S&P Analysis Week of 12/13/2020: Will Selling Continue?
Will the S&P continue to sell off this week or will it make new all time highs?
There has been a lot of whiplash and volatility over the year and last week was another good example. How many people thought they were in a good trade making profit only for the market to come back and take it away and some?
The market makers love to make investors look like fools and I expect that to continue this week.
My setups this week are pretty simple:
Trade #1 (long): This trade setup waits until we are back at all time highs. A break above this level (with a retest) would be a good bet we are going to see higher prices and/or a melt-up.
Note: Markets like to test the bottom of breakup candles and the top of breakdown candles. Do not be surprised or frustrated if price climbs back up to this point. It could just be a retest, which is why I would wait until we get above this breakdown candle. Also, price usually does not succeed on the first attempt. If price hangs out in this area after the first attempt, expect the market to plow through this level at some point.
Trade #2 (short): This trade setup waits until we break last week's low (with a retest) before going on to make lower prices. Last week I indicated a potential short trade but I labeled it as 'not preferred' because we were in an uptrend and the trend is your friend until its not. We are still in an uptrend technically (all the charts on the higher timeframes look healthy). However, if price starts to make a lower low from last week, we are probably heading for lower prices. So that's why I drew this trade in this week.
Note: I still think you need to be very careful shorting in an uptrend. Last week, we saw whiplash because there were numerous short opportunities erased by a reversal pump. That's what happens when you try to short in an uptrend. Prices bounce a lot easier or tend to want to continue to go up.
NEVER play the breakouts (they usually result in a retrace back to the breakout/breakdown area). Wait for the retest and resumption in the direction of your trade setup.
Notice the Nasdaq futures...bearish wedge going in for the backtest of the high. If we get a hard sell on Powell speech, I'm looking at the breakout of the big triangle that was never retested. 11,914 on futures.
mjmassens
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My mind is beginning to think like yours, as I had the same thoughts! Furthermore, I expect SP futures to target up to 3708 very quickly. Most likely tomorrow we get there. Tuesday may get a down. We won’t pass it on 1st try. It needs to build up momentum on the back turn to plow through it like you said. The plow through may be next week for the Christmas rally, and we trade sideways all week, meaning chopfest as market makers let options expire worthless for Quadruple Witching on Friday. Conversely, bears needs 3627 to break for a real shorting opportunity. This week will be very difficult and dangerous to trade most likely, as too many conflicting news events occurring. Good week to stay out unless you are confident in a position or day trading only.
XYZ-Trader-
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@mjmassens, I agree with a lot of your statements. I missed to point out the quadruple witching this Friday. That day usually has the most volatile closings. It might be best to stay out of the market during the last hour of Friday.