Is The Bull Still Awake?
Good morning,
If you have not read our last publication make sure to do so… so that you understand the context of this morning’s brief.
Trading is all about reacting rather than anticipating.
We talked about 3 different outcomes of potential for the S&P 500 out of the base it was trading in.
The 3 different outcomes were either a BREAKOUT, BREAKDOWN, or A TRAP!
Yesterday the S&P 500 broke down below $4,090 and TANKED.
Guys…we can’t control the market and you have to understand that but, we can react to what the market is doing when we have an edge.
This is what I want to touch up on this morning, is giving you inside access to a mind of a chartist.
Looking at this chart you can see that yesterday it broke down below its base and closed below the short-term moving averages which are a good gauge for momentum.
As a chartist, you want to analyze supply and demand and you do this by reading price action, okay?
What We Are Watching
One thing we are watching is…will this be a trap?
Traps are usually meant with the STRONGEST reversals that lead to massive breakouts.
Traps are a GREAT confirmation for a chartist who is reading charts.
IF and it is a big IF the S&P 500 can FAIL FAIL FAIL to breakdown and continue its sell-off below this base then it will SHOW US, CHARTIST, that there is a LACK OF SUPPLY.
Over $4,090 on the S&P500 could cause massive demand to come in because it will show bulls and chart readers that the S&P 500 failed to break down and that lack of supply will only cause more demand which can potentially cause a rocket move to the upside.
This is what we want to be on high alert for!
But…
Current economic conditions mixed with geopolitical tensions are super poor and have been super poor for stocks!
It makes sense for the market to continue to drift down lower but, markets never make perfect sense and that is why price action is key.
The Reality
The reality is, that this is a very tough market and I want my readers to know that you do not need to always be in the market and current market conditions you need to trade small, trade smart, and trade less frequently!
Inflation is crazy, we all know that. The FED will be very aggressive which will hurt the markets, yes, but, YOU NEED TO BE FOCUSED ON DEFENDING YOUR CAPITAL because the sun will shine quickly in the markets and you want to make sure you have the firepower to put into the markets when they are appealing.
The market continues to drift lower this morning as inflation hits a new 40-year high.
Traders… let’s buckle up, protect ourselves, and let’s find that one stock that has potential for momentum to the upside despite the poor market conditions.
We are looking actively for a potential supernova stock that has massive potential. Airlines is the one industry we are watching very closely.
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