Last week here I discussed that bulls had the edge, but that neither bulls or bears should get too enthusiastic about breakouts/breakdowns. That was the case up until Thursday, where SPY was set to break the 194 level for a third time. At that point shorting the rip was no longer appealing and instead going with the breakout had become more favorable as subscribers and I did with IWM calls. 
Although the larger overall picture is still in a bearish trend, the bulls currently have the shorter time frame upper hand and a buy the dip strategy is favorable. The strength of the recent buying (shown below) is strong enough to suggest that this current cycle higher is not over.
SPX stocks above their 20-day MA: This is the highest number of stocks trading above their 20-day MA since the end of 2014. Until there is new market highs with this diverging, risk is likely to the upside. 
SPX stocks above their 5-day MA: This has been able to remain above 70% since the recent double bottom, unlike during the thrust off the double bottom in September. Staying above 50 would add more credence to the bullish case.
The above also demonstrates that the market is short term overbought and buying here doesn’t offer great opportunity. Furthermore, SPX made a 20-day high on Thursday, often a place it will pullback or stall. The better trade is to wait for a pullback or consolidation.
SPY open Interest: Taken at face value this is more bullish; however, it also indicates potential for the market to stall next week. The high calls at 195 and 196 will very likely act as resistance (at least upon the first test). The high strike puts at 190 suggest that price will close at or above there by Friday. Thus, should the market jump over 195/196 early in the week, the open interest combined with overbought measures favor shorting the rip. With that being said, should the market get above Friday’s high with strong internals than shorting is no longer favorable. Very little trading took place between 197 and the 199.5 level and once through 197, 199.5 will likely come very quick.
On the other hand, pullbacks into support present a good opportunity to get long. A drop to 190 or slightly below would offer the greatest opportunity, but seeing as there exists many technical support levels higher than 190 (the main two being 193.50 & 192) price may not get there.
In sum, the current intermediate trend (few week time horizon) favors the bulls, but buying at current levels has a high risk of failure unless price gets over 197 in which 200 will likely come very quickly. A sideways consolidation for several days or a pullback that remains above 189 SPY or 1890 SPX offers a good buy opportunity for higher prices over the next several weeks.
For daily market analysis and individual stock open interest and analysis plus real time options trades consider joining us.
Perhaps a Stall, but Edge Lies with the Bulls
Last week here I discussed that bulls had the edge, but that neither bulls or bears should get too enthusiastic about breakouts/breakdowns. That was the case up until Thursday, where SPY was set to break the 194 level for a third time. At that point shorting the rip was no longer appealing and instead going with the breakout had become more favorable as subscribers and I did with IWM calls.
Although the larger overall picture is still in a bearish trend, the bulls currently have the shorter time frame upper hand and a buy the dip strategy is favorable. The strength of the recent buying (shown below) is strong enough to suggest that this current cycle higher is not over.
SPX stocks above their 20-day MA: This is the highest number of stocks trading above their 20-day MA since the end of 2014. Until there is new market highs with this diverging, risk is likely to the upside.
SPX stocks above their 5-day MA: This has been able to remain above 70% since the recent double bottom, unlike during the thrust off the double bottom in September. Staying above 50 would add more credence to the bullish case.
The above also demonstrates that the market is short term overbought and buying here doesn’t offer great opportunity. Furthermore, SPX made a 20-day high on Thursday, often a place it will pullback or stall. The better trade is to wait for a pullback or consolidation.
SPY open Interest: Taken at face value this is more bullish; however, it also indicates potential for the market to stall next week. The high calls at 195 and 196 will very likely act as resistance (at least upon the first test). The high strike puts at 190 suggest that price will close at or above there by Friday. Thus, should the market jump over 195/196 early in the week, the open interest combined with overbought measures favor shorting the rip. With that being said, should the market get above Friday’s high with strong internals than shorting is no longer favorable. Very little trading took place between 197 and the 199.5 level and once through 197, 199.5 will likely come very quick.
On the other hand, pullbacks into support present a good opportunity to get long. A drop to 190 or slightly below would offer the greatest opportunity, but seeing as there exists many technical support levels higher than 190 (the main two being 193.50 & 192) price may not get there.
In sum, the current intermediate trend (few week time horizon) favors the bulls, but buying at current levels has a high risk of failure unless price gets over 197 in which 200 will likely come very quickly. A sideways consolidation for several days or a pullback that remains above 189 SPY or 1890 SPX offers a good buy opportunity for higher prices over the next several weeks.
For daily market analysis and individual stock open interest and analysis plus real time options trades consider joining us.
Share this: