Sentiment: Neutral

Weekly Chart:

From a weekly perspective, during the final week of 2024, the bulls faced significant challenges in attempting to resume the bullish trend following the sharp collapse before Christmas. Prior to last week, I maintained a bullish outlook on the market's behavior at this level. However, after observing last week's price action, it now appears the market is transitioning into a trading range (TR).

Since July 2024, the market had been in a clear bull trend, with a obvious adjustment in September. Following that, the trading range was decisively broken out of (BO) and tested, leading to a strong bullish continuation. The breakout was exceptionally clean, with minimal overlap, highlighted by the large bull bar during the week of the presidential election (Yellow Section 1).

After reaching an all-time high (ATH), the market reversed sharply, retracing about 50% before continuing the bullish trend. However, the issue emerged again after the market hit a new ATH in mid-December, and the momentum of going up was weak. This time, the reversal was more pronounced, with the market testing levels even lower than the previous 50% pullback (PB). While the bear bars in this period have long tails, indicating some bullish buying pressure, they remain bear bars. This suggests bears are actively participating in the market and seeking opportunities to gain control—unlike earlier phases, where the bears struggled to challenge the bullish dominance effectively(Yellow Section 2).

Daily Chart

From a daily chart perspective, over the past two weeks, the price action has formed both higher lows and lower highs, accompanied by two legs down. Assuming this is a trading range, these characteristics slightly favor the bulls(since it is in the bottom of the TR). However, it’s crucial to remember that the market behavior should align with typical trading range dynamics. Key points to consider include:

  1. Two-Leg Movement: In trading ranges, price often exhibits two legs up or down before reversing, which is consistent with recent price action.

  2. Vacuum Effect Near Boundaries: If the price moves rapidly toward the boundary of the range, it may create a vacuum effect, drawing price quickly to support or resistance levels before stalling or reversing.

  3. Breakouts Are Likely to Fail: In trading ranges, breakout attempts often fail, resulting in reversals back into the range.

5 Mins Chart

The opening of the next Monday will be pivotal. If the price opens higher with a gap (Green arrow) and successfully tests last week's close, it would indicate a successful breakout (BO) from this small trading range (TR). In such a scenario, there is a high probability that the bigger TR will solidify, and the market will likely transition into a two-leg bullish trend in that bigger TR for the week.

Conversely, if the price opens below last week's close and tests the resistance without breaking out, the market is likely to head lower, targeting gaps 4 and 3 with minimal hesitation. Should the price fail to find support at these levels, the TR assumption becomes invalid, and the market is likely to shift into a bearish trend, potentially testing at least 5800—the bottom of the significant bull bar from November.