Spot the Shift: Is Market Compression Leading to Big Move?
Updated
SPDR S&P 500 FUTURES ( 
ESM2023) & ETF ( 
SPY ) - Market Update - 10/12/23
The trading session was a showcase of failed breakdowns. This reaffirmed that most local lows and highs are set with these failures. A key takeaway is that more trading doesn’t necessarily lead to more profits. The strategy that has proved most profitable is consistently stacking level-to-level gains and then getting out.
As we've observed nearly every day since March, we're in a “buy dips regime” technically. This perspective has simplified trading for the past two months, as every 1-2 day dip has been bought. This past week, after a robust 100+ point vertical rally, the market has entered a consolidation phase, building a range with resistance at 4165 and support at around 4115. This range consolidation led to one of the tightest range weeks of 2023, with four daily candles stacking side by side.
Market observers and traders are anticipating a big trend move due to the current compression in the market, which is likely to lead to expansion.
In recent weeks, it has been crucial to trade from level to level, making terms like “bullish” or “bearish” less relevant for short-term traders. We've been in a 1.5 month consolidation within a strong bull trend, rallying 350 points from March 13th to mid-April and consolidating ever since. Current support and resistance levels lie at 4045 and 4230, respectively.
Bull Case
Holding key support levels is required for the bull case, with the potential for a breakout if these are maintained.
Bear Case
The bear case requires a fail of 4123-21, indicating potential for shorts. We are currently in a very tight, tactical range with low predictability.
Economic Factors Turning our attention to economic factors, the producer price index, a measure of prices for final demand goods and services, increased 0.2%, which was less than the Dow Jones estimate for 0.3%. The headline PPI rose just 2.3%, down from 2.7% in March, marking the lowest reading since January 2021.
Bonds
In bond markets, U.S. Treasury yields were mixed on Thursday, as a report on wholesale prices confirmed inflation was slowing. The yield on the 10-year Treasury decreased 4.7 basis points at 3.392%, while the 2-year Treasury traded less than 1 basis point higher at 3.908%.
Support Levels:
4134, 4121-4123, 4114 (broadening formation), 4106, 4090, 4078-82 (major), 4061 (major), 4040-45 (major), 4034, 4015-20 (major), 4010, 3980-83 (major)
Resistance Levels:
4145 (major), 4153 (major), 4166, 4174, 4179-81 (major), 4190-93, 4200, 4209, 4218, 4225 (major), 4233 (broadening formation), 4243, 4250, 4262, 4275 (major)
Final Thoughts
Remember, more trading does not necessarily equate to more profits. Instead, a strategic approach—methodically stacking gains from level to level and knowing when to exit—will prove to be more profitable.
We must always stay vigilant, adaptable, and patient in this dynamic market. We'll continue to provide regular updates and strategies to help you navigate these waters.
Not Investment Advice:
Please note that the information and strategies shared in this newsletter are for informational and educational purposes only. They should not be considered investment advice, nor should they be used as a basis for making any investment decisions. Always consult a financial professional before making any investment decisions, and ensure you understand the risks involved in trading and investing.
ESM2023) & ETF ( SPY ) - Market Update - 10/12/23The trading session was a showcase of failed breakdowns. This reaffirmed that most local lows and highs are set with these failures. A key takeaway is that more trading doesn’t necessarily lead to more profits. The strategy that has proved most profitable is consistently stacking level-to-level gains and then getting out.
As we've observed nearly every day since March, we're in a “buy dips regime” technically. This perspective has simplified trading for the past two months, as every 1-2 day dip has been bought. This past week, after a robust 100+ point vertical rally, the market has entered a consolidation phase, building a range with resistance at 4165 and support at around 4115. This range consolidation led to one of the tightest range weeks of 2023, with four daily candles stacking side by side.
Market observers and traders are anticipating a big trend move due to the current compression in the market, which is likely to lead to expansion.
In recent weeks, it has been crucial to trade from level to level, making terms like “bullish” or “bearish” less relevant for short-term traders. We've been in a 1.5 month consolidation within a strong bull trend, rallying 350 points from March 13th to mid-April and consolidating ever since. Current support and resistance levels lie at 4045 and 4230, respectively.
Bull Case
Holding key support levels is required for the bull case, with the potential for a breakout if these are maintained.
Bear Case
The bear case requires a fail of 4123-21, indicating potential for shorts. We are currently in a very tight, tactical range with low predictability.
Economic Factors Turning our attention to economic factors, the producer price index, a measure of prices for final demand goods and services, increased 0.2%, which was less than the Dow Jones estimate for 0.3%. The headline PPI rose just 2.3%, down from 2.7% in March, marking the lowest reading since January 2021.
Bonds
In bond markets, U.S. Treasury yields were mixed on Thursday, as a report on wholesale prices confirmed inflation was slowing. The yield on the 10-year Treasury decreased 4.7 basis points at 3.392%, while the 2-year Treasury traded less than 1 basis point higher at 3.908%.
Support Levels:
4134, 4121-4123, 4114 (broadening formation), 4106, 4090, 4078-82 (major), 4061 (major), 4040-45 (major), 4034, 4015-20 (major), 4010, 3980-83 (major)
Resistance Levels:
4145 (major), 4153 (major), 4166, 4174, 4179-81 (major), 4190-93, 4200, 4209, 4218, 4225 (major), 4233 (broadening formation), 4243, 4250, 4262, 4275 (major)
Final Thoughts
Remember, more trading does not necessarily equate to more profits. Instead, a strategic approach—methodically stacking gains from level to level and knowing when to exit—will prove to be more profitable.
We must always stay vigilant, adaptable, and patient in this dynamic market. We'll continue to provide regular updates and strategies to help you navigate these waters.
Not Investment Advice:
Please note that the information and strategies shared in this newsletter are for informational and educational purposes only. They should not be considered investment advice, nor should they be used as a basis for making any investment decisions. Always consult a financial professional before making any investment decisions, and ensure you understand the risks involved in trading and investing.
Note
🔄🎯 We've completed the third full round trip in #ES_F this week! It's been a swing between ~4165-4115/20. After spiking to the 4165 target, we're back at ~4120, marking round trip #3.
⚖️🔑 We're at a key test right now. To spark any late-day rally, we must reclaim 4123. Keep an eye on 4114, 4105 below.
📊📈📉 Today's close will be critical - will it be above or below 4115?
Trade active
Long ES_F at 4112 with stop just beneath the LOD. Long SPY 6/16 415 C @ 5.30 with stop just beneath the LOD.
Note
📊💡 The logic behind our current risk/reward strategy is the triple bottom pattern we're seeing. Bulls are truly putting up a fight to snatch control from the Bears at this juncture.Let's see who wins this battle. Stay alert and stay tuned for more updates!
Note
Breakout above this #ES_F intraday resistance here at 4119.50. Bulls regain control above 4123.Note
📈 Stellar technicals on display with #ES_F! We've witnessed an awesome triple-bottom support at 4112, now followed by a breakout at 4123. Keep a close eye on the upcoming levels: 4134, 4145, and 4165.Note
💰 Setting our sights on the first profit targets! For #ES_F, our limit orders are placed at 4134, and for SPY, we're looking at 6.05. Let's lock in those gains as they come. Stay tuned for more updates!
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