Macro micro trader

This one is a quick update post FOMC as I’m on the road and won’t be able to update much with the limited tools on the phone. From the macro perspective, markets now believes that the Fed would be able to tame inflation and would also bring economy crashing down towards recession. Whether that would happen or not is something to be seen over the course of next 6-12 months. For us, as traders it is important how we make the best out of the situation ahead of us.

Here’s what I think ES is doing: As mentioned in the last weekly update, this week turned out to be as choppy as it can get. And in turn it is headed lower as markets are now driven by higher time frame charts – weekly, that is. Last week’s bearish engulfing candle was one that gave enough clue to short the rallies. We did get enough opportunities around 3920, but I kept waiting for a bit more towards 3940, which was never to be. Yet we went short by the day end after the relentless selling post Powell presser. Following charts explain why:

As visible on the chart, bulls have been successfully able to defend the 3840 zone for the last 2 days and that’s no co-incidence. It’s a 4H demand line and have been respected even during FOMC today. Only when it broke down, convincingly, did we go short at 3820. But the question arises, where do we go next? Following chart explains where:

What we see here are two demand lines – one at 3691 (4H demand zone) and another sits far below at 3398. My base case view is we would be making a new low towards 3400 before bouncing back hard. There will be intermittent bounces between 3645 (June low) and 3720 (small support), but all those bounces would eventually get sold into for a final target of 3400. For weekly MACD to give us a positive divergence. Unless we see weekly momentum diverging even as ES makes new lows, we can not form any intermediate bottom in the market and all the rallies will get sold into.