As expected in the last weeks bulletin, the market continued its upward movement to test the prior (all time) high. The all-time high area being a supply zone, a drop from there is expected. The pre-market activity on Monday morning (16 September 2019) confirms the same – as we see a pro-gap in both SPY and QQQ.
Given that the market is coming there for the third time since leaving the area, we can expect that the supply area is weakened (unless the market proves it to be strong). This is clearer from the intraday – hourly action.
We also notice that third re-entry happened with lower volume than we had experienced earlier in August when both these markets dropped from the respective supply areas. If the market drops from here, the consolidation area marked by dashed horizontal lines is not too far – and first line of demand would come in that area. Not surprisingly, the dashed line also happens to be around 38% Fib retracement, adding to our confluence points.
Technically, we expect bulls to dominate for some time, and we can expect the market to continue upward before next month’s earning season starts. FED announcement is due later this week. Given the FED chair’s dovish view on the market from earlier in the month, we can expect the statement echo the same sentiments. If all this happens as expected, we can see the market clearing the recent high this week. However, we advise traders to follow strict risk management rules while trading.