To The Moon

It was the most volatile week of the year for the $S&P 500(.SPX)$ and the second most volatile for the $NASDAQ 100(NDX)$ , with the indices declining 2.7% and 4.9%, respectively. Oversold conditions are overextended in daily timeframes as studied yesterday, but there is still space in weekly timeframes, which is the core of my premium content.

A bottom may be close in term of time, in terms of price action most of the bearish move is in, but we have different conditions in tech versus non-tech sectors, so any bounce must be validated by the recovery of the Central Weekly Level (CWL), and then the longer term structure must recover the Central Monthly Levels (CML) as well.

Every Friday, I post the modeled levels for the week ahead. Based on price action and volume, these levels consistently frame market movement because institutional algorithms react directly to them. This week alone, the SPX topped at 7,716 and closed slightly below 7,391. Both levels were modeled last Friday for this week. My expectation for a technical bounce was validated when price reached that upper boundary. As we have studied, when a level acts as firm resistance, the odds of a reversal increase, just as closing above support increases the odds of a bounce.

We saw this on Wednesday. The SPX showed afternoon indecision just below 7,716, making Thursday’s decline unsurprising, the surprise came from the magnitude of the drop. Fortunately for subscribers, the levels I post include the Central Weekly Level (CWL) that acts as the ultimate directional validator: bullish above, bearish below. The surrounding layers map out the highest probability targets. Placing stops for longs just below the CWL, and stops for shorts just above it, provides the best insurance against violent reversals.

The primary edge here is having potential targets and risk management levels mapped out well in advance across multiple tickers. This roadmap allows you to analyze your preferred setups before the Monday open and assess to where the risk-to-reward ratio is optimal.

In addition to the SPX levels mentioned, consider the precision from last week:

• $iShares Russell 2000 ETF(IWM)$ : I posted 284.4 and 270, which caught the top and bottom for this week. With a CWL of 280.2, stops placed just below protected longs from the broader selloff.

• $Amazon.com(AMZN)$ : Also highlighted as a high-probability bullish setup for this week, it was given a CWL of 241.7 (bullish above) with upside targets at 254 and 268. The price moved from 241.7 right to the 268 target area.

• $Meta Platforms(META)$ : The stock topped at 638.8 and bottomed at 585.2. Both boundaries, along with a CWL of 623.9, were provided last Friday.

How to Use the Levels

Everything below has been covered across the educational posts of the last months, consolidated here so you have one executive reference. For more details visit my educational library, particularly the sections 3. Identifying Setups Using Support & Resistance Levels. and 4. High Probability Setups. You can also download the two eBooks on fundamental and advance technical indicators available in the library:

A) Context comes first

Before any level matters, the broader read has to support the trade. Market regime, higher timeframe bias, sector and relative strength, and the macro overlay of rates and the economic calendar. Directional assessment is key to use the levels accordingly (I provide it in the Weekly Compass every Week).

• The Central Weekly Level (CWL) is the line the entire setup rests on. For a bullish outlook, price must remain above it. For a bearish outlook, it must stay below. This is the line that validates or invalidates the thesis for the week.

• The Central Monthly Level (CML) carries structural weight. A breach here signals trend change, for bulls and for bears alike, and it is the slower, more consequential of the three.

One rule governs all of them: above is bullish, below is bearish. What changes is the horizon. The combinations are where the reading gets useful:

• Above both the CWL and the CML. Structure is constructive on both horizons. Caution before shorting it blindly.

• Above the CWL but below the CML. A bouncing process could be in play. Holding the weekly line is mandatory to validate the thesis, and depending on the distance to the monthly line, the risk can favor longs.

• Below both. Structure is bearish on both horizons, and short term weakness has longer term weight behind it.

• Below the CWL but above the CML. The week has turned but the trend has not. This is where the monthly line becomes the stop reference for anyone speculating on a recovery.

Always use the complete set of levels. Monthly lines help to dimension major overextensions.

B) Price Action is Key

Price near the level is not a trigger. A trigger is a specific confirmation:

• Staying above (for longs) or below (for shorts) the level through the session

• A break and close through it with a momentum candle.

• A retest and rejection, suggests a reversal is in play with shooting stars, hammers, and other reversal setups.

• Volume surge validates a move.

C) Invalidation and where the stop goes

The CWL is the first sign of invalidation. The CML is the major signal of trend change. That hierarchy is the whole risk framework.

Two things to get right:

Never place the stop at the level itself. Algorithms visit these lines and bounce. A stop sitting exactly at CWL can be taken out of a setup that went on to reach its target the same day. Give the stop breathing room.

More than one placement is valid. Below the CWL is the default. Below the first support layer is valid for tighter risk when the price has escalated levels. The CML works for speculative positions that need more room, as long as you accept a potential wider move.

D) Targets and the flip rule

This is the part that does the most work. A target is not just a place to exit. What price does at the target tells you what happens next.

Bullish continuation. When a bullish target is exceeded by the daily close, the odds of continuation increase as that level flips to support.

Bearish continuation. When a bearish target is lost by the daily close, the odds of continuation increase as that level flips to resistance.

Reversal resistance. When a bullish target acts as resistance, the odds of a reversal are high.

Support bounces. When a bearish target acts as support and holds through the close, the odds of a bullish reversal the next day increase.

In bull legs, the odds for a bounce are higher when support is not breached. Indecisive price action augments the probabilities (hammers, dojis, dragonflies, piercings…)

In bear legs, the odds for a retrace are higher when resistance is not conquered. Indecisive price action augments the probabilities (shooting stars, dojis, dark clouds…)

In choppy markets, both cases happen, which is why the daily close is the arbiter and not the intraday touch.

When a target rejects price, the move that follows carries more risk than a clean flip of resistance into support for longs, or support into resistance for shorts. And once a level is reached, the level below becomes the new reference for managing risk on longs, with the inverse applying to shorts.

Price action moves between these lines, often using them as escalators in both directions. That is what makes them usable as a trailing method and that’s the reason why I combine different timeframes: the support that turns into resistance is your guide on the way down, and the resistance that turns into support is your guide on the way up.