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Today, the market formed another intra-day choppy consolidation day with the daily trading range.
Market like this one can eat a trading account with whipsaws and commissions. At times, the best position is sitting out.
Here is the day's overview.
Market Conditions & Daily Chart Assessment
- Overall bias: Markets in a consolidation phase — neither a confirmed distribution top nor a continuation breakout; outcome still unresolved. 1
- Daily charts described as "tightening" across all major indices — moving averages converging, ranges contracting, signaling an impending directional move. 2
- S&P / Spiders: Trading inside yesterday's range after gapping up on inflation news; no significant structural change on the daily chart. 3
- IWM / Russell: Shifted from a self-correcting uptrend to a neutral/coin-flip pattern; described as a rounding top on the intraday chart. 24
- QQQ / Nasdaq: Whipping back and forth; gapped up, pulled back, filled the gap toward support — no directional conviction. 5
- Dow: Strongest performer intraday; Goldman Sachs gapping up contributed to relative strength. 6
- SMH / Semiconductors: Gap up placed price in the middle of the trading range — "in the void" between support and resistance, directionless. 7
- Software stocks (IGV): Showed relative strength; gap down was bought, forming potential bottoming patterns; IBM was a notable drag after issuing a pre-earnings warning. 68
- Key reference level: 7,500 identified as the middle of the broader trading range for the index being tracked; prices have been gravitating around this level for weeks. 9
Catalyst: Inflation Report & Market Reaction
- Positive CPI/inflation number released pre-market → interest rates pulled back → markets gapped up. 1
- Greg cautioned the reaction was backward-looking: oil prices had been declining when the data was compiled but are now rising again, creating a potential future inflation risk. 3
- Market euphoria faded quickly after the open — S&Ps settled back to the middle of yesterday's range, illustrating the gap-up-then-fade dynamic. 3
- Fed Chair testimony (likely Powell) played live during the session; Greg monitored it but noted markets were largely unresponsive — "just flip-flopping" while he spoke. 1011
- Key Fed commentary heard: economy described as "solid," labor market "markedly resilient," commitment to price stability reiterated — but no specifics on how inflation would be addressed. 121314
- Greg's editorial observation: "Not one of them asked him what he's going to do about it" — pointing to a lack of substantive questioning from Congress. 15
Options Market Observations (Extreme Strikes)
- Call strike moved up 5 points while the put strike dropped 30–40 points — strikes moving in opposite directions, reflecting diverging bull/bear sentiment. 3
- This widening gap between call and put strikes signals that market participants are becoming more polarized in their directional opinions. 9
- Moving averages on the options-related chart described as "so tight" — consistent with the broader consolidation narrative. 9
- Greg's conclusion: extreme strikes serve as reference points for where prices are unlikely to go on any given day, not targets. 9
Individual Stocks & Setups Discussed
Bullish / Bottoming Patterns
- HPE (Hewlett Packard Enterprise): Featured as a primary teaching example — above all moving averages, downside shakeout pattern, sharp advance, consolidating at minor resistance with a void above; declining 200 MA noted as a potential near-term obstacle but major resistance not until ~$8.50. 1617
- Western Digital: On support, retesting a pivot, gapping up to resistance — identified as a candidate for a high-probability put credit spread if premium is available. 18
- Bitcoin: Forming a bullish 180 (engulfing yesterday's red bar), clearing prior highs — bias is higher. 719
- Ethereum: Described as looking "even better" than Bitcoin — downside shakeout, bullish price action at resistance. 7
- CrowdStrike: Continuation pattern, performing well — "pretty damn good." 20
- ZS (Zscaler): Converging moving averages, next to a red-bar-ignored setup — bottoming pattern. 20
- FTNT (Fortinet): Incredibly strong, new all-time highs, no overhead resistance — described as a self-correcting uptrend; Greg suggested share-sizing below the swing low for swing traders. 2122
- OZK (Bank OZK): Regional bank showing upward movement, though pattern not described as ideal; later formed a topping tail, weakening the setup. 2324
Bearish / Cautionary Patterns
- DRAM: Rejected at the declining 50 MA on initial move up — potential short with stop above the high of the day; Greg covered the position during Fed testimony. 2526
