Market Analysis: S&P 500 - How to Execute This Trade?

4 déc. 2023

SPX

We are on track to reach new highs in 2023, thanks to the November bull run. The overall outlook appears highly positive. However, it's essential to always consider that retracements are a natural part of a bullish trend, helping to establish market structure.

Looking at the S&P from October 2022 to the present, Fibonacci levels have proven to be excellent supports. Delving deeper, the critical support zone is in the range of 4150-4060. This area had been a significant resistance for most of 2023, where the price had stalled.

But how could a trade be executed securely in that zone to capitalize on the last Bull Run?

Lowering our time frame to 4H, let's examine what the price did to break the resistance and transform it into support in May 2023.

The first thing to highlight is the initiation of the upward trend in May, marked by a double bottom at the end of April and early May.



Thanks to our indicator in development, which we will share soon, a clear signal for a long entry was provided.



But without the indicator, how could one identify this entry? Entering long on the touch of the double bottom was aggressive and risky, even with Fibonacci retracement nearby.

Look at the largest candle after the double bottom. The 06:00 (UTC -5) candle shows a strong uptrend in the European session, indicating strength that the American session will later capitalize on.

This candle will never be invalidated. It will only be tested multiple times, always with excellent responses.



Now let's move to the end of the movement. Before the last touch in the support zone we highlighted, there's a large expansion candle at 10:00 on May 17. This will be the candle that sets a new high and subsequently allows the movement to take off. Examining the last touch in our support zone, no candle manages to close below it. This could have been our signal to enter long.



Complicated?
Yes. Thanks to our indicator, we seek to simplify all these steps.

Now let's move to the last area of interest. We can immediately see how our previously highlighted zone still works perfectly even now. Let's add some more information. To begin, a Fibonacci channel and retracement.



Let's see how the Fibonacci channel works well, providing us with many (aggressive) entry points.
But we are interested in going long and having excellent timing.

We find the first bottom in our area of interest at 1:00 PM. Entering the next day in that area would have been very aggressive and would have led us to a stop-loss. We know that the area of greatest strength in support is the last one, so let's see how it performs there.



The next day, the S&P opens with a gap that takes us above the first bottom. This begins to be an excellent bullish signal. Indeed, we can see that the price never touches the minimum.

Once again, our indicator provided an excellent entry at the minimum!



How could one enter without this indicator? The only secure entry occurred at 10:00 on October 30, but taking advantage of it was challenging as it entered our area of interest for a short time. Subsequently, there were other long entries, but the highlighted zone was the best.



Now, however, the situation is different. As announced at the beginning, we are near the highs, so the possibility of strong shorts exists and must be considered. The initial zones for a long entry could be 4541-4521, but always evaluate how the price approaches the support and avoid entering like a kamikaze!