My Trading Game Plan

September 15, 2022

The market could go either way. These are the levels and the price action I want to see.

PRE-OPEN MARKET COMMENTS THURSDAY – The SPY is forming a wedge ($391-$425) and we are within striking distance of breaking below the bottom of it. Support at SPY $391 is critical. If we close convincingly below it (long red candle) we are likely to continue down to the low of the year in September.

Yesterday the market took a breather after heavy selling Tuesday. A doji formed near the low of Tuesday’s candle and the market could go either way.

Overnight markets are relatively flat and so are the futures this morning. I am day trading so I am market neutral. I do see greater trading opportunities if we break support so my preferred scenario is a small unorganized rally during the day sprinkled with some green candles. I do not want to see a rally above SPY $400. When the bounce stalls, I want to see it get slapped down hard with stacked red candles that take out the low of the day. That would tell me that sellers are still aggressive. If this happens I will have an excellent entry for a short position and that bounce will give us a running start at $390.

If the market starts to soften and we start stacking consecutive red candles with very little overlap I will also take a short position. I want to see the $391.50 level attacked and I want to blow through it. If I get this pattern I will add to the short.

If the market gradually creeps down to the low from Tuesday, I would be more cautious. I will short on the way down if I see some nice red candles, but if we stall at that level I would take gains. I would re-enter shorts on a nice long red candle through that low only if I see follow through.

At what point do I become bullish short term? If the market is able to rally above SPY $400 I will start to take bullish positions in small size. If the market is able to close above $402 I will take a more bullish posture. That would be a sign that we are going to fill in some of the gap from Tuesday and that support at $390 is going to hold for now.

The key for me is to keep overnight risk to a minimum. We’ve seen big moves recently and I can’t tell you from one day to the next where the market is going to go. If the SPY is able to breakout of the wedge formation there will be a swing trading opportunity for at least for a few days. That is about all you can ask for in this environment. I see compelling reasons for a drop and a rally and so do institutions. They are active on both sides and this volatility will eventually lead to a breakout or a breakdown. Until then, I am seeing both sides clearly. I know the important price points and the type of price action I want to see into those levels.

Stay flexible and keep it small until we have some clarity.

Support is at SPY $390 and resistance is at $397.60.

This is what our proprietary indicator is showing us and what we will be looking for.

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September 14, 2022
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