Weekend Prep 1/16

*disclaimer: Not financial advice. This is my personal trade plan only. I am not qualified or licensed to advise anyone on their specific positions or trades, I am sharing my personal opinions only. Never make financial decisions based on any information on this site or any associated platforms. Always consult a professional for investment related advice and do your due diligence*

Good afternoon! From what I see, the public sentiment has flipped bullish over the weekend. It’s quite an interesting spot for this capitulation, I’ll discuss this more shortly… As we head into the week, remember that building a thesis is only the first step to trading – Make a plan and allow price action to prove you correct before putting your monetary and mental capital at risk. Let’s have a great week!

HTF Context:

$ES 1W

$NQ 1W

$ES 2D

$NQ 2D

• The indices found some bullish candles last week, which the bulls deserve some credit for… However the overall context is still bearish. The trend is down, price is coming from supply and the wave counts point lower. Until the HTF situation changes, the bears retain the benefit of the doubt in my book.

Mid-Term Outlook:

$ES 8H

$NQ 8H

• I find it a bit surprising that public sentiment has flipped so bullish over the weekend when really nothing has changed. The indices chopped higher than the ‘shallow’ w2 levels that were originally on watch, but price is still well within the standard wave 2 territory. $ES has arrived at 3H supply and the 0.618 fib with $NQ tagging the 0.5 fib. My primary outlook remains bearish from here, looking for a reversal to form from these levels. Above 4080 some bull alts come into play, but until then I remain on watch for a bearish reversal structure.

What if $ES gets through 3H supply?

$ES 1D

$NQ 1D

• If the bears fail to produce a reversal from the zones mentioned in the mid-term outlook, these alternate paths will deserve some consideration. I must admit that I’m skeptical of these counts at the moment, especially due to labeling the Aug-Oct move an (X) wave. I don’t expect these alternates to come to fruition at the moment, but it would be foolish of me to ignore the possibility that my main counts could fail. If $ES closes above 4080 I will be forced to take a closer look at these running/expanded X waves.

What is the Russell telling us?

$RTY 1D

• The divergence in the Russell2000 is something worth paying attention to, but not a reason panic. $RTY tends to diverge from $ES and $NQ on occasion, with a recent example being the failure to make a new high in December. A quick sweep of the November high followed by a bearish reversal from the 0.618-0.786 fib zone (golden zone) would keep the flat (or WXY) in play and send price to new lows with $ES and $NQ. A close above the 0.786 would open up a similar bullish alt as shown on $ES.

Gameplan for the week:

$ES 1H

• Today’s update may seem a bit complicated – and it is. The indices are at a key spot and there are several factors to consider… However when forming a trade plan I want things to be as simple as possible. My gameplan for this week can be broken down into 3 sections…
  
  BELOW 3962 — With the uptrend broken, I will evaluate structure to see if a reversal structure has formed (impulse down, new supply). If a proper reversal develops I will be looking for swing short opportunities in line with the HTF and MTF outlook.
  ABOVE 4080 — Above 3H supply the bear thesis would be damaged and my focus would shift toward long opportunities in accordance with the alt counts.
  IN THE MIDDLE — My focus in this range will be on low timeframe opportunities only (although I will hold runners for broader targets when appropriate).

Swings:

$AAPL 4H

$NFLX 3D

• $AAPL provides some bearish confluence for the indices with the arrival at 2H supply. $NFLX has also reached a key fib/supply zone. Both will be on watch in the event the indices form the bearish reversal that is expected.