To The Moon

Megacap momentum stocks dragged the tech-heavy Nasdaq slightly lower, while industrials helped boost the blue-chip Dow into green territory. 

The SPY opened lower on Monday but ran into a group of buyers who caused the broad market ETF to rise from its low-of-day. The trading action caused the SPY to print an inside bar pattern on the daily chart. The bellwether S&P 500 ended the session nominally higher.

Inside bar explosive action coming soon

The pattern leans slightly bullish in this case because the SPY was trading mostly higher before forming the pattern, but traders can watch for the ETF to break up or down from Friday’s mother bar on higher-than-average volume to confirm future direction.

The SPY could also be settling into a bull flag pattern on the daily chart, with the pole formed between March 23 and April 4 and the flag being created over the trading days that have followed. The measured move, if the pattern is recognized, is about 6%, which suggests the ETF could spike up toward $430 in the future.

Dip buyers causing a bull flag breakout

"It’s a go nowhere day," said Sam Stovall, chief investment strategist of CFRA Research in New York.

"Investors are still convincing themselves that the Fed will raise interest rates by 25 basis points in May which could add to the likelihood of an impending recession. And investor agita is increased ahead of (this week’s) CPI and PPI reports."

The Dow Jones Industrial Average rose 101.23 points, or 0.3%, to 33,586.52, the S&P 500 gained 4.09 points, or 0.10%, to 4,109.11 and the Nasdaq Composite dropped 3.60 points, or 0.03%, to 12,084.36.

Trade #1

Trade #2

Trade #3

Trade #4

At last glance, financial markets have priced in a 72%likelihood of that happening, according to CME's FedWatch tool.

Recent indicators suggest a softening but sturdy economy, one that can withstand hawkish Fed policy as the central bank works to bring inflation closer to its 2% annual target.

"There’s clearly a disconnect between what the Fed is telling us they’re going to do and what the market believes the Fed is going to do," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "When the Fed repeats time after time what their priorities are and what they’re going to do, they’re going to do it."

Market participants will pay close attention to the consumer (CPI) and producer (PPI) price indexes, expected on Wednesday and Thursday respectively, for a more complete picture on the extent to which inflation cooled in March.

Options trading summary

Bullish traders want to see the SPY break up from the inside bar pattern and the bull flag on higher-than-average volume, which could indicate a longer-term upswing is on the horizon.

Bears want to see the SPY close a trading session under the eight-day exponential moving average, which will negate the bull flag and could accelerate a move to the downside.

🚨 If you find the info useful, I'd appreciate if you could click on Like 👍, Comment 💬 & Repost 🔄 this article found at the bottom of your screen. Follow me for the latest news, trading ideas & strategies to ride the market daily with profits! 🤑

@MillionaireTiger @TigerStars @CaptainTiger @Daily_Discussion