Market analysis for May 20th, 2024

5/20/2024

Welcome back traders! I hope you all had a nice weekend. We finished up last week strong. We had set a goal that I thought was obtainable but also a stretch. We wanted to bring in $10,000 of profit for the week with all our 0DTE's combined. We blew that fiqure out of the water with over $17,000 of gains.The star of the show was our SPX trade. $2,000 of capital yielded $1,700 profit. More importantly, it was a low risk, nice reward potential trade. Even if you only made $80 dollars, the risk/reward was the key.

Let's take a look at the markets for this week.
All indicators are still firmly bullish.

The SPY closed on Friday at $529.45 (+1.65%), marking a new all-time high weekly close. On the daily chart GoNoGo Trend shows that strong bullish momentum is maintained, however the platform is signaling the potential forming of a double top.

Like SPY, the platform is flashing warning signs of a double for QQQ. Price closed the week at $451.76 (+2.19%) and is currently resting above the March 21st highs. If the pattern is invalidated and the next move is higher, the 1.618 fib extension sits at $471.75.

Small caps IWM closed the week at $208.08 (+1.85%), but unlike the other two indexes the Russell 2000 was unable to make a new high, the beginnings of hidden bearish RSI divergence.

The expected moves for our two major indices is, unfortunately back down in the dumps with a less than 1% implied move in the SPX and even with NVDA earnings out this week, the NDX is not much better.

Most of the market internals looks healthy.

Most of the activity from last week was generally bullish, looking at the heat map.

As we hover near the ATH's of most indices, the question is, do we pause here and reverse or continue higher?

We have been having tremendous success with our VTI montly swing trade. It's time to put the new version on. It will be a tough call today to go with a bullish or bearish setup. The indicators are all bullish but also overstretched to the upside.

Economic data on Friday showed that the U.S. leading indicator index fell -0.6% m/m in April, weaker than expectations of -0.3% m/m and the biggest decline in 6 months.
Fed Governor Michelle Bowman stated on Friday that she anticipates inflation to remain elevated for “some time,” yet she maintains her expectation that price pressures will eventually diminish with interest rates held at their current level. At the same time, Bowman repeated that she wouldn’t dismiss the possibility of raising rates if necessary. “While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed,” she said.
Meanwhile, U.S. rate futures have priced in a 9.1% chance of a 25 basis point rate cut at June’s monetary policy meeting and a 26.0% chance of a 25 basis point rate cut at the conclusion of the Fed’s July meeting.
In the coming week, investors will be monitoring a spate of economic data releases, including the U.S. S&P Global Composite PMI (preliminary), S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Existing Home Sales, Crude Oil Inventories, Building Permits, Initial Jobless Claims, New Home Sales, Durable Goods Orders, Core Durable Goods Orders, and Michigan Consumer Sentiment Index.
Several prominent companies like Nvidia (NVDA), Palo Alto Networks (PANW), Zoom Video (ZM), Analog Devices (ADI), Snowflake (SNOW), and Intuit (INTU), along with retailers including Target (TGT), Lowe’s (LOW), TJX (TJX), Dollar Tree (DLTR), and Ross Stores (ROST), are scheduled to release their quarterly results this week.
In addition, market participants will closely monitor the publication of the Federal Reserve’s minutes from the April 30-May 1 meeting on Wednesday, during which Fed Chair Jerome Powell indicated that interest rates are expected to stay elevated for an extended period due to lingering inflationary pressures.
A host of Fed officials will be making appearances throughout the week, including Bostic, Barr, Waller, Jefferson, Mester, Kroszner, Barkin, Williams, and Collins.

My bias for today: It has to be bullish based on recent price action but don't be surprised if we get a retrace. As I mentioned, most of the technicals are flashing overbought here.

Our trade docket for today, as every Monday is busy: /HG, /MCL, /NG, /ZN, BA, CCL, CVS, DELL, DIA, GLD, GRPN, IWM, MSTR, SPX/NDX/E.C. NDX/Bitcoin 0DTE's, ORCL, SMCI, FSLR, WYNN, CRM?, PYPL, SHOP, SPY/QQQ, VTI?, ZM.

Intra-day levels for me:
/ES; 5343/5373/5418/5490 to the upside. 5326/5303/5269/5253 to the downside.