Deep analysis of the US stock market. How will the end of April end? We are the beginning of Q2CY2018 for the trading calendar year. April is almost over which is the first month of the quarter. It is time for a deep analysis of US Stock market.
Let’s first start with the US Stock markets. We are looking at mid to long term view of the markets so we will analyze only the Daily, Weekly, and Monthly Timeframes. Forecasting of the US Stock market can best be seen through two products. One is the $ES Emini-SP500 and the $VIX Volatility Index.
Here is the monthly chart for the $ES, Emini-Sp500.
We are in a nice bullish trend. It is very strong because we are holding the red line which is the 9 month support at 2638. There is a multiple time frame support at this level. As long as we close above this level every month, we will maintain a strong bullish trend.
Lets now look at the weekly time frame to get a closer perspective if we have any chance of breaking the monthly support.
The weekly time frame is showing a major bullish trend too. However, there is a high probability of a major pull back to the cloud to occur as long as the resistance at 2704.50 holds. The support that will cause the major pull back to occur will be 2575.25. Therefore, we are ranging between 2575.25 and 2704.50 with earnings season just beginning.
Let’s look at the daily chart and see if we can get a better view:
The daily tried 3 days ago to go bullish because it closed 2 day in a row above the cloud. The sentiment went from consolidation to bullish when this occurred. However, there was no bullish momentum at all!. Therefore, a pull back occurred. The daily is showing we are consolidating between the weekly support and resistance. However, the daily is indicating that if we can break the resistance, we will have a high probability of starting a bullish trend because momentum will finally be on the bulls side.
In conclusion, patience is the key. Long term the view is bullish. However, caution has to be taken because we are not far from the major support which can cause a weekly major pull back. We will be looking for both day and swing trades both bullish and bearish but more heavily towards the bullish side.
Let’s examine the $VIX, to see if we can get a better insight. The $VIX has an inverse relationship with the US Stock market. What does this mean? If the $VIX goes up, the stock market goes down. The opposite is true too.
Here is the weekly chart of the $VIX
The weekly shows bearish even though the sentiment is bullish (above the cloud). The reason is the green 26 week line is a resistance. It should be a support with a bullish support. As long as this resistance holds, the $VIX has a high probability to get below the cloud and change sentiment to bearish. This is the same thing that the $ES was telling us. There is also a bearish timing influence until the end of the month.
Here is the daily chart:
It clearly shows bearish with the multiple time frame resistance at 20.24. We retest the last low but we did not break it due to momentum. However, if we retest the low again, the momentum will be on the bearish side and a bearish trend will have a high probability of occurring.
Between the $ES and $VIX indicate the bigger rewards is for towards the markets going bullish. This is why we will be looking towards bullish trades this week from both short term and long term. We will look for bearish trades but we will be very conservative on our approach.
Here are the stocks that are bullish in the stock market:
Here are the bearish trades in the market:
We will look at the monthly seasonality of $ES provided by www.alerttrades.com for free!.
Below is the daily chart of the $ES with the seasonality included on it.
Seasonality shows there a 90% probability of the $ES being bullish at the end of the month. The SIV which stands for Seasonal Index value indicates that the market will consolidate. We need the SIV to be above 10 in order to indicate a trending month. Therefore, it will be a bullish consolidation month.
The predication shows an average % movement of 3.2% with draw down of 1.6%. The reward/risk is 2. Look at the chart, we had a draw down of 3% this month. With a reward/risk of 2, it shows the average reward if past patterns repeat will be retesting the high which is the top of the consolidation pattern.
The seasonality of May is the same i.e. bullish consolation with a worse reward/risk.
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