Where is Final Final destination for the S&P500?

by birtanpublished on August 24, 2020

Hey traders david frost my strategic forecaster here for another episode of common sense market analysis today is wednesday august 5 2020. we're looking at a daily chart of the spy

Or spider which is the proxy for the s p 500 what do we have on the docket today first order of business we'll talk about the daily chart second order of business we'll look down at the different time

Frames on the spy third order of business we'll take a look around the horn see what we've got we have an eye out for divergences remember we're looking for a top doesn't mean

It's here today yesterday tomorrow we're on the lookout for a top or a turn we don't know where it's going to come in we're in the time zone where we're on

The lookout so let's get that out of the way again i need to reiterate that each night because i think it's extremely or as i love to say uber important what's the horizontal

Line on the screen it is 333 48 it represents a gap that being said let me make mention of something else so i get a lot of emails not a lot i get a handful of

Emails about the gap 333.48 traders are saying my chart says it's this thinkorswim says it's this td ameritrade says it's that e-trade says it's x another platform says it's why other

Traders say the gap was filled here's the net net let me clear up all the noise surrounding this gap or any other price on my chart i've done the homework these charts are correct

If your chart does not look like this and there's the gap and we've seen this on this chart every single day if your chart does not look like this your chart is incorrect i'm not saying

My platform is the only platform to use i'm not saying that at all what is my platform i get this question all the time too my platform is tradestation i'm not saying tradestation is great

I'm not saying they're bad i'm saying i use tradestation for the following reasons a i've used them forever so i like my charts i don't like change that's reason number one

Reason number two is i know the numbers are right the charts are right i can manipulate them to be correct if they're not depending on what market i'm looking at that's reason number two

Reason number three is i get good trade executions on tradestation reason number four i don't have a lot of issues with tradestation i'll probably have one tomorrow

That's murphy's law we all know about murphy but all in all i don't have a lot of issues so those reasons are enough to where i don't need to look for anything else the charts are correct

If your charts don't look like mine your charts are wrong next topic back to the daily chart what jumps off the page when we look at the chart they're in an uptrend they're headed for

A destination they're headed for the gap now let's talk about this for a second i made an intraday video today for inside the numbers members on this topic it was probably in a

Little more detail than i'll go over here but here's the net net we're not 100 sure that they're going to stop short turn around and go back in the other

Direction at the gap they may or they may not remember what's the ideal scenario the ideal scenario is they hit a number from afar when they hit it from afar

It's usually some kind of an exhaustion point and the market generally has a reaction in the other direction i simplified it but that's the concept here

The market has been essentially a creeping market beware of the creeping market there's nothing good about a creep just to accentuate the point

Here's another concept so the market runs up and it pulls back it wasn't ready to go anywhere near the gap at that point in time that's fine we're not even calling that a near miss

Then they made another attempt they tried it up here and they pulled back a little bit but they didn't really pull back a lot we're not really considering that much of a pullback it was more of a

Down day or two that being said i'm kind of eyeballing this chart as saying hey the market's been basically consolidating and this isn't a real ideal consolidation it's more

Of an uptrend but it's been consolidating they've been eating time off the clock ever since they came back up to this zone going back and forth now they're breaking out the moving

Averages are creeping higher day by day as long as the market creeps higher day by day and really they're not in a hurry to go get the gap so maybe just maybe and this is one of

Those things of an awareness we have to be aware maybe just maybe the final destination is not the gap yet a higher number could it be new highs is it somewhere in between

We don't know just yet the new highs if they made new highs wouldn't be that far above the gap so now let's talk about something else let's talk about tradability or tradeology let's talk about a hypothetical trade so

Let's say a trader saying i hear what he's saying but i'm going to take my chances i'm taking a trade at the gap i don't care what he says let's say that's the case

What do you do how do you trade it what's your risk level what's your i'm wrong cut and run level well let's roll back the chart a little bit so we can see the old highs

So the old high comes in at 339.08 the gap is 333.48 now this wouldn't be a scalp slash day slash even short term swing trade kind of situation this is a i'm putting a stake in the

Ground and i'm betting that they're not going to go and make new highs i'm willing to wait if i'm that person doing that kind of trade i'm saying my awareness is

They're not going to make it easy they're going to make it look like they're not going to ever go down they're going to go a little bit above the gap they're going to make it look like the

Gap wasn't the thing and then all of a sudden when nobody's looking they're going to turn around and go back in the other direction so i want to take a trade at the gap that's trader number one there are

Traders out there that will do this i'm not saying it's wrong i'm just saying it's an option but if you're doing that the real stop out is a daily close above the old high

