Will Federal Reserve push SP500 above the all-time highs?

Will Federal Reserve push SP500 above the all-time highs?

This week we'll focus our attention on the Energy complex. Up move can be expected with Heating Oil presenting the best opportunity. Heating Oil / Crude Oil spread trade is also possible. Possible trades in Gold in Euro FX. And of course still looking for the SP500 to break above the all-time highs.

Crude Oil

I'm looking to be a buyer here. This is a very short-term play. In and out in maybe 2-3 days. What we have is a well-accumulated market. On Balance Volume is stronger than the chart. The 10-year seasonal pattern suggests that the trading range could continue.

Crude Oil analysis 09152019

From a price action perspective, we have higher bottoms. All those bottoms registered higher volume. The daily bars from Wednesday and Thursday ended with a high volume too. Thursday's price action suggested that 54.00 (Crude Oil WTI futures) would be a significant target for the next day. But Friday's move failed to reach it and closed as an insider bar.

Looking at the energy complex we'll see that Heating Oil and Unleaded look stronger than Crude Oil. Heating Oil looks like the winner here.

Heating Oil analysis 15092019

It has the same inside bar configuration. I will be ready to buy signals if I see them in Heating Oil.
Also, the spread trade long heating oil and short crude oil is worth considering.

On other markets. I am expecting a pull-back (upmove in Gold) where I will look to take sell signals. From a price action point, a view Euro FX (EURUSD) might become very interesting if after this huge bar on Thursday we see a few small ranges. Two, three days with not much activity holding around the highs or slightly declining.

Stock Market.

  • The Economic Surprise Index turns positive showing stronger economic data than the consensus.
  • ECB cut interest rates and approving a new round of bond purchases
  • Federal Reserve is expected to cut interest rates with 0.25%
  • The yield curve is returning to its “normal” shape
  • Russell 2000 small-caps stocks index is gaining speed

With all this, the S&P500 is now where it was right before the previous FED meeting. Strange, isn't it? We are also in striking distance of the all-time highs.

Most traders are viewing such situations as very good opportunities. If you sell here, your stop is above the previous top while your target is way down. Technically, you can expect the market to go first to 2940 and then even 2800. This is a fantastic risk-reward ratio. That's why I think right now most retail traders are positioned on the short side.

If you also want to enjoy this “opportunity” I suggest you take a hard stop. It's always possible to see some down days (because of tweets or FED's decision rates). But the best trade is to wait for this down move (if it happens) and then be a buyer.

Like I wrote last week we are going above the all-time highs and probably this time will stay there longer.

Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading

Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer

Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com

TAGS: FED, Federal Reserve, Euro FX, EURUSD, SP500, Gold, Crude Oil, Heating Oil, Price Action Trading, Seasonality

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