Week of 6/2/2024 for SPY SPX ES

Someone Was Very Wrong Last Week

Headed into last week things looked pretty solid for bulls. Friday had retraced a good portion of Thursday’s move, we had made a new all-time high, and value overlapped higher for the week. However, we were cautious due to some subjective factors. I’ve shared the first half of last week’s paywalled commentary so you can get some insight into my thought process:

Sure enough, the week did nothing but head straight lower. Value was developed lower and lower in one of the most strongly bearish weekly profiles we’ve seen in a while. This was, of course, until effectively the last 30 minutes of Friday. It was a rather epic squeeze. Price had held massive support at Friday’s low and ended up closing at major resistance on Friday. It is certainly easy to feel very bullish after a move like that, and the vast majority of the time being bullish is appropriate in US equity markets. However, someone is very wrong here. Either the entire week of participants was wrong, or Friday afternoon’s participants were wrong. It’s never as simple as this, but the market was kind enough to leave us an extremely straightforward litmus test as a part of Friday’s profile in the event that we trade lower first this week. We will know quite readily if we should BTFD or STFR.

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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:

5446

5434

5425

5417

5400

5383

5368.25 ATH (ETH)

5358.25 5/23 RTH HOD/ATH

5349 (top of 5305.75-49 box)

5331.25-33.75 Last week’s RTH high

5323.5

5307 (5305.75-5307.75 bottom of 5305.75-49 box)

5296.75 last week’s close, horizontal and recent downtrend resistance

5278

5270.25 Friday’s IB high and spike base (can continue to use our long term 72.5 level or the 70-74 range box bottom)

5264 (63-64)

5253

5240 (5235-40)

5218

5205.5 Last week’s low

5186.75

5179.75

5173

5163

5153

COMMENTARY:

In theory this week should at least initially be rather straightforward. Either Friday’s late move is accepted, or it is rejected. We closed Friday Just below downtrend resistance, the prior internal 5305-49 box bottom, 2 prior weekly VWAPs, horizontal resistance, and within a bit of an LVN for May. A move like that weakens then market and gives participants a chance to sell at a perceived premium relative to last week’s action. There is a decent chance that we pull back to start the week because of this. If we do pull back, then the only question is if 70 holds a back test. The entire 70s range is loaded with technical spots. We have the Friday spike base at 70.25, the bottom of the broader box we had been using (71-74.25 was the bottom), and a weekly and monthly LVN around 77/78. I would plan to buy a dip that holds 70, and I would plan to get long a look below and fail of 70 (64 the likely candidate which was weekly VPOC if viewing all hours).

If we simply rip higher through 5307 (and the move is sustained), then we simply plan to buy dips to all-time highs.

If 70 is lost and we begin to see lower highs and lower lows below 64 then things start to look tenuous and last week’s low could be in play. There are certainly levels before that, but a rejection of Friday’s spike to me suggests that the development of value at lower prices is incomplete or at least a deeper retest is needed.

Because this 70 “pivot” is so clean I don’t feel the need to do much guessing. We did see breadth begin to improve late in the week and Friday felt a bit like a capitulation low so I would put that in favor of bulls. There was, however, an unusual large number of massive trades on individual names that took place after the move. It is possible that this was some of the opportunistic selling mentioned above, or it is possible that participants are choosing to buy high of day Friday for a trip to the moon this week. Again, we should know quickly. I believe it is most appropriate to plan to be long until proven otherwise.

One last thing, which may continue to have my attention in the weeks to come: In the week of 5/12 plan I mentioned that we may soon need to monitor for negative market reactions to bad economic news. For 2 years weak economic news has been met with a bullish response as it was suggestive of a potential softening fed position. Friday’s response to the horrifying PMI was quite the opposite (at least initially). From the week of 5/12 plan: