Market Outlook - Bull Trap ? Bear Trap?
Good evening everyone, and welcome to another session of what we can expect in this upcoming market environment . As we saw last week , volatility was drastically increased, as the market made many many large scale moves in the matter of hours.
As a result , many traders, and investors were confused, and there is a good chance many ended up losing money, whether they panic sold , or just tried to chase the trend right before it reversed. On the other hand their were a select few who , perhaps a select may that were able to make sense of this movement, and able to capitalize. If you kept track of last week's post : https://www.truetradellc.com/post/bear-market-stock-market-crash , hopefully you were able to make sense of this market , and take some high probability trades !!! We got the early week bounce on monday and continued lower for the week. Now to get to this weeks post and give some key areas to watch out for , Monday and Tuesday will be crucial for seeing if we are going top be heading lower, or back to new highs.
As usual I'll start with my favorite , the S&P 500 , or $SPY / /ES .
/ES - DAILY UNTIL 3/5
This past week we got the early week bounce, into the rejection. On 3/1 we gapped up , holding that initial 3805 support. The green circle indicated the buyers off the 3805 support on that gap up which lead to the red circle sell zone off 3898 👀, pointed out in the last post.
( FROM THE "Bear Market ? Stock Market Crash ?")
Looking a little closer to the charts, we can decipher some of the action taking place , and look for hints and clues of what possibilities lie in the week ahead.
/ES - HOURLY UNTIL 3/5
When we gapped up on 2/28 - Sunday , we made an immediate push back to 3857, started to consolidated a bit, and continued to push higher. Generally when you start to see a consolidation like that off a nice up move , you can expect a break higher, it similar to a bull flag pattern , where buyers step in from support, get an immediate push up (form the pole) and then we consolidate and break higher.
After the break back over 3857 we got to the 3898, we popped over , but then almost immediately got back under and started to hold (red zone). Remember on the breakdown a week ago I mentioned that 3898 had not been visited, and it was very likely that a retest of this zone would be done. So in normal market fashion , we just ran a retest of the breakdown , and continued back in the original direction , down.
On the continued down move, we revisited the 3857, got a bit of consolidation UNDER the level , giving the first sign that buyers were weak at the time (blue zone). After the failure to pop back over , we got back to 3805 , broke under , pulled a little chop fest on 3/3 -3/4 and then continued lower. The thesis at the time was to remain short under 3857 , so even with all the bounces and volatility, we remained level headed and continued to play the downside.
On the 3/4 flush we got well past the first area i would've expected support at 3768, and found ourselves getting pretty close to the 3707. After the lowe we made on 3/4, we began to hold higher on 3/5, failing to make a new low , and then we had a wild ride to end the day , going from down almost 40 points to closing up 80 points 😯.
So now you are probably asking , "what can i expect in this next week" , and now i will do my best here to give my unbiased market outlook and give some key levels with some price action insight to help us see what could be in store for next week.
My current view entails that we run a retest of the 3857 area (which we have not tested since the breakdown on 3/3) and after seeing how we react there, i'll have a much better view and case for what is to come. Off the back , the short term trend is down , so i would expect a rejection off 3857 or lower , and off that we probably to revisit towards 3817. If we reject 3857, pullback and start to hold that 3817 we can make a case for putting in a higher low and head back up. But if we break back under , we are in store for more downside. Rejecting off that 3857 would put in another lower high (3959, then 3935, then 3898 then now 3857) , and increase the bear case. If we can get back and hold over , it is highly likely we head back to at least 3935 if not new all time highs. We had a pretty heavy reaction off that 3735 so the bull case is not completely out of the window yet, so just wait and watch.
/ES - 4HR CHART UNTIL 3/5
The levels on the downside have been adapted a bit in regards to this last weeks price action , while the upside levels still remain pretty constant.
UPSIDE:- 3857 (384.6 and 386.2 on SPY) - This is the KEY spot , this spot will dictate whether or not the markets will turn back to the upside quickly or not. If we get a break on the first attempt, look for a push back to new highs, while if we reject the first time , look for a hold at the supports mentioned below for aa retrace hold back up. If we reject hard , look for more downside to come
- 3898 (390 ish SPY) - intermediate resistance, already ran a test after the breakdown, gets there again , we probably break back towards 3935
- 3935 (392.64 SPY) - Get back over here and holds , back to new highs we will go.
- 3817-3822 (380.22 and 381.55 SPY) - If we reject that 3857 area , pullback and begin to hold here, you can look for price action signals , buyer momentum to go long. While if we pullback and fail to hold here, can look for more downside to come.
- 3735 (Around 373.72) - Seems to be the larger support this past week on /ES. If we visit it again , good chance we hold for a bit before flushing lower towards the levels below 👀
- 3717 (Around 371.33) -changed the 3707 level up to a new one from 1/28 open price, looks to be more crucial for now.
- 3630 ish ( Around 363.97 - I like the spy level better here) - This is the area I do not expect to break on the first attempt, it's possible that we don't even visit it this week, but if we do get here, this is where i would expect a bounce play , with 95% confidence, this is definitely a spot to watch for buyers if we visit it in the upcoming weeks.
Now that we have discussed /ES , we can take a quick dive into /NQ (Tech) which continued to be the weakest , and then /YW (Dow) which has still been the strongest out of the three.
/NQ - DAILY UNTIL 3/5
Tech basically followed /ES on a daily basis, the move on tech were a bit more drastic , and it did make a new low on 3/5, unlike/ES which ended up holding higher. We visited a key area on QQQ off 298.92 , which is a large support zone. We got the bounces off here on both 3/4 and 3/5, so the level i working , but the question now is will we hold higher and continue or reject and fade back. In the upcoming week , it is crucial to keep an eye out on that 298.29 for support, while 310 will need a recapture to head back to the upside. (Levels posted below)
$QQQ - DAILY UNTIL 3/5
Now we have the DOW , aka the strongest of the three.
/YM - DAILY UNTIL 3/5
This last week we got towards the lower end support on the DOW holding 30848 on the daily and basis , while revisiting that breakup candle from 2/4 at 30694. It looks very interesting here indeed, and if we can get back over that 31554 once again (which is very possible with the positive stimulus news, as this sector will be affected the most with it). Similar to last week , keep your eyes out on $DIA supports around 308.2 and 304.5 while watching out for sellers off 316.65. If we have an up move in the market stock or even a down move , dips on this stocks/ breakouts on stocks within the DOW will be much more powerful.
Last but not least we have the volatility sector, or $VIX.
$VIX - DAILY UNTIL 3/5
Sellers continue to step in strong off 30 , while buyers are large off 21. The 3/5 bounce had $VIX headed back to a mid level 24.5 bid area where buyers stepped in on 3/3 for an up move. If we start to sell on the indies 3/7 and open on 3/8 , we can look to be long on $VIX with a hold over that 24.5 We had a pretty slow steady sell off on 3/5 after pushing to 30 at open.Lets see what is in store for next week 👀
Final words: Overall , the bounces we had on 3/5 were pretty solid , and off support, but at the same time , we haven't recaptured key levels on any of the three indices . If we gap over the key levels to open on 3/7-3/8 I will shift back to longs. So as always, take the information , develop our thesis , but be flexible , and let the market tell you what is happening , and who is in control. Don't develop a bias !!! Always do your own due diligence , and don't hesitate to ask if you have any questions!!!
(Market opened just as I posted, /ES opened just over 3857 , /YM over 31554 and /NQ is just there around 12759.... lets see if they hold , as I'll have a mini update on market conditions when i post the weekly watchlist tonight !!! )
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Hope you all have a wonderful rest of your weekend, and a great upcoming week :)
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What do you think will happen? We continue lower, or we head back up, comment down below.