Market update for the week of 8 May

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Recall on 1 May; this chart shows the “tapering” effect since Oct 2023, where the yellow line shows the uptrend of aggressive buying while the channel shows a gentler slope, which is a lesser strength of buying in an almost-ranging market. ‘

We are back in that channel while the medium-term outlook is still uptrend. However, notice an immediate resistance level at 419-420 in the channel area, which we will need to break out for a further upside signal.

We can observe that the channel top line has been the selling pressure thus far, so breaking above 419-420 is crucial, and there are catalysts for that. We have the CPI on Wednesday and PPI on Thursday. So looking out for this critical level.

On a lower time frame, 410 is an important level to defend in the immediate term if we are to continue moving uptrend. That is why we have not advocated a swing short on the market, as this line is a pivotal area.

A short position can be activated if it breaks below this level, an even attempt to recover but is still being pushed down; it gives a strong signal of a downtrend forming, which could break the short-term uptrend structure. This is when a prior support level becomes a resistance level. Hence, look for a re-test and a sustained push-down before taking any shorts.

The pressure we are now getting is from the banking turmoil. It is ok to miss any signals because there were always be new opportunities.

We are still seeing the continuous buying structure in the short time frame chart, so it has not been advisable to short at this time frame.

So to reinforce, you would want to go down from 1 and then 2 to test the prior support and pressure down again to 3, where the previous support at 410 becomes a resistance.

If not, you will encounter a bear trap, as seen in last week’s sudden pullback, where we showed our trade plan that there is a possible return path during last Friday and the market moon back up to the ranging level.

So, that is the trade plan for next week, and we will keep you updated along the way.