Last week here I wrote that the path of least resistance for the week ahead was higher, which played out nicely. This week, the same is true, yet as a short-term trader I am more cognizant of the psychology starting to shift regarding the current market place as I will explain. Last week, anecdotally speaking, my sense was that most people were not on board to continue higher; this week I sense more people are becoming believers after the recent breakout. Furthermore, more and more stocks look appealing to me for continued strength, which is bullish on all time frames: short, intermediate, and longer term. Having said that, as sometimes a very short term trader that uses options, I would be remiss to not be prepared for a quick minor pullback or sideways premium eating consolidation within the next two week period.
The weekly MACD cross signals more immediate upside
I took a look at every bullish weekly MACD signal cross since March 2009. In each of the 10 instances, the market continued to make higher highs the following week 100% of the time. Furthermore, in 9 of 10 instances the market also closed higher to end the week. The one instance that failed (July 2013), the market closed 1 point down, so essentially flat. No system is full proof, but that should give any one attempting to short the market pause.
Furthermore, with broad participation in all of the indexes making new highs , a steady rise in stock participation and no signal of being overbought (see below) the long side is still seen as more attractive. With that in mind, I intend to continue to play the long side with tight stops and quick profit taking on any short term plays, but not shy away from swing positions that are working despite the potential for an upcoming consolidation period.
Percentage of SPX stocks at 20-day highs increasing, but far from overbought.
Percentage of SPX stocks above the 50-day MA rising, but not yet overbought.
The SPY open interest: The highest calls stand at 212, but continued market strength can easily over run those calls. If the market does run above 212 note that SPY will be approaching a touch of its daily upper bollinger band, which may serve as a place of pause. A move over 212 that fails to hold or a failure of continued strength early next week would likely target 209. This is both the breakout level as well as the start of higher open interest puts. A fall below 209 and it’s possible the market goes back to retest 205, also where the 20-day moving average is. Due to the risk/reward (as outlined above) of the market most likely ending higher next week, any pull-back should be seen as a gift.
If you find any value in these posts please head over to my Facebook page and like it. I also have some open interest commentary on AAPL, FB, and TSLA for next week there.
Good Luck next week. If you are looking for daily market commentary, trade ideas, open interest and option education/trading then consider a subscription.
Tags: AAPL, bullish, day trading, open interest, options, SPX, spy, stock, stock market
New Year, New Highs, Same Ole Bears
Last week here I wrote that the path of least resistance for the week ahead was higher, which played out nicely. This week, the same is true, yet as a short-term trader I am more cognizant of the psychology starting to shift regarding the current market place as I will explain. Last week, anecdotally speaking, my sense was that most people were not on board to continue higher; this week I sense more people are becoming believers after the recent breakout. Furthermore, more and more stocks look appealing to me for continued strength, which is bullish on all time frames: short, intermediate, and longer term. Having said that, as sometimes a very short term trader that uses options, I would be remiss to not be prepared for a quick minor pullback or sideways premium eating consolidation within the next two week period.
The weekly MACD cross signals more immediate upside
I took a look at every bullish weekly MACD signal cross since March 2009. In each of the 10 instances, the market continued to make higher highs the following week 100% of the time. Furthermore, in 9 of 10 instances the market also closed higher to end the week. The one instance that failed (July 2013), the market closed 1 point down, so essentially flat. No system is full proof, but that should give any one attempting to short the market pause.
Furthermore, with broad participation in all of the indexes making new highs , a steady rise in stock participation and no signal of being overbought (see below) the long side is still seen as more attractive. With that in mind, I intend to continue to play the long side with tight stops and quick profit taking on any short term plays, but not shy away from swing positions that are working despite the potential for an upcoming consolidation period.
Percentage of SPX stocks at 20-day highs increasing, but far from overbought.
Percentage of SPX stocks above the 50-day MA rising, but not yet overbought.
The SPY open interest: The highest calls stand at 212, but continued market strength can easily over run those calls. If the market does run above 212 note that SPY will be approaching a touch of its daily upper bollinger band, which may serve as a place of pause. A move over 212 that fails to hold or a failure of continued strength early next week would likely target 209. This is both the breakout level as well as the start of higher open interest puts. A fall below 209 and it’s possible the market goes back to retest 205, also where the 20-day moving average is. Due to the risk/reward (as outlined above) of the market most likely ending higher next week, any pull-back should be seen as a gift.
Good Luck next week. If you are looking for daily market commentary, trade ideas, open interest and option education/trading then consider a subscription.
Share this:
Tags: AAPL, bullish, day trading, open interest, options, SPX, spy, stock, stock market