The Week of Sep26, 2021

Oct1

Added a 5-lot of Calls to hedge my ES position as I expect price to rally at least to 4341 today as long as 4293 holds as support. Below is my current risk profile.

Below is the ES chart showing where I’ll hedge my hedge.

Sep30

The overnight price action in ES is quite clearly forming a bear flag. This pattern typically breaks down and price continues lower after the break of the lower trendline. However, as I hope you know, no pattern is 100% consistent (or even close to that) so it’s quite possible that price could break higher from the flag. How do I trade a bear flag? I’ll short ES near the top of the flag (upper trendline) and DH the position near the bottom of the flag (lower trendline). I do not add long positions inside a bear flag! IF the lower trendline breaks I’ll initiate a short position with a stop if price moves back above the lower trendline (failed breakdown). On the chart below I show only price plus the 38.2%, 50%, and 61.8% retracements of the decline from 4472 to 4334.75. So far price found resistance at the 38.2% retracement level. IF price continues to rise inside the flag I’d expect the 50% retracement level at 4403 to be strong resistance and a very good short opportunity. Most importantly I’ll be watching for a breakdown below the lower trendline!

Below I’ve added the daily and weekly pivots to the bear flag so you can better understand the price action inside the flag. 🤔

Below is the SPX chart. On the hourly it look’s more like an ascending triangle (which is bullish) than a bear flag. Upper resistance is at last week’s HB (solid yellow line). The key level is 4342.98 which is the lower support (61.8% retrace) of the 9/20 large reversal candle’s HB zone. Below that would be a new low for this week which is bearish. I’d expect price to attempt a retest of the range low at 4305.91 should the HB zone fail to provide support.

Resting an order to DH my ES position if price reaches last week’s low.

A strong close could really change the look of today’s SPX daily candle (chart below). With an hour to go price is right at the bottom of the HB zone. Although today’s low was well below it, a close back above the top of the zone would look bullish. On the other hand, failure to close strong would be a win for the bears. Important hour coming up here!

Sep29

Much of my price action analysis comes down to what is actually happening compared to what should be happening. The yellow arrows represent what would be happening if there was strong demand for ES (S&P500 futures) from yesterday’s low. Compare that to what actually happened. When price rises or falls while staying mostly inside of the bands it’s not a strong move. Can it continue anyways? Of course, but it’s more likely just a retracement move instead of a new trend. As I post this price has now broken down below the lower band and the bands are beginning to flatten. The bias is now for lower prices again and I’ll be watching to see if potential support at last month’s or yesterday’s low holds.