We’ve got a very particular situation taking place in the markets right now. For instance, when we look at the chart of the Dow Jones we can see that it clearly has six month institutional demand that is in play and because it is in play we’ve experienced a very strong rally in price recently. The rally was so powerful that it was able to remove the weekly supply zone we had drawn out on the map. We have similar weekly zones that are about to come into play on the S&P 500 and the Nasdaq.
So the question now becomes which force will be the prevailing force?
Will it be the six month demand on the Dow or will it be the weekly supply on the SPY and QQQ”s?
The Dow Jones CFTC data does not currently have any strong long positions presence so it starts to make me wonder how strong this rally will be.
On the other hand we’ve seen a very clear storyline play out regarding the other indexes, especially the S&P. We’ve been following along as the banks have been accumulating a massive short position and using the media to help facilitate the whole process. It is for these reasons that my bias lies with the drop that is expected. Nonetheless, this week and moving forward I will be cautious with my analysis, giving the respect that is deserved for the six month demand that was formed on the Dow. There was a reason for it and we must discover it’s secret.
I’ve been waiting for this moment to get back into the markets and start accumulating a strong short position on the $SPY but with this current dynamic in play I will ensure that the short signal is there on the chart before I start in.
I’ve also been working on a list of potential long positions on many stocks. There seems to be many stocks contacting heir higher timeframes demand areas just as with the Dow. This way if momentum to the upside persists, then I will be ready to pull the trigger on a bunch of new long trades. It’s too early to tell at this moment which direction will play out, like I said, I have my bias and it is based on hard evidence so we’ll wait and see how things unfold this week.
Lately we’ve been hearing a lot of talk about a Fed pivot, basically referring to the Fed potentially slowing down the interest rate increases and eventually stopping. This is looked upon as favourable to the markets and has been fueling this move to the upside as retail traders buy the market and the banks open up short positions. We can clearly see this on the latest CFTC data.
Let’s be smart and patient out there traders, great trades are coming our way and we will locate them
Kevin Araujo