Alex's daily Market update & Focuslist - 12/20
Today was reversal day
Good evening folks!
Today was reversal day, but will it hold…?! Let’s dive in!
Alex ✌️
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GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
/ES sold off more than 1.2% on the BoJ announcement last night, but we could not follow through, and we quickly turned green on the market open. We really tried to reclaim the 3855$ level today but finally closed below it.
As the writing of the letter, the futures opened above the channel DTL and the 3855$ level, back in the resistance area. (I was looking at that channel DTL breakout for a potential bounce)
I was looking for a potential bounce attempt after being ST extended, and that’s precisely what we saw today. The downtrend seems tired, and we could be in for a relief rally back to retest some key levels. Will that be a 1-3 day rally…or 5…I don’t know, but we’ll look closely at how we react to kma’s and resistance levels.
On the upside,
The 50dma will act as potential resistance along the 3898$ level we recently broke down.
The 10dma will also come into play tomorrow.
On the downside,
The 3780/3735$ area is my next potential support area.
NASDAQ (NQ_F) Daily
RUSSELL 2K (RTY_F) Daily
Alex’s TAKEAWAYS
The market is still unhealthy and downtrend with the breadth that continues deteriorating. That said, we are short-term extended after an 8%+ indices move in only five days following last Tuesday's CPI report. A bounce probability has increased considerably with today’s reversal. Will that be a 1-2 day only event or something more important, idk…! we’ll look at how we react to kma’s and key levels retest.
That being said, we approach holidays with only three trading days until Christmas, so you can expect liquidity to decrease considerably until Friday. We either see more volatile moves or a very choppy market. Having that in mind, I don’t think we’re in a market to be aggressive, and one should stay defensive, especially with the overnight exposure.
Time to take it easy, study, do some year-end post-trade analysis, and prepare for 2023.
Some observations:
The market is still short-term extended, and we got a reversal today.
Many sectors are at key levels and building constructive action. We need more information, but this is a first step.
Breadth remains VERY WEAK, so I still think that if we rally in the next few days, it’s only a relief rally, and I will look at adding back short exposure on a reversal at key levels (resistance, 50/21dma, etc.)
VIX & DXY (US$) are acting constructive
Market health & Trend indicators:
LT SIGNAL: downtrend (red) + BELOW 50dma = BEAR market (🟥)
MT SIGNAL: downtrend (red) + BELOW 10dma = Downtrend (🟥)
Tomorrow's economic news:
Gameplan:
We did see the first reversal to consider a potential bounce/ relief rally, so that I will trade a few names long, but only intraday, and certainly not keep exposure overnight. (day trades)
That reaction bounce should also offer an opportunity to add to my existing short positions (SPXS+Ind names). In the next few days, I will look at the 3900$ level very closely for a possible retest & rejection (BORS)
Until then, it’s sitting on my hands and waiting for a better R/R spot to engage in swing or position trades. We’re in no man’s land right now.
In the following sections of tonight’s letter, I’ll cover essential parts of my daily routine & preparation for tomorrow’s trading session.
✅ My daily Focuslist, including setups, alert levels & explanation (LONG/SHORT)
✅ My Portfolio update
✅ Sectors Review
✅ Market Breadth & Internals
✅ Economic Calendar
✅ Prime Model spreadsheet (PT_database)
✅ Leaders list (technicals, fundamentals & potential TMLs)
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