Which is several points away if you will you have to be willing to understand that you have to be willing to take some pain if they're gonna go above the gap it's

Not a weekly options position type of trade it's a i'm gonna take an option position on this and i'm gonna take it out several months to where at least

November preferably december with time on your side even if a trader did get stopped out of that trade because they made new highs let's just say sooner than later the

Option that's out to for example december isn't going to get cut in half we don't know that for a fact i'm just saying there's enough time on the clock to where you can withstand

Being wrong for a while nobody wants to be wrong nobody wants the pain nobody wants to be in a losing trade but that's the deal if you're willing to take a trade at the gap or you want to take a trade at the

Gap you really have to be willing to say i'm doing it against the old highs that's my take anyway what's way number two way number two would be a daily close

Above the gap or at least that day's high so you could say and let's roll it back again so the high of that day was 3 35 81 and you can say at least against the

High of that day or any daily close above 333.48 and i would cut and run a trader could do that too that's way number two what's way number three and this is my preferred way at this

Point in time since we're not coming from afar were coming from a creeping market so my way would be to wait for a sign and or signal of a trend change what is that

Those are the things that are identified in the course lazy e-mini trader once we see one of those what we have is something to trade against something to tell us

We were wrong because we have a specific spot a specific number and it wouldn't necessarily be above the old highs if it happened somewhere in between

Current price and the old high and that's the thing where you don't have to be the first participant to the party you just want to make sure you're at the party while everybody's having fun

So you don't really need to catch the high so that way we'll call my way at least this time before we move on to other charts and stuff i thought we would take a look at the

Daily chart of the futures just so you can see the same area looks different on the chart but it's the same general thing 338 33 38 50 is the gap on the futures chart this is

Also important to look at we've looked at this before recently but it's worth looking at again here's that huge breakdown candle the high

Is 3300.75 so right on the number the big fat round number one of the reasons why we were so focused this week on this big fat round number it'll be

Important come friday where do we close do we fill the gap up here do we close below the breakdown candle do we close above the breakdown candle are we making new highs

We don't know but by friday it's going to be an important place for wherever the market is in time and price what's going on over in inside the numbers today the pre-market commentary now set the

Stage they're bullish coming into the day they're above the big fat round number so we know a the big fat round number what was once resistance will now be support we know that

And we also know it opens the door to the infamous gap you see of note down here we had a healthy list of stocks on the move today we'll get to that later so i just want to note for traders

Sometimes when we have that people get a little bit flustered they say how am i going to manage all this you don't have to manage it you just have to worry about the stocks that are coming close to their entries

They're not all going to happen at the same time under normal garden variety market conditions and secondly they're not all going to happen anyway some will happen it's unlikely they

All happen once in a blue moon it happens but most of the time we get a handful out of a bigger list that's fine you got to throw some stuff up on the wall see what sticks what sticks

Are the numbers that went to their destinations or targets today the spy wasn't real complex today it was in a very narrow range so there's not a lot to talk about inside the numbers from a commentary

Perspective but you want to see how we set up the day you want to see the thought process you want to see what we're looking at are we bullish are we bearish where's resistance we're support

You got to know your numbers even at that on a quiet day we still need support and we still knew resistance and i'm going to show you that now what i'm going to do is scroll up start

And stop the video whenever you like read the notes go back to the charts see if i'm right double check the work but as i scroll up you're going to see a couple of things you're going to see where support was

And then you'll see later on when we go back to the chart you'll see that it was in fact support and that number was on the south side 331 50 cited at 105

Am and even before that we're talking resistance where's resistance we said it early i want you to double check 332 will be some resistance if reached early

So as the market comes up short-term candles closing above 322 should be 332 it's a little typo but you get the point that would negate the overhead resistance overhead resistance means

They're not going to just waltz on through a number they may go sideways for a while and eat time off the clock and that's a tell in and of itself but normally they're going to have some kind of a reaction

Or pullback now arranging day you're not expecting much and if you don't know it's an hour arranging day you take what the market gives you you know the routine five minute chart right of the vertical today's activity

What do you know 332 was in fact overhead resistance it's overhead resistance whether the market goes sideways for a while or collapses either way it's still

Classified the same way as overhead resistance it's not overhead resistance if a number or an area a zone does not stop the market from going up so therefore

332 was in fact overhead resistance the other number you saw on the board was three thirty one fifty three thirty one fifty was in fact support know thy numbers moving right along what you'll see here is the

Theme is not a lot's going on it's a paint drying kind of day you know the routine watch paint dry and here's an intraday video you don't see these a lot this is the first one

That i ever made i like the concept i had something on my mind i could have typed it out and shortcut it but i decided to over deliver and make a video i think it's a cool thing

