Technical Outlook:
- SPX reversed all of its gains from the day prior and furthering the chop that has plagued the market over the past two months.
- As a result of yesterday’s sell-off, SPX lost the converged 5, 10, and 50-day moving averages.
- Most important for the bears today is whether the head and shoulders pattern is confirmed with a move below 2039 on the daily chart.
- This pattern has been in the making for about two months ago, and is a textbook pattern setup.
- Significant increase in volume yesterday on SPY. It was 50% higher than the day prior and well above recent averages.
- For the bulls, the key will be to reverse this market and close above the 20-day moving average.
- VIX on the verge of breaking out again – needs to see a close above 16.40.
- For the first time since 2/24/16, T2108 (% of stocks trading above their 40-day moving average) is trading below 50%.
- The moving averages are all converging on current price action and primarily that is a sign of a market that hasn’t moved any where in a couple of months.
- The last two times we saw this happen, a massive sell-off ensued (last August and December/January).
- 30 minute chart of SPX barely established a lower-low on the chart.
- If SPX manages to dip below 2040, the ability for the market to move in much bigger chunks in either direction becomes very possible.
- From 2040 to 2138 – you have a price range that is insanely choppy and continues to be such.
- The 50-week and 100-week moving average have crossed two weeks ago to the downside. Last time this happened was 2001 before the tech correction and again in June 2008 before the mortgage crisis saw its major correction.
- I believe at this point, profits have to be taken aggressively, and avoid the tendency to let the profits run – the market is in a very choppy range that has mired stock price for the past two years. Unless it breaks out of it and onto new all-time highs, then taking profits aggressively is absolutely important.
- Historically the May through October time frame is much weaker than the rest of the year.
My Trades:
- Did not cover any short positions yesterday.
- Added one additional short position yesterday.
- Currently 30% Short / 70% Cash
- Remain Long SPXU (ETF that shorts SPX) at $28.30.
- Remain Short MA at $95.98 and one other stock.
- Looking to add more short exposure on a break of the neckline of the SPX head and shoulders pattern.
- Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone
Chart for SPX:
