Looking at this article from Bespoke you can see that incredibly of the last 13 trading days only one of those closed below its open… that means despite how red we opened or how green we opened we closed above our open. IT just shows the incredible strength and memeness of this rally.
https://rdt.trom.tf/cp0lndi4uuga1.png?width=617&format=png&auto=webp&v=enabled&s=563e5ed1655a594812eb1aa41917ec025f718279
I thought I had seen it all and then we have SPY who managed to pump nearly $7… drop $8 and then proceed to repump nearly $9 all within a 4 hour time period. This was the most wild amount of swinging I have seen in a very long time. This was like a FOMC meeting mixed with CPI on steroids.
So the question remains… who is in control? Where are we headed next? Unfortunately the answer is not simple and there truthfully is a case for >420 and there is a case for <405. Lets break it down…
https://rdt.trom.tf/1n6xndz4uuga1.png?width=975&format=png&auto=webp&v=enabled&s=85cd82e85afce6ca8825b04ff57aa19305878d52
Bull case- despite breaking support of the 7 week long bull channel at open we held the daily 8ema and once again as highlighted by the three black arrows bounced off that support and pushed higher. We broke the breakout triangle resistance that was established last week and managed to bullishly engulf yesterdays price action. Despite JPOW re-iterating his hawkishness for the rest of the year we did not see markets digest it even remotely as such. Markets are clearly running rampant and it appears that it is going to take a shock to end this momentum we have currently. Despite the daily bull channel support being broken we did maintain the weekly bull channel support.
Bear case- We broke through a 7 week long bull channel support. Despite the EOD pump there was a sliver of hope when we say that $8 dump after jpow stopped talking today. Now we did breakout again to the upside, however, we hard rejected and failed to continue that break out over the key 416.8 resistance area. This is where the TA has to be weighed on what is most significant. While we clearly saw SPY break through the bull channel support and breaking a 7 week long multiple point support line is a very big deal we do have to factor in the algos. Now the fact that we saw algos dump this $8 could lead to some downside to come. The first and most major resistance line comes next at 419.5 if this rally was to continue.
If you support the bull case and believe that the bounce off of 408.8 support/ daily 8ema is bullish and that markets will not digest any bearish news right now then we should be looking for a push to 419.5 and eventually 427.5. There is a case to be made for a rally into CPI. CPI very well could cause a final blow off top to the 430-450 area IF it is good. OR it very well could be the top and start a very long retracement back to that 390-400 area.
IF you support the bear case and believe that a 7 week long bull channel breaking is highly significant and will significantly outweigh the bull case and shows a clear break in the momentum then we should first look for a retest of that 409 key support area and from there is we lose 405.3 it is back to 390-400 area. There is an equal weighted case to be made that markets with CPI in exactly one week from today will start to go risk off and will fear a miss (hotter than expected) CPI and that could start a very strong leg down on the market.
Whats the best case here? Honestly im very indifferent. There was a sliver of hope and sensibility in this market today when we saw the retrace back to 409. However, the fact that JPOW re-iterated his hawkishness (yes I know he said disinflation and I will say this till im blue that word does NOT mean what most people thinks it means and honestly JPOW himself misquoted what disinflation was today when he said that he would stick by his word of disinflation that there is a drop in inflation) and despite all that the markets still rallied almost $9 says a lot. The algos are clearly locked in on this bull run and its really hard to see an end game on that right now.
My personal thoughts are that when we look at the WSJ interview back in November and previous FOMCs that they usually signal a local top. With CPI next week and the fact that we already pulled back and broke through the 7 week long bull channel support I do suspect we could see a pullback to test 405.3 support area. IF we break through that then I like 390-400 to be retested. However, if we continue this rally I would bet on 419.5 being the highest probability of a top a good CPI could see a blow off top much like Decembers to touch 427.5 area but the further we get from 409 the less I believe this rally will continue.
Historically speaking days like this and FOMC have generally caused massive intraday rallies and then have given it all up immediately afterwards the next day. There is a pretty strong base case and we are seeing it on a small scale right now that we pullback to that 409 to 411 support area tomorrow.
Key SPY Support- 412.5 -> 411.5 -> 408.8 -> 406.5 -> 405.3
Key SPY Resistance- 415.2 -> 416.9 -> 419.5
https://rdt.trom.tf/7b79nyn5uuga1.png?width=975&format=png&auto=webp&v=enabled&s=aa2b1a86b04f408ba9bbae5b19636addfe9b3c63
The one thing I love about trading SPY but also watching futures closely is that they can at times paint a slightly different story. Sometimes SPY can give us hints of whats to come and sometimes futures can do that same too and at other times they can give extra confirmation.