I think traders will get a lot out of videos today was an example it was a test i got some good feedback but you never know what might show up in a video halfway through the day

And moving right along and as we get into the afternoon the market was basically just in a chop shop it hardly went anywhere all day into the end of the day they went down they went up they do that it's in

Anything goes into the end of the day type of situation we know that what about stocks on the move it was a laundry list today as you'll see from

This list four hit their entry targets really five we had one that jumped the first target but it hit the second target so we'll go with five mchp ww twilio court and the target jumper was

N-e-w-r let's go over and take a look at the chartology microchip tech so you can see this one comes down comes up short has the rally has the reaction in the

Other direction comes back comes up a couple of pennies short does it later this was at least for me a no trade these happen sometimes we can't control it

We can't control exactly what the market does what we can control is our numbers if a stock comes into my number our number fine i'm willing to take the trade if it plays games with the number

Either i have the wrong number or they're just playing games and i don't want the trade i only want the trades that have the highest probability of working out in my favor or our favor that's why we

Only take the trades that come into the number in the manner in which they do we follow the rules we paint by numbers and when you do that i assure you this works what's the

Takeaway 9818 or something within a few pennies of that was in fact without a shadow of a doubt support now think about this for a minute the stock closes the prior

Trading day at 107.31 getting a buzz cut at the open long before the market even thinks about ringing the opening bell we come out with a price of 98 18 maybe it was 98 and a quarter

Whatever the number should have been doesn't matter the point is that was support how about ww international two numbers on the board 24 21 23 81 the first number you can see what

Happened came pretty far straight into the number did the thing that it was supposed to do the high was 24.95 shortly thereafter did the thing they were supposed to do traders take profit along the way

Comes back down if they're still holding any you're stopped out but guess what goes to the second number new trade now in this case it wasn't really a new trade because

They basically ate time off the clock most of the afternoon before they got there so we don't want that it looks like it's going to go lower it can go lower they're eating time off the clock what

They're doing is they hung out for a cup of coffee looking like they're going to a different destination lo and behold both numbers work anyway you don't know that's going to happen

These aren't the same trades when this kind of thing happens for a couple of hours during the day an hour and a half during the day leading into the afternoon these aren't the type of trades we're

Looking for we're looking for the thing that happens early in the morning straight shot nice reaction take your money put it in your pocket slam bam thank you ma'am

Twilio rodeo this one is one of those things we had some front runners there were a lot of traders that made a lot of money in twilio the one that didn't was yours truly the low in this candle 269

47 my number on the board 269 45. you can chalk that up to a spread front running wrong number they run up like 11 here's a high of 279.95 just short of 11 bucks all the way back

Down satisfy the number go all the way back up another 10 bucks rodeo de jour take away 269 45 give or take was in fact support stock closed at 283.75

How do you do that you have to know thy numbers we do this day in day out i used to like milk duds but i don't like duds in this form of a dud n-e-w-r jumped the first target so it's

Off the table 55-70 second number on the board immediately activated on the table didn't do anything it went basically in a chop shop formation after finding low

They went back to the number slightly above this is a scratch it's a no thing what's the takeaway though well here's a takeaway a the takeaway was that was the number but they hung

Out for a cup of coffee which means we could still see lower prices maybe even tomorrow or some point in the future but here's the other thing and i harp on this all the time the reason i harp on it is

Because it's important the numbers are still important from a stop loss perspective they're not arbitrary so the stop on this particular trade and i know it was cut off the right side

Of the screen you'll have to take my word on it was 54.50 there's 54.50 it's a blue line so the stock actually went down a buck below that but the stops are hourly closes so the

First hour closes at 10 30. so this is early in the day 9.50 so it's not close to the stop look what happens as they start getting closer to the first hourly close they start rallying away from 54.50 or

At first they start rallying to 54.50 and then they get above it so look at this so here is 10 20 10 30 is over here and they're above 54.50 the stops are there for a reason

What is the reason it's a number that based on my analysis i don't believe that under normal garden variety market conditions they're going to close hourly below if they do

Then the entire trade was a debacle and it was wrong we don't go into the trades with the premise they're going to be wrong we go in believing we're going to win 100 of the time

With the awareness that we can't possibly win 100 of the time and the 80 20 rule applies and about 80 of the time these trades are going to work out which also means

About twenty percent of the time these are losers some are little tiny losers a handful are bigger losers that's the way this business works it is what it is we know that we have to be reminded

But we know that let's get back to smiling central how about c-o-r-t pretty self-explanatory look at this haircut closing price of 1574 the stock at 1347 slightly below decides to find stability

