S&P 500 setup seems awfully similar to July 31st
With the S&P 500 near all time highs, it has now run into resistance around the level of the prior swing high on July 31st and has begun coiling in a fairly tight range. At a glance, today's trading day is incredibly similar to the setup in July 31st, coming around nine days into a melt-up after a gap.
On July 30th, the market opened higher for a breakout which was rejected. This same setup happened yesterday. It liquidated some shorts and reduced the number of active short positions on the S&P 500. On July 31st, liquidity was taken on the sell side, but then the breakdown was rejected, and the candlestick closed as a hammer. Today, liquidity was taken again on the sell side and the breakdown was rejected, with a hammer once again.
One thing for certain is that like in July, this is a very uncertain time. Federal chair Jerome Powell is speaking at 11 am tomorrow, so we can expect some volatility in markets tomorrow and perhaps a break out of the trading coil to start the December trading month.
Overall, however, I am more inclined to bet the market will go down, with JP Morgan expecting an 8% drop in the markets in 2024. Additionally, with GDP being hotter than expected, since higher GDP typically results in higher inflation, it is my personal belief that the federal reserve may start cutting rates later than expected or may even raise rates further.
Since the repetition of this setup from July seems to be a fairly bearish indicator and the VIX is at an attractive level of 12.91 right now, I have positioned myself with 30 DTE SPY puts to profit from further decline.
On July 30th, the market opened higher for a breakout which was rejected. This same setup happened yesterday. It liquidated some shorts and reduced the number of active short positions on the S&P 500. On July 31st, liquidity was taken on the sell side, but then the breakdown was rejected, and the candlestick closed as a hammer. Today, liquidity was taken again on the sell side and the breakdown was rejected, with a hammer once again.
One thing for certain is that like in July, this is a very uncertain time. Federal chair Jerome Powell is speaking at 11 am tomorrow, so we can expect some volatility in markets tomorrow and perhaps a break out of the trading coil to start the December trading month.
Overall, however, I am more inclined to bet the market will go down, with JP Morgan expecting an 8% drop in the markets in 2024. Additionally, with GDP being hotter than expected, since higher GDP typically results in higher inflation, it is my personal belief that the federal reserve may start cutting rates later than expected or may even raise rates further.
Since the repetition of this setup from July seems to be a fairly bearish indicator and the VIX is at an attractive level of 12.91 right now, I have positioned myself with 30 DTE SPY puts to profit from further decline.
Trade closed: stop reached:
This parabolic move up has been very rough and unexpected, the federal reserve injected a ton of liquidity into the markets.