/2020: Post Election Madness

CME_MINI:MESZ2020   MICRO E-MINI S&P 500 INDEX FUTURES (DEC 2020)
Who is the newly elected President of the United States? How does that impact the markets?

As of this posting, we don't know who the elected U.S. President is. Even if a winner is declared, it is most likely going to be contested.

This week there are many variables a. One important variable is the consolidation that price is making in a triangle wedge .

We are currently at the top portion of the triangle wedge so price is in a critical spot. If price breaks out, we could easily get to and exceed all time highs.

If price is rejected then you will see price pay a visit to the last broken resistance area area. This breakout area was heavy resistance and was never retested. Price WILL come back to this point at some time...when is anyone's guess. Price can take days, weeks, months or years to retest that area.

My guess is that the retest will be sooner than later.

I indicated three setups:

  • Trade Setup 1 (long): The easiest would be a break above the triangle wedge because it's cleaner and easier to play.

  • Trade Setup 2 (short): A rejection of the top of the triangle wedge .

  • Trade Setup 3a (long): A bounce off of the broken resistance. This would satisfy the retest. However, if it does bounce this is not a preferred trade for me because of the overhead resistance. Price would have a lot of work to do to breakout above this area.

  • Trade Setup 3b (short): This is a continuation of trade setup 2. If the breakout area fails, then price will continue most likely to the bottom of the consolidation triangle wedge .

Note: The consolidation between the triangle wedge is energy and a lot is building up. Once the energy is released either in the northern or southern direction, there will be a big move. This is just for awareness in case that even happens during this week.

Good luck and be careful.

Remember: When it feels really right, it's probably wrong. And when it feels really wrong, it's probably right.

Don't forget to support my analysis by hitting the like button
Comment: It looks like it is trade setup 1 for sure this week. Technically that was a brake out with an intra-day retest of the diagonal resistance line. However, I suspect after price reaches its intended target that we should see all the lower levels retested.

I had the direction correct on my chart, but I guess I needed to put the title of my chart higher...lol. Price is pumping into my header. lol
Comment: After the big reversal yesterday during the NY session, price is back pretty much where we started on Sunday night testing the breakout area (which I mentioned would happen and why you don't play breakouts).

Caution here. Generally if price makes a higher high, that would be a long entry. However, with the big rejection/reversal, I'm not certain it's the same trade setup #1 anymore.

I am looking more for trade setup 2 or I may just sit it out until there is additional clarity.
Trade active: Took the long setup #1 during the overnight session since it technically gave a signal. I had enough room to move my stop loss to break even so this is a free trade.

So far trade setup 1 is on time and on the spot.
Comment: My long trade is profitable. I sense we will be testing the highs set on Monday before the big sell-off. At least that's what the technicals suggest.

I will be holding this trade longer. I have my SL at break even still. Not ready to take profits. I want to push this trade more.

Comments

This is what I see. LINEAR mode removes candle noise.

SP500 BUY (new closing ATH with very little noise around it)
DOW SELL
NASDAQ BUY
VIX SELL (UNTIL GAP FILL, THEN MEGA BUY)
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Good call on holding longer! I smell the sell off next week. Lines up with historical election year charts.
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XYZ-Trader- mjmassens
@mjmassens, Possibly. I feel like first we are going to retest the highs from the pump on Monday. Price is hanging out around a critical breakout area of 3575. We close above 3575 and you'll see more moves to the upside. If we can't close above 3575, then I agree that we will see a sell off.

However, we don't really have a lot of bad news going on (nothing that we don't already know about heading into next week). Even if we get more lockdowns or election uncertainty, I think the market has priced it in. Also, the economy has adapted to COVID so even if we go into a big lockdown, it won't have the same consequences as back in Feb.

I try not to hold a bias but I feel like we are going to be breaking all time highs and be up for the year by Dec 31st.
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mjmassens XYZ-Trader-
@XYZ-Trader-, I think we get a selloff like October/Sept before the possible new highs. Elliott wave has another target at 380 SPY. It nailed the 364 top. I'm filing the number under my watch list, not discounting the possibility even though my gut says a bear market is possible.
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XYZ-Trader- mjmassens
@mjmassens, I agree. Something to watch for. Even in bear markets there can be big rallys so I suspect we will see scary moves by the markets along the way.

If we close above 3575 today, we can probably see another week or two of price rallies.
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mjmassens XYZ-Trader-
@XYZ-Trader- I'm a bear for obvious reasons right now (gaps everywhere), but the bull thesis is equally strong...will we see 381.81 SPY in 1-2 weeks?

Elliott wave, scarily enough, struck again, right on the nose. 358.1222 was the Elliott target, and SPY closed at 358.1 to the penny! That's two key price targets Elliott wave called in one week! 381.81 would fully complete the pattern. So, you are very right, new highs are likely on the way. Maybe this week, maybe in December.

That SP500 Friday close at a new All Time High closing price in the last 30 seconds kept me thinking. This could've been a giant big bear trap all along. All the negative Covid headlines may be enticing more bears. Despite the messy 4 or 5 gaps in the chart below created last week and today, the Daily chart pattern formed a Bull Flag with today's move up, and it's a very big Bull Flag. Despite the fact Election Year seasonality indicates a November 16 drop, and so far the patterns have lined for an election year, this year is anything but normal.

How do you kill a bull market? When everyone turns bullish. How do you make everyone bullish? 2 ways...close the highly watched February gap in the VIX chart, giving traders the "all clear" signal that VIX has "calmed down" and equities are no longer risky, and turn every last bear into a bull. It's likely a LOT of people shorted the market this week. Few people expected an ATH close at the last 30 seconds of Friday. If they really wanted to squeeze every short, now is the time to do it.

The bigger thesis for SPY 381.81 lies in Elliott Wave theory. I've been following a trader who simplifies the market with Elliott Wave (youtube Elliot Wave Options) and he has called 2 numbers on SPY flawlessly to the penny this week. First, he called SPY 364, which is the exact target we hit on Monday's opening high. Then he called SPY 358.1, which is the exact number SPY closed at on Friday. All along though, his Elliott Wave pattern kept pointing to SPY 381.81. I believe all the above makes for a very compelling case to get there in a hurry and fake out a LOT of people. They want maximum liquidity in the market--they need the people who are still on the sidelines to jump into the market, and they can do that by closing the VIX gap so it's "safe" to jump in, and by smashing a new high right after having created one. Mega FOMO, parabolic moves, then take everyone's money. I think it make a strong argument for bulls.
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Check out the Dow Jones All Time. At Peak Resistance. https://www.tradingview.com/chart/1lnqAIuy/?fbclid=IwAR38wo2leZY8MYYvRXpQORBq1Nm3h8eq-mXijZxxReHr4Suz5_2W32KBJAw

A blow off top would send us into a new channel with unknown levels.
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MASSIVE "W" double bottom pattern?
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3640 is a target based on Elliot Wave. I think we flirt around these upper resistance zones, hit the new ATH, and the bigger correction/crash will fill the lower gaps. All I know is we'll go higher at some point, and also lower! hahaha...good luck! patience is key!
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