Just kidding, I know the answer.
Last week here, I was bullish overall, but biased for a minor pullback. However, I wrote “Although I am biased toward a minor pullback ensuing next week I am open to the possibility that it won’t take place. What would change my mind is a further rally above Friday’s high with internal and/or external accumulation signs.” It really took no time at all to change my mind and Monday morning I got more long then I already was rather than taking profits on what I was currently carrying into Monday. It was a huge week for us at SassyOptions.
Last week I also mentioned that a 2011 like scenario could take place where roughly half the gains from the bottom were given up, but that I found it unlikely. To keep an open mind though, I noted a few things to look for to help determine the warning signs that major weakness was ahead. Below is the list (which can be used in the future as well) and now we know answers: yes, yes, no and no.
- Does the market make a higher low on a weekly closing basis?
- Does SPX close above its weekly 50-day moving average?
- Do any days next week show external distribution (volume)?
- Do any days next week show internal distribution (breadth)?
Main view for next week: I’m neutral as to whether we move higher, consolidate sideways or pull back. You may not find that helpful, but I’m not going to lie and tell you I have a strong viewpoint about where it is going. However, until I see internal or external distribution, buy the dip (likely small ones) is the game plan. Furthermore, as long as the market remains strong, I will be taking advantage of big moves in strong stocks (AMZN, GOOGL, NFLX etc).
20-day highs: This continues to hang around the middle area and I remain aware that they are not surging with new SPX highs. Since they are not breaking down either, all I can do is continue to monitor its development. Given the current bullish environment, should this breakdown next week to oversold levels (5% or below), it would be a place to buy the dip.
20-day lows: I find this to be much more sensitive when it’s not hanging at the lows. Friday put in the first surge since the September bottom. This could possibly be a first warning sign and something that should be carefully monitored over the next couple of weeks.
SPY Open Interest: For the last few weeks, I have paid relatively less attention to the open interest. This is because during a strong market surge, it has less chances of being helpful except that it strengthens the bullish case when it heeds no attention to high strike calls (the same is true for downtrends and puts). Last week SPY did pin at the area that would leave the most calls and puts worthless (to understand this concept more read here), so it’s possible the market is going to begin a slower period of consolidation and something I will be monitoring relative to the open interest. As of right now, the best pin is 210 (which should come as no surprise given SPY closed right about there Wednesday, Thursday, and Friday); however, any large moves early next week will likely change the pin (I will post updates of changes should they occur over twitter).
To analyze it a bit further, the graph below strengthens the bullish case and any pullbacks under 210 have high odds of being bought up. Should 210 not hold there is technical support at 208.46 (Friday’s low), 207.75-208 (also a high level of puts). Anything below 207.50 targets the 200 day SMA (206.36) or the gap fill 205.51. Above 210 (and particularly above Friday’s high 210.32) targets 211, 211.66, and then likely a retest of the highs.
Final notes: The good jobs number on Friday and interpretation that it will result in a rate rise gave the market a great excuse to sell off. The fact that it didn’t is important information and if there is more upside follow through next week or a failure to break nearby support, there is no reason to be bearish. Furthermore, if financials continue to break higher (due to a perceived rate hike), it’s unlikely for the market to breakdown.
Just one more thing: There are currently so many huge stock moves taking place after eight months of chop with only select sectors taking turns. If you are a trader, TAKE ADVANTAGE!!! These surges only come every so often and can have a major increase on your p&l. If you need assistance in finding the big movers (with real time trade alerts), and want daily analysis of the overall market direction, consider joining us.
Did Wall Street or Spain Term the Phrase Running of the Bulls?
Just kidding, I know the answer.
Last week here, I was bullish overall, but biased for a minor pullback. However, I wrote “Although I am biased toward a minor pullback ensuing next week I am open to the possibility that it won’t take place. What would change my mind is a further rally above Friday’s high with internal and/or external accumulation signs.” It really took no time at all to change my mind and Monday morning I got more long then I already was rather than taking profits on what I was currently carrying into Monday. It was a huge week for us at SassyOptions.
Last week I also mentioned that a 2011 like scenario could take place where roughly half the gains from the bottom were given up, but that I found it unlikely. To keep an open mind though, I noted a few things to look for to help determine the warning signs that major weakness was ahead. Below is the list (which can be used in the future as well) and now we know answers: yes, yes, no and no.
Main view for next week: I’m neutral as to whether we move higher, consolidate sideways or pull back. You may not find that helpful, but I’m not going to lie and tell you I have a strong viewpoint about where it is going. However, until I see internal or external distribution, buy the dip (likely small ones) is the game plan. Furthermore, as long as the market remains strong, I will be taking advantage of big moves in strong stocks (AMZN, GOOGL, NFLX etc).
20-day highs: This continues to hang around the middle area and I remain aware that they are not surging with new SPX highs. Since they are not breaking down either, all I can do is continue to monitor its development. Given the current bullish environment, should this breakdown next week to oversold levels (5% or below), it would be a place to buy the dip.
20-day lows: I find this to be much more sensitive when it’s not hanging at the lows. Friday put in the first surge since the September bottom. This could possibly be a first warning sign and something that should be carefully monitored over the next couple of weeks.
SPY Open Interest: For the last few weeks, I have paid relatively less attention to the open interest. This is because during a strong market surge, it has less chances of being helpful except that it strengthens the bullish case when it heeds no attention to high strike calls (the same is true for downtrends and puts). Last week SPY did pin at the area that would leave the most calls and puts worthless (to understand this concept more read here), so it’s possible the market is going to begin a slower period of consolidation and something I will be monitoring relative to the open interest. As of right now, the best pin is 210 (which should come as no surprise given SPY closed right about there Wednesday, Thursday, and Friday); however, any large moves early next week will likely change the pin (I will post updates of changes should they occur over twitter).
To analyze it a bit further, the graph below strengthens the bullish case and any pullbacks under 210 have high odds of being bought up. Should 210 not hold there is technical support at 208.46 (Friday’s low), 207.75-208 (also a high level of puts). Anything below 207.50 targets the 200 day SMA (206.36) or the gap fill 205.51. Above 210 (and particularly above Friday’s high 210.32) targets 211, 211.66, and then likely a retest of the highs.
Final notes: The good jobs number on Friday and interpretation that it will result in a rate rise gave the market a great excuse to sell off. The fact that it didn’t is important information and if there is more upside follow through next week or a failure to break nearby support, there is no reason to be bearish. Furthermore, if financials continue to break higher (due to a perceived rate hike), it’s unlikely for the market to breakdown.
Just one more thing: There are currently so many huge stock moves taking place after eight months of chop with only select sectors taking turns. If you are a trader, TAKE ADVANTAGE!!! These surges only come every so often and can have a major increase on your p&l. If you need assistance in finding the big movers (with real time trade alerts), and want daily analysis of the overall market direction, consider joining us.
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