(1) The overnight price action in /ES is clearly in a range with last week’s high being support at the bottom of the range. That’s good location for a long trade however a breakdown below that level could see a strong move lower. The other side of the coin is that a failed breakdown below 4476 could trigger a strong move higher since there’ll be sell stops at that level. Often when price is stuck in a range the bulls will push price below the bottom of the range to trigger sell stops which they’ll fill with their buy orders and that becomes the catalyst for another rally. A sideways consolidation such as we’re experiencing now is most often a continuation move. In this case, since the prior move was a rally, this consolidation is bullish. Only a breakdown of 4476 changes the short-term bias to bearish.
SPY right after the open:
2 hours into trading and the SPY continues to grind higher and is attempting a breakout here. I’m very skeptical of a breakout from a pattern of rising 8 SMA bands where price has been mostly contained within the bands. It’s similar to a bear flag formation where price is rising in a very overlapping manner. However, until there’s a breakdown below the lower band and yesterday’s 447.98 HB there’s no need to short it. The 448 area is the current bull/bear line.
Agree! That last week’s high level looks so important (and precarious) here. While I don’t trade based on macro events, I’m mindful of the Jackson Hole Fed meeting coming up and the potential implications for this fragile bullish setup.