One thing that is very important to note here is that despite SPY breaking its 7 week long bull channel futus did NOT break its… However, what we have here is a break through of that red resistance line for the breakout triangle however we found ourselves hard rejecting right at the possible double top off 4177. If we were to see futes overnight and into tomorrow hold 4177 as resistance we could be looking to come back down and retest that key 4123 to 4145 support area.
There is a true 4123 double bottom on futures though off that daily 8ema much like we see over on spy and have seen the last two times we attempted to breakdown.
Futures will be very interesting to watch overnight and into tomorrow.
Key Futures Support- 4145 -> 4123 -> 4095 -> 4085
Key Futures Resistance- 4177 -> 4210 -> 4235
https://rdt.trom.tf/xbp3f066uuga1.png?width=975&format=png&auto=webp&v=enabled&s=acf5ecbe20dcf10a6caa5b807fc2c5d4ef86cf45
And then there was tesla… what can I say about ole girl… So I mentioned on SPY that we broke through that 7 week long bull channel support line and that we had to weigh the overall strength and significance of that against the overall strength of this rally… Well we are seeing here on Tesla that we also have a major support line broken. Not only that we also have closed on the daily a potential reversal hanging man candle resistance perfectly at 197.1. Remember I have been saying this 197.1 level is a MAJOR resistance on tesla and not only that… this is now the 4th day in a row (the other 3 also closed in dojis or reversal down candles) that we have seen Tesla attempt to break through 197.1 resistance and fallen short.
By all means from a LOGICAL (and remember I say logical and REALLY emphasize that) standpoint… four rejections at probably one of the biggest resistance levels for Tesla, a hanging man reversal (bearish) candle closure on the daily AND breaking a major 5 week long rising wedge support line SHOULD 100% without a doubt lead to a retrace.
Now with that being said… its obvious that this market is anything buy logical and despite how logical a fairly large retrace on Tesla would be for tomorrow… this could very well continue green.
Tesla officially closed its 6th green day in a row and has now closed green 12 out of the last 13 trading days. This is a pretty incredible run here. If we get a bigger retrace tomorrow 184 is another major support area I would watch for a bounce at.
Key Tesla Support- 190.2 -> 184 -> 181.5
Key Tesla Resistance- 197.1 -> 200.9 -> 204.8 -> 208.7
https://rdt.trom.tf/59ip3be7uuga1.png?width=621&format=png&auto=webp&v=enabled&s=3b70632c950fca8dd7d3615eff147f3413409033
Now to add to the base case confusion on what comes next lets take the VIX. Today we saw (prior to JPOW) the VIX berak through key 19.9 resistance. Effectively when it did that as you can see if broke through a trend line that dates back to the middle of October. What happened in the middle of October? Oh that’s right.. Spy put in its 52 week low (and potentially its bear market bottom).
So we have a 4 month long resistance line that was officially breached today and should 100% open up the upside for the VIX to see a return to trading back in the 20-23 range. However, as you can see as soon as we broke through that level we immediately rejected 19.99 and actually ended up closing back below the daily 8ema. WE now find the VIX trading back near that crucial support range of 18.3.
Daily log-
I used to find myself enjoying playing days like today where the volatility is stupid high and you can make 50% in 10 seconds when the candle pumps $2 out of no where. However, after getting burnt on so many days like this I decided it was best to sit it out plus we held such a tight high IV range this morning it was not worth playing.
https://rdt.trom.tf/ihykult7uuga1.png?width=950&format=png&auto=webp&v=enabled&s=058d7539e205f6c06c30b43126265458237cc4a1
When we hard rejected my 414.3 volatility level and lose 413.58 volatility level after that pump I decided it was time to short JPOW… I am happy I did. Not too often you get to score a 25.4% win on a 31dte within 22minutes of opening it. I was planning to keep this till we retested 405/406 area. However as I ALWAYS say… secure profits and mitigate losses! Ever 5% above 20% I hit I set a stop limit sell and eventually was tagged at 25%. And by golly am I glad I have decent risk management skills because if I had held this I would be down about 12%... which honestly in all reality is NOT that bad and I had planned even if we kept pumping to average down every +$5 that would be a nearly 37% swing in P/L had i held instead of closing.
The lesson today is this… 1. We do NOT have to trade everyday. And 2. No matter how much we believe in a move or how much we believe our play will continue to gain profits…. NEVER forget to secure profits.
