Good morning traders, the range is the range until you see the fireworks that are going to happen when we break the range. For the last 5 weeks we have closed inside the market makers weekly expected move with the exception of a scare on 3/31/23 in which we closed outside the upper edge and then the last two weeks we have had scares in the middle of the week where we were outside the lower edge briefly but coming back to close inside each time. The scary part about this is that the longer we continue in this range the more violent the break will be. Now I have been on record as saying that I am expecting a huge blow off top to signal the end of this rally and range so that qualifies as a violent move to the upside. Meanwhile I am not crazy about taking to many risky longs up here. I do have long positions but they are relatively low risk where I bought out of the money calls waiting on the blow off top to happen. I have taken this time to stock up on vol spreads and maybe this week I will buy some iron condors instead of selling them in preparation of breaking this range. In my opinion it is not good risk/reward stacking to many long positions up here.
The weekly outlook is on the spy has a bearish bias closing below 412.63 with a retracement expectation around 408.9. We do have harmony between the technical side (bearish bias) and Quant side (bearish bias). However, we have a gap in order flow leftover from last week which tells me the market is irrational and to be careful because a more explosive alternate thesis maybe in play.
Key levels to watch for … Resistance (jack) 413(queen) 414-415and (king) 416-417area. Support (jack) 412 (queen)411-410and (King)409-405. The main thesis for the day is a BULLISH bias closing above 412.63 with a projected target/high of between 413-419. Alt thesis is BEARISH bias closing below 412.63 with a projected target/low of between 412-408. The main channel we are in is between 397-416. Last week, market strength and breadth opened gap up and stayed at high range until noon when it hit an extra gear to the upside. I expect strength to open strong but at some point later in the day strength will start to level out hinting at some weakness to play out later in the week. We have Dissonance between the technical side which is (BEARISH) and the Quant side (BULLISH bias). The futures have a bearish bias for the day with harmony between the technical (bearish) and the Quants (bearish). Scenarios for the day:
1) Rounded reversal day type structure. We could get a continued push higher toward jack or queen resistance area and find midday chop around either queen or king resistance before going back down with the same energy or force we went up with the first part of the day or vice versa. 34% probability
2) Trend day up we open gap up and start with a push back toward the previous close. We find support on or before the previous close then begin the uptrend for the day. We usually find midday chop around either possible queen or king resistance area (key to watch today is for a failed trend day where we fall down from target) 34% probability
3) Expanded Range Day structure. we could get a premarket rally. Experience some profit taking early bringing us back to test support and giving another try at breaking resistance but mainly chopping back and forth. Vise versa 32% probability