From last week’s newsletter:
“396.60 is immediately below, a fib level and also where the 50SMA sits. It’s possible for us to see some tight range action here between 396.60 and 406.60 until we can manage a close below 396.60 or above 406.61 (keep in mind the 407.22 DP sell level).”
On Friday SPY 0.00%↑ did close just below $396.60, but still within margin of error (22 cents), so it’s an inconclusive close and we will need to continue to monitor this level next week. ES was able to tap and bounce off the 200SMA however still closed below the 50SMA (first daily close below 50SMA in over a month).
While it is my bias, based on the information and trends and my own experience, that the markets will continue lower into 3600 and below, it's important to constantly stay open minded and ready to adapt and change direction when the time comes. It's not about being right (nobody cares anyway), it's about making money (making more than you lose), don't fight the trends, always stick to your gut feelings, but also broaden your perspectives by keeping an open mind and being able to learn about and hear other perspectives.
That being said we are inches away from retesting that downtrend line back from ATH. This is critical for the next big move. If we bounce off this trendline as support, it's possible market is ready for 4300. If we break that support line, then a retest of October lows is in order. It's an important move coming up and will decide the course of direction for the markets over the next couple of months.
I've continued to see heavy OTM put flow into SPY, and ITM call selling on SPY, so double bearish with a 380 minimal target in the next 45 days (per the order flow). However, this can change quickly, so we will need to continue to keep an eye on flow, and if a new trend develops (OTM call buying or DP buys), we will need to be able to adapt quickly.
Over the past few weeks i've confirmed the continued downside using the dark pool dumps as a leading indicator of where the wind is blowing. I was able to confirm consecutive dark pool dumps first at 416.72, then at 415.20, then at 407.22 and last week at 400.62. Until we see some dark pool buys come in, we can continue to assume the trend is to continue down for this wave/cycle.
For next week I will be watching $400.67 on $SPY / 4024 on ES. With no close above this level we can see continued downside pressure into 390.59 / 3894-3914 (the downtrend line). If we can manage a close above this, then it would signal bulls taking control and lows for this wave are in.
So we’ll need to watch the following levels for next week (must be subscribed, sharing LOTS of weekly and monthly levels on this one…):
Keep reading with a 7-day free trial
Subscribe to JR28 TRADING SUBSTACK to keep reading this post and get 7 days of free access to the full post archives.