Turns around heads back in the other direction why is that because we found the support long before the market opened for business keep in mind this is a 13 and a half dollar stock

Here the high is in fact 1468 that's a dollar 21 cent bounce away from the target entry put it in perspective 14 cents is one percent are you doing traders take some profit along the way

And the ones that follow the rules painting by the numbers are able to hold on for the ride that's how you can turn some of these trades and this was a good example into

Risk-free emotionless trades we would never let the remaining portion of our position go negative what does that all mean so say i bought a thousand shares at 13.47 say i sold 500 shares at 13

65 1370 some number pick a number but what if i still had 500 shares and i just said you know what i'm not gonna let it ever go below my entry so guess what it never came back to the

Entry here's even a five minute chart all you had to do was nothing you could take another half of the remaining position off at some other number you can ride these things until you decide

Enough is enough or you can trail a stop there's a lot of ways to skin the trade there's no right answer and wrong answer there are philosophies there are strategies there are tactics and you use which ones

Fit into your comfort level that's pretty much a wrap on stocks on the move here's a 120 minute chart of the spy just wanted to point out that we've got another one of those bullish

Flaggish kind of things going now sometimes they fail and when they do they have to come down and fill the gap and then they have somewhat of a reset or restart but above the moving averages

The trend remains higher there's a gap above the gap is generally magnetic so right here when you look at this you don't anticipate what might happen on a failure or something like that what

You say is here's the duck this is what the chart looks like here's the read of the tape and we have an awareness of the other side that's the way you approach these things

You take it at face value the duck but walks like a duck talks like a duck it's gonna be a duck the majority of the time sometimes we take a hood off it's an ugly duck that's the one where they're

Down filling the gap tomorrow morning and those type of situations are really sponsored by the trick trap fool and frustrate crew do we have anything doing in the

Iwm well interestingly enough they're at 150 379. where have we been saying the iwm is going 153 in change 154 something in that

Neighborhood is this all it has to be not necessarily for example let's do the same or similar exercise that we did in the spy before did they gap up here and eat all this time

Off the clock to go up remember first they went up and they hit 150 but that wasn't really the destination right here so what they did was they ate time off the clock did they do it all this time

To go up to 153 probably not this may be a weigh station that may be another destination some other place what's the next major area of overhead resistance for me it has to

Be about 156 to 15650 it's in an uptrend it's bullish had a very good day 1.9 up against the spy that was up basically one half of one percent leading in the upward direction my

Favorite market leading indicator of note move it along second favorite market leading indicator a number one canary in the coal mine anything doing here other than what's doing no same routine in an uptrend moving

Averages are pointed up they're challenging or have challenged and now just closed above the old high there's another destination at mind where is it ten thousand five hundred to ten thousand five and a

Quarter give or take maybe up to five forty five fifty doesn't mean they have to get all the way there what it does mean is if they get there sooner than later

It will be overhead resistance the closer they get the more magnetic those numbers become and they pull the market in silicon valley people interestingly enough the queues didn't do anything today they

Were up nine tenths of one percent 24 cents that's a rounding error however the queues are high on the chart they're at new highs we're not going to read anything into that like it's really bearish the

Market's going to collapse because the queues were not up today we're not going to do that we're going to recognize they're at new highs they'll soon run out of buyers obviously

But we're just going to take it at face value high on the chart well above the moving averages it's bullish until it's not just like the trend is your friend until it's not nice day today for the financials

Remember without the financials the other markets or around the horn is unlikely to participate in either direction up over one percent today in the financials still above those moving averages is

Bullish this is a long term eating time off the clock type of pattern you can certainly make a case that this is a bullish flaggish kind of pattern so i can do this from down here the

Market went up and it just ate time off the clock riding the moving average so it's kind of narrow but look this can go all the way up here why not i know there's a lot of traders

Out there that are looking for a collapse in the market the market shouldn't be up here it's hocus pocus the economy is x y and z the fed is supporting everything i get all that i know that

Nobody cares it doesn't matter price is the absolute take it at face value when the market turns it turns guess what happens when it turns i'll be as bearish as the next guy

Smash mouth interesting didn't go anywhere today kind of similar to the cues so that's on par a little bit of a doji candle but do we make anything out of that they're at new highs that's fine well

Above the moving averages in an uptrend we're not going to make a federal case out of it it's an awareness if you want it to be a puzzle piece put it on the table i'm really going to look to the spy for

My sign and signal of a trend change if i told you how much i appreciate each and every one of you without you those videos are not possible true and accurate information

We're going to pull the rip cord here today i'm david frost my strategic forecast thanks again for tuning in to another episode of common sense market analysis

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