Good evening folks!
Two weeks remain before the end of this horrible 2022 bear market year. Let’s close this year strong, and I’m already looking forward to 2023. It can’t be worst, right? :)
Alex ✌️
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GENERAL MARKET ANALYSIS
S&P500 (ES_F) Daily
Price Action Analysis:
/ES tried to reclaim the 50dma overnight but got rejected right before at the 3900$ level. We could not hold that support area, and we closed the day below the 3855$ level. That’s another support area that we sliced through…
We are not 8% off the highs in only five days… that’s a big move & fast! I will be cautious playing the downside without a meaningful bounce/PB going forward as we are ST extended. A one to three-day upside move to retest key levels or kma’s would be only healthy in a downtrend.
On the upside,
The 50dma will act as potential resistance along the 3855/3898$ area that we just broke down.
I am also watching closely at that mini-channel we have been forming in the last two days. A breakout of that DTL could offer a signal of a potential bounce.
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 1-3 days bounce probability will increase each down day we get going forward.
For a downtrend to continue lower, we’ll need these natural reactions along the way. We’ll get more information on the bounces to know if that next down leg has some fuel or is short-lived.
Time to take it easy, study, do some year-end post-trade analysis, and prepare for 2023.
Market health & Trend indicators:
LT SIGNAL: downtrend (red) + BELOW 50dma = BEAR market (🟥)
MT SIGNAL: downtrend (red) + BELOW 10dma = Downtrend (🟥)
Tomorrow's economic news:
Gameplan:
I still think this market is unhealthy, and I play the downside until proven otherwise. If we get a reaction bounce, it could be tempting to trade a few names long, but only intraday, and certainly not keeping exposure overnight.
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) to confirm that theory and add to my existing positions. Until then, I continue trimming my short position in anticipation of that bounce.
Until then, it’s sitting on my hands and waiting for a better R/R spot to play the market. 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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