SP500 Futures Trading Plan for 5/2/24
Recap: I wrote in the plan that “Red channel support moves to 5045 tomorrow, just below core supports at 5054-57. With these levels relatively close together, my preference is to trade them in tandem, like letting price check 45 and then recover the core supports to go long.” The market traded sideways until the FOMC decision and press conference, and I didn’t particularly like any of the signaling to enter the trade. I typically avoid trading during major data releases or FOMC and like to wait for that extreme volatility to die down. As Chairman Powell spoke, we got two strong reversals on tests back down to the 5054-57 and I ended up entering long in the upper 5060s; This was probably a bit risky to do. I exited contracts in accordance with my risk management methodology, took a contract off at the next level at 5087, and left a runner which made a monstrous run up to resistances at 5117 and 5126, where I closed the trade. I reviewed this trade below.
I also said in the plan that “I’d be interested in trading this to the short side if we got a move up to 5125/26 and then a move back below 5117.” This would have worked out well had I not already made the above trade.
Balance/Trend: The market established a base at the red channel support overnight and this morning before launching off and moving almost all the way through the channel, and then moving almost all of the way back down again. This action doesn’t do much to change this primary trend that I’ve tracked for the last month, but for now, it’s a pullback or flag channel within the longer term trends, which are pointing higher.
Analysis: The huge volatility in today’s session was a function of Fed day, interest rates, and inflation chatter. The initial bullish reaction faded quickly and bears took over to close the day below key support levels and near that midline of the red channel. Today’s close comes right around the core support levels from the plan and, based on the closing price alone, this sets up a battle around this tomorrow. I will want to keep this at front of mind for tomorrow, though we know that overnight and premarket action can cause big price fluctuations. For now, bulls will want to recover these core supports to make another run at moving price through this channel and to attempt a breakout. Bears will look to defend price from moving back into last week’s accepted value range and then breakout from that midline in the red channel.
Trade Review, Detailed Trading Plan, Charts