Head on a swivel this week 📊 - Sunday Brief

Mornin’ team!

Hope you all had a fantastic weekend.

Big Sunday report coming in hot for you all.

Let’s dive right in…

Impact Snapshot

• Key Economic eventsRetail Sales (Tues.)PMI Index (Tues.)Housing Starts (Wed.)Building Permits (Wed.)FOMC Minutes (Wed.)Jobless Claims (Thurs.)

• Key Earnings 

Market Evaluation

It is worth doing a re-cap of what we’ve been sharing thru our newsletters the past few weeks and what we’ve been warning about.

While we are looking at the bigger picture, there are a couple of things that happened in the markets that are worth noting.

When the market hit the highs, there were two things that played the pivotal role for that to happen.

First, the long-term money managers were under invested. 

That means they were either holding too much cash or they had securities that didn’t have enough risk with them if the market started to rise.

Second, a big amount of hedge funds were short and got squeezed over June and July.

As the hedge funds got squeezed and forced to cover their shorts, that brought the long-term money managers in because they felt the squeeze.

This was the term we’ve been talking about as “pain trade”.

Markets have the tendency to do what causes the most pain and discomfort for everyone. That was what was taking place when we’ve reached those highs.

Everybody got excited about that, talking about markets going to new highs and all that etc. and what they didn’t appreciate was that we were looking at “old business”.

Short covering is old business, not new business. It’s not new business and money taking positions, its simply shorts buying back their existing positions. Once a short covering rally ends, it weakness the market. 

We’ve stressed this exact point for weeks now. If you read our older newsletters it was the most major outlook for the bigger picture we’ve kept sharing.

Read the Market Evaluation of this post we’ve made that we’ve started mentioned of this exact event taking place here: 

Again, if a market is too short it strengthens that market. The market has rejected almost all forecasts.

Many were betting for a recession that didn’t come for that period and were forced out of their positions on the way up which added further upside support fuel that was going to end.

The Week Ahead

The next step is observing if the pullback brings in the long-term investors in the markets that will bring new positions to boost the markets on the upside.

As there is no meaningful excess that would stop that from happening or we can see a more serious liquidation if we close bellow the monthly pivots.

Going into the next week, we will observe if the sellers can maintain the aggression to push the prices to the next pullback zone area of 4341 which would be the edge of the distribution with high probability of buyers coming out to defend this zone.

Buyers want to close a daily above 4493 which is serving as a key point level that has been turned into resistance and needs to be reclaimed in order for a continuation towards 4545 and the unfilled gap at 4593

The pivot we are interested for the upside is a clear reclaim of the 4497 and continuation to the levels showcased in the chart bellow. Pay attention to the FOMC minutes on Wednesday where volatility in the markets will be present.

ES

The targets we will observe for the week ahead:

• Main pivot: 4497

• Upside Levels: 4544/4557/4593

• Downside Levels: 4426/4393/4370

Alright traders. That’s it for this week’s Sunday brief.

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We’ll see you in the next one!

Let’s have ourselves a week out there on the charts.

Disclaimer: Futures and options trading carries a significant level of risk and may lead to substantial financial losses. The content provided in this newsletter is solely for informational purposes and should not be construed as a trade recommendation or financial advice. It is essential for readers to independently assess and make their own investment decisions, taking into consideration their personal financial situation and risk tolerance.