Price Is King, Though Bearish Signs Visible

The bull market continued to surprise on the upside last week. Apart from the brief correction on Thursday, the market just continued to grind higher and ended up very close to the highs of the week.

What's next?

All of our indicators are mixed/neutral this week as price continues to grind higher. Price action is clearly bullish as the market grinds higher, pulls back, finds support and then continues higher -- rinse and repeat. Internals looked decent until the second half of the week but fell off the cliff on Thursday and did not recover with price on Friday. So some bearish signs are clearly visible there. Open interest data also looks bearish on our review today. But price is still king and should be given the most importance.

Regardless, with all of these warning signs we are seeing in the open interest and internals, we need to be on alert now for a correction being possible sooner rather than later.  Note:  Just a correction.  Nothing suggests anything more than that at the moment. As always, we will continue to use our indicators, systems and trade process to guide us in our trading and positioning in the market.

ES Grey Zone areas:  The grey zones on the Emini S&P 500 (ES) 5 min chart below are what I draw in on a discretionary basis.  They are support and resistance areas which the market is most likely to react from. If we test a zone from below, it is likely to be rejected and fall lower to test support zones below. If we test a zone from above, it is likely to take support there and begin a move higher. So these zones can be used for intraday trading and/or as entry points for positioning for swing trades. These zones are drawn in based on what the market has done there previously both on smaller and larger timeframes.

Grey zone support now at 2999-93, then 2976-72. Resistance zone at 3023-29 and then 3040-3046.

For Monday daily pivot is at 3019.5. Resistance R1 is at 3033 and R2 at 3043. Support S1 is at 3009.5 and S2 at 2996. 

All the best to your trading week ahead.

Princely Mathew hosts The Smart Money premium service at ElliottWaveTrader.