Market Milestones: Sheathe the Talons, Release the Doves

[Image] Good morning , Welcome to Market Milestones, your weekly Real Life Trading market update filled with charts, technical analysis and the occasional shenanigans. If you missed last week’s episode, it closed with the sentence, “Either way, the market is extended in the bearish direction, at key support and due for some kind of rally.” And rally it has. The QQQ and SPY have seen only bullish days this week with a strong gap and continuation on Thursday. [Image] The market has reacted favorably to an assortment of different economic data all week long. The most notable was The President of Money, Jerome Powell’s, slightly dovish tone during the Wednesday FOMC press conference. The POM tried to give the impression that he could whip out the talons any second and go full murder bird if needed. However, the market didn’t buy it and just wanted to give that sweet little white dove a nuzzle and release him at a wedding. The market thinks we are done with hikes and that cuts are on the horizon. The big tech companies that needed to hold and show strength have done exactly that. World War III has not started yet. All of this means that there is still a path to new highs into the end of the year on the QQQ and possibly the SPY. Technically, not all big tech has held were it needed to. AAPL just might be joining GOOGL and TSLA on team bear. It stumbled in post market on Thursday as its revenue declined yet again and China challenges persist. It looks like we will see a pretty gnarly gap and go and evening star reversal on Friday. After this gap, AAPL could see a continuation of the lower lows and lower highs that have plagued it since its August earnings. Without AAPL, the market may struggle to continue its march higher as AAPL is still 7.6% of the SPY and 11% of the QQQ. However, the market could use a pullback after 4 solid up days in a row, so perhaps AAPL simply assists in that retest and then back on the bull train we go. We have recently changed the famous blue bars which have called this move for over a month, to red bars. The reason for this is they have been truncated to signify the probability of a lower high on SPY. If these bars are going to stay correct, we should pause and consolidate for a bit and then continue to grind higher over the next couple of weeks. A new low would take these off the table and eliminate the possibility of a new high for this year. SPY [Image]( [Image] As the great John ‘Hannibal’ Smith always said, “I love it when a plan comes together.” In order for you to ever be smoking a cigar and triumphantly delivering this line, you need to have a plan to begin with. In trading, a plan is crucial to successfully navigating the markets and eliminating emotion. A plan does not have to be a 6-page document of detailed rules that you print out and nail to your wall. Its great if that is what works for you, but it can also be as simple as one chart with some notes including risk mitigation measures and targets. Here is an example of one chart and one plan that I implemented over the last month. On September 25th I created and shared a chart on SPY using the October 2022 low and overlaid it on the current price action. This is what I now call the blue bars pattern. This pattern called for another drop, a bounce and gap fill of the overhead gap and then a sharp drop into the $410 level before a larger bounce. SPY "Blue Bars" from September 25th 2023 [Image]( I reviewed and shared the chart several times a week in different iterations and I started to plan a trade using the blue bars. I was planning the trade for several weeks which gave me more confidence as it kept doing what I wanted it to do. I planned a pyramid entry into SPY with the lowest and biggest order at $409.91, just below the NVDA gap on SPY. As SPY started to bounce on October 24th after only filling my top tier, my chart and plan kept me from panicking. As SPY cratered lower on October 26th and 27th, my chart and plan kept me from panicking, canceling orders and moving them even lower. I knew exactly where I would buy puts to protect my position and I fully expected it to go lower, triggering me into those protective puts. We didn’t go any lower and instead bounced all week long. I am now in a collar, making the trade unlosable for the next 2 weeks. Not every trade works out this well, but man oh man, I love it when a plan comes together. SPY Pyramid [Image]( If you made it this far, I appreciate it. [Let me know your thoughts](mailto:support@thetradersplan.com). Are the red bars superior to the blue bars? Does SPY see a higher high this year or was Thursday the high of the year as AAPL sends us into a bear market? Strive On, Yates Craig, RLT & TPN Market Analyst Disclosure: You are responsible for your own trading decisions. ALWAYS, do your own research before investing in any of the above securities. This is not a solicitation to buy/sell ETFs or securities. NEVER invest money in ETFs or stocks that you can't afford to lose. You can lose all of your capital by trading any securities mentioned. These ETFs/securities are very volatile and gain and lose value quickly. We reserve the right to freely trade in any mentioned ETFs or securities. We are not compensated by any mentioned companies. We trade ETFs and securities based on our opinion of intrinsic/possible future value only. We are not registered investment advisors, so always do your own research before buying any securities. Unable to view? 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