Wednesday, June 12, 2024

ES Morning Update February 7th 2020

The SPX and DOW both made new all time highs yesterday and are backing off a little this morning. There's still a chance they go a little higher but a double top like this provides resistance on the first attempt, so we'll have to just wait and see I guess. If you are already short then you are happy we are pulling back and want it to continue. If not, then possibly you get another chance when (if) the market continues up again.

The pattern is a bull flag so odds are in favor of another squeeze up soon. Whether it fails or starts today or Monday is unknown of course. It could go either way at this point, as we could be 95% done with the move up or 100%, but we are close never the less. Picking a top is very hard as when too many traders see it and short it SkyNet just uses those shorts as more fuel so squeeze it up even higher.

Most of the time it tops out when all the bears give up and there's no one left shorting. It's also at the same time that all the bulls are fully long it seems. Upside targets are in the 3370-3400 SPX range from most everyone else I read. I can't disagree with those projections either, but will again point out that when everyone is looking for the same zone it might not get hit? Too many times I've watched the market go up or down to fill a gap where traders are ready to take a position and SkyNet will fail to fill it by a hair and reverse the other way with traders frustrated that they didn't get filled on their buy or sell orders.

Now they have to chase it, which is exactly what SkyNet wants them to do. The machine (SkyNet) is always out to kill you (steal your money to make you go broke), and never there to help you win. Keep that in mind the next time you see a gap area that you think will get filled and reverse as many times it will fall shy or overshot through it.

It's kinda like big even level numbers, such as 3300 or 3400 on the SPX, or 29,000 and 30,000 on the DOW. On first attempts everyone see's the big even level and put trade orders in at the level, so SkyNet will fall short of hitting or pierce through it to fake them out. Therefore we shouldn't expect 3400 on the upside to be hit on the first rally attempt. Odds are that it will fall short of it because so many traders are waiting there to short it.

And let's not forget that many bulls got long after 3300 was recaptured and a new all time high hit yesterday. They are looking for that move up to 3400 and smart ones will start selling early in the 3370's, 3380's etc... area. This again is why the market will many times fall shy of hitting the even number level. Bears got squeezed out yesterday and some new ones shorted of course, but the question is... are there now enough bears left to squeeze it up closer to 3400?

I don't know the answer there of course, which is why it's hard to pick a top. I'll just add that by the close on Monday or Tuesday I think the top will be in and we'll start going down from there. May God bless all us fools as we need lots of help in not only trying to trade successfully, but all the other decisions we make in life in general. Have a great weekend.

Author: Red

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