- IWM / TNA: Rounding top pattern — "pretty obvious"; not a high-probability long at current levels. 24
- IBM: "Getting destroyed" — monster move to the downside on a pre-earnings revenue warning. 68
- JPMorgan: Gapped down to the bottom of its trading range (while Goldman gapped up) — illustrating the "bipolar" sector action in financials. 6
- SPCX: Made new lows; an analyst upgrade cited was dismissed by Greg as likely a self-interested call. 27
- Tesla: Gapping up slightly near the bottom of yesterday's range — no support structure; Greg said he would become a believer only if it turns around convincingly. 27
Neutral / Developing
- Gold: "Jiggling around," up slightly on the news. 7
- Silver: Appearing to make a low. 7
- Crude Oil: Continuing to push toward $80; described as the "real inflation concern" if it continues higher; backed off slightly during the session. 628
- NVIDIA: Gapped up, trading inside yesterday's range; on support — watching for buyers to show up. 2329
- Apple: Big topping tail yesterday, trading within a range — bought this morning but sold yesterday. 23
Key Technical Concepts Taught
Bar-by-Bar Analysis & Bias Formation
- The core methodology: create a bias first, then look for price pattern confirmation. 30
- Example applied: after a bullish wide-range bar (explosive move), the belief is buyers will appear on pullbacks — then watch for a bottoming tail or reversal near a pivot line. 530
- Topping tails weaken resistance: "The depth of penetration into this area weakens it — it's less potent as a reference point than it was three days ago." 17
- Bottoming tail bar = key confirmation signal for potential longs; multiple instances cited (IWM, TEAM, Russell futures). 3132
The Void Concept
- Void = a lack of support or resistance — when something gaps up, it leaves a void below; new all-time highs create a void above. 16
- Practical application: if a stock clears resistance into a void, it has "very little to stop it from going up" — HPE used as the primary example. 17
- Volume profile visualization was used to show the void concept visually as "a big empty spot." 16
- Sellers have no meaningful reference point to sell into within a void → self-fulfilling upside momentum. 17
Trader Pivot Lines & Self-Fulfilling Prophecies
- Pivot lines work because many traders watch the same levels simultaneously — creating bids at those points. 5
- Greg noted that the Ninja Trader platform's pivot line calculations don't align with TC2000 and TradeStation — had to have them adjusted.
- Everything in technical analysis described as a self-fulfilling prophecy to varying degrees — the universality of support/resistance concepts being the strongest example. 33
Moving Averages as Visual Aids
- Moving averages (20, 50, 200) described explicitly as "visual aids" — not decision-making tools in isolation. 32
- The convergence of the 20 and 50 MA on the ES futures chart highlighted as another visual confirmation of market contraction. 2
- Declining 200 MA on individual stocks noted as a potential obstacle but not an absolute barrier. 1734
Credit Spreads Methodology
- Greg's approach: credit spreads are based on price pattern probability, not the Greeks. 35
- Key question: "Is there premium where I believe it won't go? And what's the date to expiration?" 35
- Greeks (Gamma, Vega) described as "irrelevant" to his process — the pattern determines the trade. 35
- Western Digital cited as a textbook example: substantial pre-market move, on support retesting a pivot → low probability of returning to the downside by Friday. 1835
Downside Shakeout Pattern
- Defined as: sharp drop → sharp advance — the aggressiveness of the buyers on the recovery is the key signal. 33
- HPE example: earnings-driven gap down, went sideways, had the drop, then sharp advance — "buyers were very aggressive." 33
- Contrasted with a "sloppy" version (the Chinese broker-dealer stock discussed) where the pattern is less clean. 34
- Above all moving averages + downside shakeout + void above = highest-conviction setup. 1733
Trading Psychology: Alex's Confession & Greg's Response
- Alex shared live: While monitoring the chat room and becoming bored during a slow market session, he simultaneously played online poker — and lost $40,000 after being up $60,000 (a $100,000 swing). 36
- Alex's self-assessment: "I know that when I'm not focused, I will lose money." He acknowledged he can recover the amount in approximately two days but expressed strong self-criticism. 36
- Core lesson stated explicitly: "Please consider trading as a business. Not as time-killing, not like when you're bored, go back to trading." 36
- Alex reinforced: do not do two things simultaneously when money is involved — referencing Greg's own initial course material. 37
- Greg's response: focus requires a method, not just staring at charts; understanding that buyers are at support and sellers at resistance is the foundation, but a systematic methodology is what enables true focus. 37
Trading in the Zone — Book Discussion
- Greg referenced Mark Douglas's Trading in the Zone — asked the room how many had read it; assumed most had but noted even those who read it may not have fully internalized it. 38
- Core takeaway from the book: Trading outcomes are random at the individual trade level — you cannot know which specific setup will work. 39
- This "flies in the face" of technical analysis instincts, because when things line up well, it feels like it should work — but it doesn't guarantee it. 39
- Greg's synthesis: "I have a belief that if things are set up in a certain way, this one has a higher probability of working than something else" — but the randomness means money management is the true equalizer. 40
- Douglas reportedly did not emphasize money management in the book — Greg identified this as the gap: position sizing and risk management are how traders operationalize uncertainty. 40
- The psychological difficulty of trading stems from being "programmed to do a good job" — our wiring creates a need for certainty that markets don't provide. 41
- Practical resolution: if the edge (setup) is present, just take the trade — the money management handles the outcomes across a series of trades. 40
Market Context: Macro & Geopolitical Factors
- Oil: Trending back toward $80 after a period of decline; Greg flagged this as the real inflation concern going forward, particularly if it reaches prior highs. 6
- War/geopolitical uncertainty: Referenced as a key reason for the market's indecision — "Liberation Day," conflict overseas, and an intraday Fox News report of Iranian missiles attacking tankers mentioned. 642
- Bond market: Described as "confused" — bonds up (rates down) on the inflation number, but daily patterns not decisive. 6
- Greg's macro view: the Fed cannot meaningfully pay down the debt; inflation management is constrained by structural factors beyond their control. 43
- AI/technology commentary (from Fed testimony broadcast): Fed chair expressed optimism about the U.S. being a "big winner" in AI productivity gains long-term, while cautioning about near-term monitoring needs. 4445
Session Observations & Trader Guidance
- Gap-up behavior: Explosive pre-market moves (bullish wide-range bars) create a bias for buyers on pullbacks — but if the gap up gets sold and fails to hold, the bias must be reassessed. 2930
- Counter-trend trades: Only justified with multi-timeframe alignment — e.g., IWM plummeting to a 65-minute support level while a 5-minute bottoming pattern forms creates a tradeable setup even against the daily trend. 46
- Volume: Treated as secondary to price — only volume spikes catch Greg's attention; when combined with a location (support/resistance) and a turn, it increases confidence but price action alone would still signal the trade. 4748
- Market makers: Described as reactive to order flow, not creators of it; Greg shared a story about a former market maker who traded purely by reading the tape ("follow the elephant" — track institutional order flow). 4950
- Upcoming catalyst: PPI report and Fed's Walsh speaking again the following morning — another potentially volatile open anticipated. 51
Action Items
- Greg → All participants: Review HPE daily and weekly chart as the model example of a downside shakeout + void setup before next session.
- Greg → All participants: Watch for Western Digital to confirm whether put credit spread premium is viable at the open.
- All participants: Monitor tomorrow's PPI release and Walsh commentary at 10:00 AM for potential market-moving reaction similar to today's session.
- All participants: Re-read or revisit Trading in the Zone with specific focus on the randomness of outcomes and how money management addresses it — per Greg's recommendation. 40
- Alex → Self: Implement strict single-task discipline during trading hours — no concurrent activities involving financial decisions. 3637
Open Questions
- Will the current consolidation resolve as a continuation breakout to the upside or a distribution top breaking down? — explicitly unresolved. 1
- Can HPE clear its minor resistance and move toward the $8.50 major resistance level? 52
- Will software stocks (IGV, FTNT, ZS, CrowdStrike) sustain their bottoming price action into a confirmed uptrend? 53
- How will oil's continued rise toward $80+ interact with future inflation readings — and will the market begin pricing this in? 6
- Does the Iranian tanker attack news (reported near session end) represent a meaningful geopolitical escalation or just intraday noise? 42
