Recap: There were several important resistance levels in the 5119-5130 area and I wrote “Another option is that we start to see some auctioning into the upper 5120s or even into the 5130s which then fails and moves back below 5119-5123.” There were two signals to take this trade, one in the premarket and the other during the cash session, and I took both. I don’t often trade in the premarket but after missing a textbook setup recently before the open, I decided that I would. This first short bounced back to check 5125 resistance once more and stopped me out. As with anything that relies on probabilities, sometimes you can get a great signal and do everything right and just get unlucky. For the second one, I entered short at 5112 and exited in accordance with my risk management methodology and closed the trade out at the next levels of 5099 and 5094.
Balance/Trend: The market is trading back inside of the red channel and above the green one, and these levels held today after being tested twice. This indicates that price is trending down still, but not at the same pace as it was last week when price broke out of the red flag/pullback channel. Price is still trending higher over the long term, but has a long way to go to breakout from this pullback it's currently in.
Analysis: After six days of one time framing lower, bulls have now begun to move price higher some. There was plenty of intraday volatility today but price ended right where it did yesterday, communicating indecision and some balance. After recovering two important technical levels in the channels mentioned above, these will be critical to hold for any additional upside. Yields continue to hover at five-month highs and PCE inflation data out on Friday could very well provide volatility to help determine whether or not this is a brief pullback or the start of a trend down.
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