Month-End Dead Highs Setup Again

July 30, 2019

The fourth week of July showcased the markets usual "stick save" at the daily 20 exponential moving average (EMA).  This gave traders the textbook setup for the bull train to grind higher into all-time highs by week's end.

The week started off with the bears failing after Monday’s session and the bulls remaining in control with the ongoing trend. Overall, it was a fairly easy week as we demonstrated again to members of our Trading Room how the market has been handing us "free money Fridays" for the majority of this year. It’s been an impressive 75+% win rate for bulls YTD in terms of positive closes on Fridays.

What’s next?

The main takeaway from the fourth week of July is that the bulls are obviously attempting to wrap up the monthly candle at the dead highs here given what they’ve accomplished thus far as we head into the FOMC meeting on Wednesday July 31. The market is offering little to no surprises these days, so we must stay focused and keep watching the ongoing "sh*t hits the fan" level in case complacency shows up during August or beyond.

The Emini S&P 500 (ES) closed at 3023 on Friday with a new all-time high closing print. Judging by the daily and weekly candles, it’s fairly obvious that the bulls are still in control and it’s either going to be a "hold half and go" setup or a straight up continuation trend week as long as supports hold.

Current parameters/bias

Feedback loop squeeze setup is in place as price held the backtest of 2996 on Thursday July 25 with the 2998 "stick-save" low, which is also the ongoing trending daily 8 EMA

We continue to buy every dip when price is above Friday’s low of 3006, at least until it stops printing us money. Adapt when below.

Our 4-hour white line projection remains king for now until price proves otherwise

On the monthly chart timeframe, it’s been an easy trend-up month and the bulls are trying to wrap this month at the dead highs again as we head into Wednesday FOMC and beyond

Ongoing "sh*t hits the fan" level is located at 2955. This is the first warning sign of a weekly/monthly bear engulf that we must be preparing ourselves if price action ever gets a repeat of the Oct 2018 mean-reversion structure or similar. We must be prepared at all times because we’re seeing a lot of complacency among traders and managers anecdotally. We cannot get complacent just because the bull train has been easy to milk this year. Know your timeframes!

See chart reviews and projections on the S&P 500.

Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.

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