May 7th, 2024

Building Momentum. The bulls persist in strengthening their argument that the recent low was a ‘good low,’ suggesting we are now heading back to the year’s highs. Markets typically transition from seeking lows to pursuing highs and in today’s high-speed markets, these peaks and troughs occur more swiftly than we anticipate.

It seems that many of the bears are still resisting this trend, thereby only adding fuel to this rally. You’ll hear arguments on why we shouldn’t be rallying right now, yet the market indicators have been signaling a desire to rally. The bulls believe they can take advantage of the lows from April, and the risks are clear for them. The bears are currently depending on negative macro factors, which can be challenging when it comes to risk management.

Although I remain bullish, it’s not necessarily a ‘buy and hold’ market scenario. The bulls have just surpassed my neutral areas (as indicated by the yellow lines on the chart). We’re positioned slightly above the 5-day SMA, and I’ve anchored a VWAP to the recent highs, where we’re precariously perched above. To maintain their momentum, the bulls need to safeguard these areas, both on an intraday and closing basis. If not, it appears we’re reverting to a two-way trading environment similar to periods in April.

Today, the focus is on evaluating morning support levels, determining if the bulls defend them and if we see a positive response. If we do, I predict we continue trending higher. If not, keep your powder dry and observe how the day concludes. Currently, I’m only interested in long positions when I notice short-term support being upheld.

Key support levels to keep an eye on for indexes in the midterm:

ES: 5101, 5186, 5155

NQ: 18,039-09

RTY: 2050, 2028

Let the market trend establish itself and be compelled to trade. Don’t rush after it.

Cheers, DELI

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