Technical Outlook:
- One of the largest bounces the market has ever seen unfolded yesterday, sending SPX back above 1900 to 1940.
- These dead cat bounces can easily last 2-3 days before the selling resumes.
- Here is what you should be asking yourself – in six days, SPX drops 234 points non-stop – over 10%. Are we really to assume the sell-off is now over in just six days and we are all going to be back on the road to new all-time highs? I think not.
- SPX looking to break above the 5-day moving average today at the open.
- Volume on on SPY remains extremely elevated, but has faded over the previous two trading sessions.
- Volatility continues to drop, but remains quite elevated at 30.32. It dropped yesterday 15.8%, which considering the amount of yesterday’s rally, would have seen a bigger drop.
- T2108 (% of stocks trading above the 40-day moving average) saw a 59% increase to 9.7% – not unusual to see such large rallies when the indicator is at such a low reading.
- Potential base forming on SPX 30 minute chart – a move over 1954 would be considered significant and could lead to the market rallying further from here. At the moment SPX is poised to open above this level.
- Still the objective for the bears will be to 1) resume the downtrend and stop the dead-cat bounce 2) Break below the October 2014 lows of 1820.
- Trade nimble, be careful about holding positions overnight, because the volatility is still at extreme levels and much of the daily moves are happening before the market ever opens.
- The current market conditions makes it very difficult to swing-trade positions overnight simply because the risk cannot be contained with the trade parameters. That doesn’t mean that I won’t consider holding a position overnight, but it has to be aligning well technically.
- It stands to reason at this point that the Fed will not raise rats in September – possibly not even this year.
My Trades:
- Bought SDS yesterday at $54.29 and sold it at $54.73 for a 0.8% gain.
- Did not add any new swing positions yesterday.
- Did not close out any swing positions yesterday.
- 100% cash
- We have a bounce that is underway, with yesterday’s rally. Ultimately I think it will prove to be an opportunity to short.
- Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone
Chart for SPX:
