Market outlook 3/22 - 3/26 - Downside in store?
Hello everyone, and welcome to another market recap by True Trade ! This past week we had a bit of excitement, making new highs on the S&P and DOW which lead to an end of week sell. What did the sell mean? What's in store for the week to come? We will take a deep dive back into the indices and analyze the price action to see what looks to be in store for the week to come.
In last week's post :( https://www.truetradellc.com/post/market-outlook-3-15-3-17 ) We discussed a change in market momentum back to the upside. But this past week's price action can lead to some downside to come. As always let's start by discussing last weeks post + action around the key levels.
From : https://www.truetradellc.com/post/market-outlook-3-15-3-17
The price action following (all stated times are in PST) :
/ES - HOURLY UNTIL 3/19
(ALL STATED TIMES ARE IN PST)
Circled locations from left to right:
(Orange) Futures open 3/14 - Futures opened just above that 3935 level to start the trading week, unless you trade futures, nothing to be done to start this day, but if you did, there was a chance to go long , with a stop placed under the 3935 level. We had a move towards 3948 , a nice 13 point move before heading back down.
(Orange) Futures / Market open 6:30 AM PST 3/15- At the time of market open , we were opening under the 3935, good spot to go short . Off the morning move , we got a 20+ point down move into 3913, before finding our way back up. Not a huge winning trade , but a good opportunity for those short term traders. After that , around 10-11 we broke back over 3935. Stop out shorts, look to switch back to the long side.
(White) - Initial break over 3856- After the close back over 3935, and the break over the overnight resistance, we found ourselves moving back into the next key upside level 3956, a good spot to take some profits and move along, At the same time we closed the trading day 3/15 over the level, giving some momentum to the upside. Can keep a trailing stop back under 3956 now , and see how much higher we head. The following day 3/16, we didn't see much going on , as we made a new high and then kind of just chopped back and forth between the level, not really giving any great trade opportunity.
(White) - Break back under 3956 - After closing 3/16 over the level, the following day we broke back under and began to base under the 3956 level, around 6:00 PM (3/16) - 3:00 AM (3/17) , this happened overnight as well, so unless you traded futures, it wasn't something we could catch. Off the consolidation under we found ourselves pushing back towards 3935.
(Orange) - Around the 3935 level , Fed day- To start the trading day 3/18 , we found ourselves sitting at/under the 3935 level. We didn't move much all morning until the fed meeting. Initially the idea was stay short under the 3935 , we moved about 10 points lower to 3925, but just held the range until the fed meeting until 11. After that once we broke back over 3935, we short right back into 3956. You could've gone long on the break back over 3935, but personally I just decided to sit it out. After the break over 3956, we exploded to new highs over 3970, and closed the day bback over 3956, giving some momentum to the bulls. But since the move was super fast, without really any consolidation before exploding, it was one i remained cautious about, and went into the next day flat, without any open positions.
(White) Back under 3956- Overnight we broke back under the 3956, reason to be short again, and a closer reason to look at Fed shenanigans, as they tricked all shorts out by closing 3/17 back at new highs, and made more individuals chase to go long. Something to keep in mind 👀
(Orange) Trading day 3/18 opened at 3935 - Since we opened the day back at. support, this could be a place to go long, keeping stop under. Off the open, we consolidated a bit, and then made a push back towards 3956, ood profit taking target, with your stop back at breakeven, or set with a positive trailing stop (aka take profit and don't go red on the trade). This was a good trade, but since we had broken back under 3956 overnight, i much prefer the short trade off the 3956.
(White) Mid day pop 3/18 back to 3956 - We got our move back into the short level, and this is where we take the short with our stop right over. We failed to breakout 3/17, and getting back under the level showed signs of weakness. Off the trade we got a move right from 3959 down to 3935, where some profits are taken, keeping our trail stop at 3956. After the initial move to 3935 we bounced back to 3935, before rejecting and heading right towards 3900 to end the day.That's why you sell partials and then hold some runners. ( price action shown below)
/ES - 30MIN end of 3/18
(Orange) Break under 3935 - This break was key, as we broke back under 3935, and broke the lows from 3/17, putting the ball back towards continued downside. After the poor hourly close we continued to head down to the key support off 3898. If you weren't in short, you could look to start a position here keeping stop over 3935.
(Blue) First visit off 3898 - This could be an area to take a small size long trade, looking for a pop back to the breakdown area (the grey box) , but as usual, playing with the trend is always more rewarding, so we just took some short profit into this level and keep that trailing stop or looked to short the breakdown area . If you took the long trade, we bounced off the level twice before getting a move back towards 3923, just around the breakdown area, take some profit off their and move as always set that triling / breakeven stop. On the other hand if you held the short trade, we never broke back over the breakdown area, and then ended up flushing down into around 3730, giving us a almost 85 point short from our original 3955 short level to 3970 . After making that low we bounced right back to the breakdown area, rejected , and headed back to 3898 once again.
(Blue) Close on 3/19 - We closed the day under the 3898 level, and this could give us some insight on what to expect for the week to come 👀
Hope this helped decipher some chart reading/ level trading questions, if you have any other questions, drop them down below !!!
Now to get into what we can expect for the week to follow. Both the S&P500 and DOW made new highs, but they failed to hold , while NASDAQ, got a decent bounce before closing the week back at its lows.
As always let's start with my favorite, /ES , $SPY:
/ES - DAILY UNTIL 3/19
$SPY - DALY UNTIL 3/19
- 3898 (Around 390.03 SPY) - With the poor close on 3/19 being under that 3898 level, I presume that if we can hold under it during futures open later today, we are likely to visit the lows from Friday again. If we open over the level and hold , that could give some reasoning to go long , but as of now, , I am more inclined to be short under the level, because they had a chance to save the close, but they did not.
- 3923.5 (Around 391.77 SPY) - This level will probably be the most crucial level if bears want to keep control. Ya it would be most bearish if we stay under 3898, but since the breakdown on 3/18 , we kind of just continued to consolidate under this level on an hourly basis. Similarly to the 3935 from last week, this 3923 level , can continue to give bers momentum if we can hold below.
- 3871 (Around 387.17 SPY ) - This level came into play on 3/19 , we kind of already had a bounce off this , so it won't be as likely we hold on the next move down. But it's good to keep in mind for some profit taking.
- 3857 (Around 385.79 SPY ) - A crucial number from just a few weeks ago comes back into play, this level turned the downside market back to upside 2 weeks ago, and if this level ives up, bulls could be in some serious trouble. If we do break here and continue to hold under. This down move will most likely lead to a great pullback then the one that we experienced from 2/17 - 3/4.
- 3817 (Around 381.72 SPY) - If we fail to hold that 385.7 level, we could see an almost immediate move back towards the 3830-3800 zone , not sure which area exactly yet but the graph above has 3 areas highlighted in that range which could act as support, whether it he 3829, 3817 or 3807. As the week goes on I will keep you guys updated.
- 3735 - 3717 (373.72 ISH) - The same zone we visited on the lows from that last pullback, it's not out of question that we could revisit this area once again, this is likely where we get our bounce, but depending on the price action we get a bounce to a rejection before heading lower.
Next up we have the DOW : /YM and $DIA
/YM and $DIA - Daily until 3/19
All week we held the daily support off 32687 or $328.31 , until 3/19 where we flushed and closed under. Dow was the leading sector to the upside, but this end of week pullback could switch the story. Yes it's possible we hold and bounce off that 32356 / $323.33, but more likely than not we should run a revsiti back towards 31935 / $319.53 sometime this week. So the key support for now would be 31935, while key upside resistance should be 32687, and as long as we can began to hold under that 32687, the move should setup for continued downside. On the other hand if we gap under the 32356, you can look to be short under that level as well eyeing 31935.
On the other hand /NQ , $QQQ , looks ripe to continue back down:
/NQ and $QQQ - Daly until 3/19
As discussed last week, tech was the weakest sector, and it continues to be moving into this week. We got that retrace back towards the 13314/ $326 breakdown last week, but we stopped short and ended up rejecting lower off $324. We closed the week back at support around 310, but it's still hard to say weather we hold or not. The scenarios in this case are, if 310 holds we can find ourselves testing 315 or 318 again, where you could look to short weakness, but if we break , don't be surprised to find ourselves back towards 298 soon after. The pattern could be looking similar to a head/shoulder, but i don't play patterns , for me all that would matter right now is 310, can be long over, but 100% be short under. We already bounced off 310 on 3/19 , before rejecting 315 , lets see how we open later today.
Lastly we have $VIX:
$VIX - DAILY UNTIL 3/19
For a few days this past week $VIX found itself under $20, before returning to close the week back over. For this upcoming week, if that $20 starts to hold its bid, some trouble could be brewing in the market. I don't generally trade $VIX much, but it's always a good one to keep your eye on to see potential market fear, and see how the indices are reacting with it. Also a nice one to use for a hedge !
My overall market sentiment is leaning a little more towards the downside, may not be a bearish market yet, but i am expecting a pullback again. Depending on how futures open later today, my insight might change. But based off the price action last week, we broke higher, rejected back to support, and then the Fed meeting caused some shenanigans with a market pump . The pump failed to hold, and we closed the week back towards the lows. Looking over everything, I do expect downside this following week. Keep your downside risk limited by reducing some longs , or taking some put hedges, / inverse ETF longs, that would be my advice for now 👀
(Remember, even if you don't trade futures or ETFs such as SPY , QQQ , you can still utilize the futures, and these indices to help you decipher market sentiment, and allow you to see the trend of the market, while giving you signs of relative weakness/strength to see which side would be best to trade for that day whether it be long or short. The same strategies used above can be used on any stock, and the principles of price action apply to them all. Use it as a blueprint , and you will slowly but surely become a better trader.)
I will have an update market post in tonight's watchlist !
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Hope you all have a wonderful rest of your weekend, and a great upcoming week :)
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Do you believe we will see more downside ?