Market Outlook for the Week of May19th

Last week was a fun week. I made money during the first half but second half was a poor performance for me I have to admit. The main problem I see I did was that I tried to fight the market because of my own bias and I paid because of that.

Right now I am still holding some shorts but its very minimal and hedged. I booked the rest of them as I was not comfortable with them and also I admit there is a good possibility of an upward run.

One thing I have to say. The uptrend from the very recent lows was quite weak till now. It remains to be seen whether it gets stronger over the next couple of days. This is my plan. I will wait to see how the next couple of days pan out. If it remains strong, I will close my shorts and flip bullish. The points I am watching on the upside is 5180/5190 first and then 5220.
Go above this and possibility of going above 5300 to 5500 becomes are very strong possibility.
But we will get to that later. Lets first examine the charts. I will start from the weekly, drill down to daily and finally hourly. I am trying here to be as neutral as possible even though my obvious bias is still bearish - probably due to the fact I am holding shorts.

Ok weekly chart attached above. I have added some comments on it. MACD crossover on a weekly is one of the most bullish signals we can get. But this is a very very lagging signal and to be used for longer term. We are not yet there and there is a good possibility for some pullback in price before the crossover. And more often than not, crossover will not be followed by immediate rallies. For now what this indicates is a die down of selling activity.

For me next 2 weeks are important for this weekly chart.

Next the daily. Again comments are added in the chart.

Stochastics have given a bullish crossover. This obviously supports the bullish case and kinda says holding shorts are dangerous. But gut feel tells me we might get some weakness next week. I will watch the next couple of days very closely before deciding to close or hold onto my shorts.

Next heres the hourly.

Most of my comments are on the chart. This whole channel over here is what defines the market today. Watch it closely. There were some indications that it could be broken last week but it pulled back in to continue the bullish momentum. My thought was that a lot of the rally last week had to do with short covering than fresh buying. This should be a red flag for us. Short positions in the system if fairly large, help keep the market from going down too much. If they decrease AND speculators start moving toward the long side, it can be dangerous. But short term this chart is bullish as long as we are in this channel. As I said before next couple of days will be very important for me. Strength will mean I am wrong and I will close the shorts and probably flip long.

Have a good trading week all. Please vote also in the poll on the right side.

Best.