Complex Bear Market
Friday is here again. Everything good? I hope you had a good week trading the market. This week has featured some range, that is for sure Most agree that the macro situation regarding the economy and general situation in the near term isn’t stellar. Gas prices are easing a bit, but there remains worries and woes all around with inflation over nine percent for the first time in a hot minute and other persistent woes abounding. Speaking of that, let’s look at the market this week.
Speaking in terms of the SPY ETF, Monday opened down and Tuesday fell back below the 8 EMA. The CPI data was highly anticipated before its release at 8:30 on Wednesday morning. Go ahead and pull up the daily ES or NQ chart for Wednesday, shift down to the one minute, and zoom in on about 8:25 or so. That massive red candle is how the market reacted to the release of the CPI data that showed inflation for the month of June to be 9.1%, above the expected 8.8% figure. I’ll discuss this in the context of intraday trading below, but the rest of the day basically improved with the day closing green but with a wick still just below the 8 EMA. Thursday brought another down day for the week with some strong bullish intraday opportunites, and Friday was a strong day to the upside, back above the 8 EMA. This week shows, once again, that there is just no telling. There is only observing.
INSIDE THE BOX
Wednesday is a great day to examine the importance of the mantra “play the charts in front of you, not what you think you know.” After the huge inflation dump premarket, there was almost universal bearish sentiment for the rest of the day. Traders were worried about the Dollar having issues as well as the high inflation number. Steadily throughout the day, however, price action climbed. Call setup after call setup printed in the one minute charts. Traders with a bearish bias…presumably because of the big premarket move down…seemed hesitant to “trust the bounce” or other such sentiment. So many sat out, or tried to tread the rising price action as a pullback on the expected continued down move. As it turned out, if you were trading intraday on Wednesday this week and you were not playing calls, you probably didn’t make much money.
One of the biggest values we offer our members is our moderators’ guidance. Once of our best, Seven Star Mike, spent most of the day Wednesday admonishing people who seemingly believed they might know what should or should not happen. He is well known to mechanically play the chart setups that present without directional bias. He reminded traders on Wednesday that it doesn’t matter what we think the market should do. It only matters that we follow the charts in front of us and attempt to make logical, controlled, data-driven trading decisions. Wednesday was a great reminder that many times when a large percentage of retail trading expects a certain directional outcome, it behooves us to wait, observe, and play the charts. Make smart entries, stop out early if need be, and let the chart tell us when to exit a winning trade.
We remain in a complex bear market with difficult conditions for intraday trading. Day traders can be profitable to the upside and down, but you need a team working with you and data on your side. This week was a pertinent reminder of that fact. I hope you did well this week, and I’ll see you next Friday.