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- FOMC Was A Bull Trap
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Preface
I am extremely bullish the S&P500
The 2022 correction allowed for historic institutional accumulations on the index AND across every single sector ETF. I believe the result of these accumulations will be historic bull-run over the coming years.
Two weeks ago, I wrote an entire newsletter explaining why I think The Bull Market Hasn’t Even Began. Be sure to read that if you have not.
In this week’s newsletter though, I will explain why I am actually “risk-off” at the moment- not looking for the current uptrend to continue just yet.
A pause in trend or even a pullback is beginning to shape up.
SPY
Weekly
Instability.
In February, price rose from $494.38 on extremely low volume which is not inherently bearish, but, now that volume has began to come in on a clear rejection of $512.8 it shows seller’s first attempt to gain control of the tape in MONTHS
Last week, price gapped above $512.87 despite the sell pressure which naturally turned it into support and allowed for a low volume retail rally. The low volume last week confirms the sellers from $512.87 are still active and did not flip long after FOMC or else volume would have been higher on the rise up.
I believe bulls are trapped.
Everyone thinks FOMC just opened the flood gates for a move higher…
Retail flooded into long positions last week!
If price opens below $522.14 tomorrow, I believe those same emotional traders/investors who fomo’d in on the way up will be the same ones panicking on the way back down.
Daily
The Weekly candle shows strong sellers off of $512.87, but the Daily shows the exact opposite. This does not invalidate the weekly sell candle, BUT it does give reason to believe that this $512.87 level could be turned into a bullish pivot.
As of now, I only expect a sideways range to be formed over the coming weeks - I am not calling for a top here, just for a range.
$512.87 could turn into a weekly support. Right now, it’s not and we do have imbalances below this level as low as $508.46
So, on the first touch, I won’t be bearish, but once 508.46 gets hit, I will want to be open to the idea of bulls holding support into the weekly close.
Much like how as long as this week’s candle opens below $522.14 I will expect it to act as resistance into the end of the week-
As long as the following weekly candle’s are opened above $512.87, I will expect it to act as a support by the end of the week.
Unusual Options Flow
$3M 4/19 4965 SPX Puts Bought (Friday)
$2.6M 5/31 510p’s Bought (Friday)
Solid bets.
Conclusion
This week’s candle open is everything.
Below $522.14 and it’s very likely price remains weak into Friday, beginning a decent to $508.46
Above $522.14 and it’s likely that early bears like the flow shown above will get destroyed by another low volume move higher.
Next upside target for me is $532.65
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