Week of 4/28/2024 for SPY SPX ES

SPY 0.00%↑ QQQ 0.00%↑ IWM 0.00%↑ DIA 0.00%↑ were all at enormous spots at last week’s low and a relief rally was to be expected in last week’s plan.

All indices now closed this week at massive spots. Bulls are certain that indices are on the way back to ATH and bears are certain that this is a higher low. I would advise caution on having any major bias until after Wednesday.

IWM 0.00%↑ is at major resistance with supply and the 20/50 sma sitting just above:

DIA 0.00%↑ failed its first test of the 20sma but made a potential “higher low.” This is in quotes because I do not consider it to be a structurally relevant higher low.

QQQ 0.00%↑ is coming into a back test of its major box range above, along with the 20 and 50 sma

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SPY 0.00%↑ stalled at its 20sma (which has crossed below the 50sma for the first time since crossing back above in November)

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Levels - Note not all weekly levels will be used each day but they could all present as part of an “active sequence” within a given day(s). Focus on the bold levels on high time frames

Complete Levels/Ranges:

5285

5272.5

5263

5245-5250

5235-5238.5

5217

5205

5194.25-5196.25

5185.75 (5181.75-5188)

5168.5-5172

5148.5-5154.25 (5150 reference 4/7 week low

5146.5 reference last week (4/21 week) high

5144.25 reference last week (4/21 week( VAH

5120-5125 last 2 week’s respective VAH

5112

5101-5105* Last 2 weekly VPOC, YTD developing VPOC, prior major level

5082.75

5072.5

5063-5066.5

5047-5052.5

5036-5039

5022.25 reference last week’s RTH low

5010

4997-5002.5 2/4 week LVN and 2/7 single prints.

4991 reference 4/19 RTH low.

4977.5-4982.25

4957.25-4960 - Jan high and VAH, 1/21 week VAH

4936 YTD dVAL (can use 36-40)

4916

COMMENTARY:

In my opinion anyone coming into this week with a strong bias might want to exercise some caution. My primary focus is on what price and the migration of value are telling me. However, we have seen the Treasury Quarterly Refunding Announcement (and of course FOMC) move the markets in extreme ways the last 2 quarters. I don’t often include my macro take and what I expect to happen, but I’ll do a bit of that this week. The last time I did so was at the October bottom and my expectations were realized.

Given the worsening inflation data, but strong economic data I had begun to suspect that Yellen would potentially be under some pressure to issue longer duration for this quarter. Doing so generally drives long end yields higher, increases borrowing costs, and exerts some downward pressure on economic activity (and inflation as a result). However, this recent (soft) GDP print may have changed that. Which has the administration more concerned? Additionally, the treasury market has already done a lot of the work on her behalf as bonds (price) have been slaughtered the last few weeks (yields higher). Higher long end yields additionally give her some cover for issuing skewed toward the shorter end as spreads have narrowed. As an example, in July when the announcement was skewed toward longer duration, the 10-year yield was sub 4% with most short-term bills yielding in the 5.5%. In October, when the announcement was both light and skewed toward shorter duration, the 10-year yield was near 5%. The 10-year yield is near 4.7% now. Additionally, the strength of the dollar, should it persist, may do some of the disinflationary work into the election.

I do believe that IF Yellen issues heavy toward the long end, then we could see something nasty in the bond market that would be highly problematic for equities. However, given the above I’m leaning toward her issuing more balance and skewed toward the short end if anything. This should be supportive of equities.

We also have FOMC. Given the pullback in equities and the bond market, the Fed has relatively little reason to maintain a hawkish stance. Anything remotely dovish (or not hawkish) should also be supportive of equities.

THAT SAID, perhaps the biggest reason I’m struggling to see the bull scenario on ES is the multi-week period of distribution in NQ. The Qs were effectively being distributed for SEVEN weeks. All of that to turn around and BTFD 8% lower at most? I personally don’t recall ever seeing a multi-week distributive top resolve only 8% lower and then make new highs. However, I’ve also never seen a more confused market in terms of macro. Price is price and we’ll get into that now.

The bear case:

Most volume profile traders would probably say that back above 5185-90 or so and the down trend is over. Technical traders might monitor daily closes above the 20 and 50 sma for the “all clear” signal. Both of these make sense, but here’s what gives me pause.

Here is the July through October correction. August ended monthly OTFU and price rallied off the -2 STDEV Bollinger band. I’ve mentioned this before as the “sellers raise the mission accomplished banner” situation and then step back in at a “seller’s discount.” Price can’t go straight down forever. Over the summer, price then made daily higher highs and higher lows, closed numerous days above both the 20sma and the 50sma, only to fail at a back test of its upper most box and the +2 STDEV Bollinger band. It made a weekly lower high and that is when the selling accelerated.

Thus, I will continue to remain cautious about my high time frame views for some time.

NQ/QQQ would need to reclaim and bid its range where the distribution occurred. It is not uncommon to see price return within these ranges and then reject right back out. I could even see a scenario in which NQ returns to March/April VPOC and ultimately reject back out of the box.

NQ value on the week overlapped lower, VPOC was lower for the 4th week in a row. It stalled Friday at its 50% retracement of the highs to the lows. It looked just above last week’s VPOC and closed near the bottom of the 4/14-week primary distribution.

ES stalled at its daily 21 ema and 50% retracement and the weekly 5sma is racing down to meet it. It absolutely could fail here or could fail in the 5180s to resume lower. It is nearing the top of its 5063-5157 box range and has the 50sma back test sitting right there. The most bearish scenario is a look above and fail week headed into May. If May then takes out the April low, then serious weakness can be expected. The monthly candle sequence looks very similar to the July/August swing high so far:

The bull case:

Stonks only go up. Yellen and Powell may have reason here to be supportive of equities. ES held its 20-week sma with all of the indices holding massive spots at this recent swing low. As mentioned previously, if you’re a bull you buy there every time. It can absolutely have just been a weekly/monthly higher low. NAAIM actually went LOWER this week. From a bull perspective we can assume they will have a lot more to buy to play catch up on a further rally. I could also argue that this is bearish that they continued to sell into the rally. If we do continue to rally, however, they will end up chasing it and drive prices higher. Additionally, stronger monthly sellers would/would have closed April below at least the March open if not below the lows. You can also make this argument as well on ES:

I have to be somewhat neutral but leaning bearish on price right here. I will be careful about initiating any conviction swings until we have seen what Treasury and the Fed do. I will be focused on day trading the index until we have that resolution and then make an assessment for potential swings. If we see weakness early in the week (especially on a look above and fail of Friday’s high) then I will lean toward shorts. If we see strength early in the week then I will lean toward longs but with tactical shorts at key areas above us until after Wednesday. At that point we should have a clearer picture for at least the Thursday and Friday plan.