May 10 Market Update | Technical, Fundamental, NewsDescription:
A simplified analysis for the week ahead.
Points of Interest:
$2965 Low-Volume Area; Targets $2940, $3015; VWAP Feb ‘20 High, Mar ‘20 Low, and Dec ‘18 Low.
Technical:
Broad market indices, such as the Nasdaq (/NQ), have shown relative strength, trending higher and experiencing muted liquidations. The Russell (/RTY) took back the Volume Weighted Average Price (VWAP) anchored from the Feb ‘20 high, which also corresponds to its 50% fibonacci retracement level.
Above current prices is a low-volume area which developed when participants had solid downside directional conviction. The short term strategy is to fade (short resistance, long support). When you trade into an area of low-volume, then sentiment (directional conviction) has changed and movement is swift. In case of the S&P 500, acceptance above Friday’s late-day spike may point to the subsequent penetration of the low-volume area and swift movement to $3015, the other end of that area.
Spending minimal time above Friday’s spike base and high would point to rotation back into the high volume area we are attempting to leave. These high-volume areas are sticky, since they develop when prices slow to satisfy two-sided, rotational trade.
Last week I said that if the market reverses and overtakes the initiative activity that created the gap, then sentiment has changed. Well, we reversed.
Despite the market moving higher on Tuesday, participants did not have enough conviction to follow through. We left behind a thick area of value and an intraday poor high before selling-off on the Fed Clarida doom and gloom news. Excess was established lower, during the overnight session. The type of selling that occured on Tuesday was not accompanied by new money, left value behind, and offered a good opportunity to sell puts or establish some low-risk long positions.
On Wednesday, we sold off again, leaving mechanical looking highs. When the following day retraced that selling, the context was there for repair of Tuesday’s high.
All this put together, the most important note to be made is Friday’s continuation higher on terrible economic news. If the fundamental context is crap and we go higher, I’m not going to be bearish.
In case of upside, targets include $2940 and $3015. On a continuation lower, targets include $2860, $2820, and $2786, the convergence of significant references.
Scroll to bottom of document for non-profile charts.
Fundamental:
Key Events: CPI; Initial Claims; Retail Sales; Industrial Production; UoM Confidence; Inventories; Producer Prices; Import Prices; Earnings.
Moody’s projects retail and apparel spec grade default rate to surge. bit.ly
European automakers restart production. Demand pickup remains questionable. bit.ly
Shell dividend cut good for credit, but highlights downturn severity. bit.ly
ISM non-manufacturing index falls as prices rise on increased shipping costs. bit.ly
Market priced in negative U.S. interest rates. reut.rs
Second phase of reopening to see turnover and employment impact. reut.rs
China is not complying with the Phase 1 trade deal. bit.ly
Borrowing plummeted as consumers pulled back credit card use. bit.ly
Mortgage forbearance requests plateau. bit.ly
Virus shock to reduce some banks’ capital, increase credit vulnerability. bit.ly
Industrial Metals Price Index suggests downturn will lack GFC severity. bit.ly
Mortgage applications from homebuyers show an improving trend. bit.ly
Treasury to issuer longer-dated debt to finance growing deficit. on.mktw.net
Sentiment: 23.7% Bullish, 23.7% Neutral, 52.7% Bearish as of 5/9/2020. bit.ly
Gamma Exposure: (Trending Higher) 3,754,598,011 as of 5/9/2020. bit.ly
Dark Pool Index: (Trending Lower) 44.1% as of 5/9/2020. bit.ly
Product Analysis:
/ES: AMEX:SPY TVC:SPX
/NQ: NASDAQ:QQQ TVC:NDX
/RTY: AMEX:IWM TVC:RUT
/YM: AMEX:DIA DJCFD:DJI
$NYA: TVC:NYA
/GC: AMEX:GLD
/CL: AMEX:USO AMEX:DBO AMEX:USL
/NG: AMEX:UNG
/ZB: NASDAQ:TLT
Disclaimer:
This is a page where I look to share knowledge and keep track of trades. If questions, concerns, or suggestions, feel free to comment. I think everyone can improve, especially me.
In no way should this post be construed as investment advice.
