Deciphering SPY's Candlestick Chronicles: Insights for Navigating Market Volatility

Plot Twist: Conflicting Candlestick Breakdown

05/03/2024

Hey Trader,

The S&P500 is toying with traders' hearts but as a passionate fan of this reality show it's easier for me to be the third party and see the bigger picture.

SPY printed two VERY interesting candles consecutively. We have a gravestone candle and a shooting star candle. In short, gravestone is just what it sounds like, it usually signals that we're going to have a blood curdling sell off. While a shooting star is, well, a magical spontaneous reversal!

The market is already ripping this morning after the jobs report. We could possibly see signs of a sell off but the more important thing is an absolute blowout reversal!

My favorite trading female Licia Leslie was a guest on our show yesterday while I'm traveling to NJ (side note, can't WAIT to have myself some Italian, anyone from Jersey reading this please tell me some good spots). She is incredible at reading candlesticks, but I'm sure she'd agree it really is an art not a science.

FIRST and foremost a quick how-do-you-do on these candles. Normally, these candles need to be at a HIGH / LOW to be the strongest of their form. Both of these are recently printed in the middle of a pattern, so it gives them less conviction.

Additionally, these two conflicting candles have the ultimate moderator to settle the debate… the VOLUME PROFILE + a li’l history baby.

I went back and found the most recent time that we had this similar pattern. It was right around October of 2023. If you don't know the power of October of 2023, I will tell you right now, it was when the BULL MARKET STARTED. Ahhem. If you look closely though, these two candles created another sell off and then BOOM we went off to the races.

People, persons and places, this is it — I'm convinced. Because the volume profile is giving us resistance exactly where we are, with a tad more follow through of a sell off, just like in October. What I'm saying is, once we hit our downside target which will most likely be next week, we're going to sell off next week and reverse like crazy into the election.

Mark’s up next with his Market Spotlight and some interesting data for AAPL and AMD!

Market Moves Spotlight

By Mark Sebastian

More economic news was posted this morning.

We are consistently seeing event risk underpriced on these major events. Heading into this week, I was able to buy a 2 week straddle (a call and put on the same strike — I was looking for movement) for about 90 dollars.

We moved more than 80 dollars the following day, and more than 20 the next. At 40 dollars the ATM straddle into non-farm payrolls seemed incredibly inexpensive.

If you aren’t already in a straddle this time, the next major release of news is CPI on May 15th… my guess is options will be too cheap before that as well. Take that into account.

AAPL was pricing in a less than 4% move into earnings. It moved almost double that amount yet again. Options are too cheap into events.