Weekly Outlook & Review
Good afternoon folks,
The S&P experienced yet another week of chop, as neither side had the momentum to break the range that was established in the middle of November. Trading this range was straightforward at times, and extremely hard at other times.
That’s why it’s crucial to outline what the week could look like beforehand. In last week’s outlook, I didn’t expect clean price action. Instead, I saw more chop since both sides were exhausted:
Next week will have climactic price action. Bulls are over-extended, bears are exhausted, and we’re running into major long-term resistance. Beyond this resistance, there aren’t many obstacles until all-time highs. I don’t expect clean price action, there’s probably more chop underway.
Once you establish this, you won't find yourself caught off guard by any events throughout the week. If you do get surprised, you'll be much better prepared and absorb the impact. This week will have some of the year’s most violent, volatile action. Let’s outline it:
Outlook for Next Week
I trade the S&P 500 index daily and use supply/demand levels as my main strategy. I focus on a handful of core setups within these levels (found here) which typically appear 1-3 times a day. I take one or two trades a day, targeting gains of 10-30 points. My objective is to maintain consistency and leverage it, rather than trying to get as many points as possible.
We have FOMC and CPI back-to-back next week, the two most volatile market events. The last CPI caused an instant 100+ point run. This coming CPI is on Tuesday and FOMC is on Wednesday. It’s useless to try to predict these events, but it’s important to be aware of them and the directional impact they will have.
The key level for next week is 4556-4560. Since more structure was established this week, we now have a few distinct possibilities for what might unfold next week:
The Trap Door: Monday will probably be a choppy/volatile day as the market prepares itself for CPI. If we move 10-15 points higher and then drop below the 4560s, it’s a bearish sign. There will be lots of chop and volatility in between, but once we break 4550 it’ll open the “trap door” to 4512 and below.
The Expansion: This is the ideal bull scenario, where we fill out the upper portion of this megaphone pattern and then break out. This would assume a bullish reaction to CPI and FOMC, and that the 4555 level holds. We’d be targeting the upper channel of this pattern around 4620, followed by 4640 and possibly much higher.
Range Continuation: A third scenario in which CPI and FOMC give opposite reactions, resulting in a stalemate in the market where the megaphone pattern continues to fill out. This assumes 4550 and 4620 hold throughout both events.
Note: we will not be trading FOMC or CPI directly, as they’re too unpredictable and volatile. We will be trading the reaction to FOMC and CPI. The results may be vastly different from this projection.
Since we day trade, we don’t have a weekly bias. We reset it every day and trade whatever setup presents itself, bear or bull. Trade setups, projections, and intraday levels and analysis are found in the paid substack, as well as supply/demand education so you can trade self-sufficiently (subscribe button below).
That’s the plan for next week. Stay tuned.
- T
Disclaimer: Investing in stocks, bonds, futures, options, and other securities carries significant risks. Some or all capital may be lost. With leveraged instruments, losses may exceed initial capital. Past performance of a security does not guarantee future results. Any content from this newsletter should not be taken as financial or investment advice, but for informational and entertainment purposes only. This newsletter simply shares my personal opinions and notes. Consult with a registered financial/investment professional. This newsletter and its authors are not licensed financial/investment professionals. By reading and using this newsletter, as well as any other publications, you are agreeing to these terms.