May 1st, 2024

Sell in May? The bears emerged at the end of April, and this morning at the start of May, they came out strong. It wasn’t what I anticipated, but the silver lining is the increase in volatility, which I believe will persist.

Yesterday, the bulls had an opportunity to push for new all-time highs, but the bears thwarted their efforts, driving the market sharply in the opposite direction. I’m uncertain about the implications for price action going forward, but it seems like this battle is far from over.

From a technical perspective, the market appears to be in a tug of war, with potential for movement in either direction, influenced greatly by interest rates. Currently, the focus is on the Fed, and for someone like me who likes directional trading, the broader market picture may remain unclear and subject to fluctuation.

Regarding the Fed today, I don’t anticipate any major announcements. It’s highly unlikely that the FOMC will introduce any interest rate adjustments. An interesting dynamic between the Fed and the market is emerging, with market sentiments leaning towards prolonged inflation while the Fed remains optimistic about potential rate cuts later this year. Although the talk is dovish, the actions may not follow suit. Geopolitics and an upcoming election in five months further contribute to the two-way market dynamics.

I have identified key levels on the daily charts, and currently, we are just outside the zones, indicating a bearish inclination. If we manage to surpass the following levels: ES 5066, NQ 17,550, RTY 1977, and ZN 107’26, it could trigger a bounce today. Also noticing the bottom bollinger bands on the daily starting to point outward, which would put us back in range expansion and help the bears case for heading to the recent lows.

I’ve decided not to trade today as I prefer to observe the market’s behavior on the first day of the month. The conflicting signals make it challenging for me to participate at this time. I anticipate light trading activity today, and without a clear direction, I lack an edge. For day traders, it’s essential to trade cautiously and not let market fluctuations affect decision-making. Take what it gives, don’t let the market take too much from you.

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