Market Pulse: Bullish Optimism




Two factors keep the bulls optimistic these days: one, the hope that Q2 earnings, which are just starting, will show solid growth. And two, that the Fed will not raise 1% at its next meeting. The sentiment that I perceive in some traders (mainly in the media that usually sells smoke, and the dumb money) is that the market seems to have bottomed out and is beginning the return that will even lead the SP500 to finish positive in the year just "because history says so: in an H1 very bearish, the market always recover strongly in the second half year". An absurd. Smart money is still not buying massively, waiting like a crouching tiger, seeing this short squeeze from retailers.

I really do not see the logical basis for such optimism. To think that companies, under 10% inflation and a certain recession soon that raises their operating costs (producer price index 11.3% now from recent 10.9%) and final price, plus a consumer adjusting his pocket (consumer confidence near all-time lows), can give future earnings similar to previous quarters, is, to say the least, naive. Or "this time is different"?

Ok, the stock market isn't the economy, but on the other hand, "celebrating" with this rising week the fact of a sure rate hike of 0.75% (!!) instead of one 1%... is crazy. Must be the times we live in.


Technically, I think we are facing a short-term recovery on this market' bearish path to a "big low". The SP500 is trying to form a short-term bullish structure (HH-HL) at a time when it moves in a (yellow) key zone, breaking, even timidly, the (ocher) strong downtrend line that has resisted it, since April. And as if that were not enough, attacking now its (skinny light blue) DMA50 and its (ocher) 3-week range at 3920. It must be taken into account that transaction volumes have been quite low, due to seasonality, which exaggerates market movements.




In other words, an important break that needs price action confirmation in the coming sessions, which would soon take it to 4100, where it will found a structure level, the (blue) DMA100 and the Fibonacci 38.2% of its annual decline. That zone (yellow), the next critical key level, seems to be an excellent place to sell highs.

So, I continue with my conservative swing trades, without building a long portfolio at current levels until I see the market capitulation. I could be wrong, it's much possible, but it's my vision.

Good trading,
@BravoTrader

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