Last week here I outlined a bullish thesis and recommended getting long on dips at specific levels that were outlined. Then on Wednesday when SPX pulled back to 1995 I tweeted out this: 
It turned out that was indeed very good support and longs initiated there were handsomely rewarded.
As a side note, I want new traders (or even experienced ones) to know making a call like that is not easy nor was getting long. I am active on twitter and definitely felt like one of the few bulls. Putting my call out there to my followers always takes guts just as getting long when things seemingly look (and “feel” wrong). I’m sharing this because sometimes it’s easy to think other traders seem to figure things out so easily. That isn’t the case and I would presume that most lasting traders are drawn to this career choice because of how challenging it is not despite it.
Who’s in charge? Overall the bulls still have the edge. Two weeks ago the rally from the double bottom was met with strong internals, which were confirmed again Thursday of last week. If you haven’t already or need a review, go back to last weeks post and possibly the week before it as well and read the reasons I became bullish. Much of the reasoning provides an important lesson for those not familiar with what to look for when the trend begins to shift. Also, much of the prior reasoning has not changed and, in fact, has thus far has been further confirmed.
Overbought/Oversold:
SPX stocks trading at 20-day highs: After confirming the recent rally (it hit levels not seen in all of 2015) there was a decent pull-back last week that made a higher low. It is not in overbought territory and future strength would be a positive sign for bulls.
SPX stocks trading above their 10-day MA: This got to overbought levels last week and although it can remain overbought for some time demonstrating strength (as it did in October 2014), last week it did pullback to a higher low and is no longer considered overbought. 
How does the weekly chart look? For several weeks I have made comparisons to 2011 and 2014, not as an analogue to predict what is to come, but as a way to demonstrate what similar (under the surface) measures have led to before during recent and similar corrections. Using the weekly 2011 example, the RSI, MACD, and stocks trading above their 50-day moving average all line up to what led to a further gains the following week (note that looking two weeks out in 2011, a pullback ensued). Again, no two corrections or recoveries will look exactly alike, but I find it helpful to see what similar looking charts have led to before. 
SPY open interest and important levels next week: As of right now the open interest suggests a range of roughly 200 to 205. Those levels align well with technical support and resistance making them even more significant. With price closing on Friday in the middle of that range at 203.28, it’s going to be important to gather clues from the price action at the start of the week. Below is some guidance: 
- Opening above 203.28: If price can remain above Friday’s close it likely targets 204.50/205. This is the breakdown area from the long trading range of 2015 and of course the highest call strike. Price will very likely stall or pull back from there, but in the face of extreme strength then a run to 206 (where the 200-day MA is) before stalling/pulling back should not be ruled out. If price does get to 205 it will be very important to look for clues in breadth (advance/decline, up/down volume, TICKS) to help inform you if the rally is sustainable or indeed ready to pull-back.*
- Opening below 203.28: If price remains below there it likely will target the 202 area. Below there and there isn’t much support till 200/200.5. If price happens to fall below that level, then the next reference would be 198.75/199 and then 197. It wouldn’t be out of the norm for price to retrace there and remain in a bullish trend, but as long as breadth remains neutral to strong the benefit of the doubt goes to even the most shallow dips being bought. On the other hand, if there is a shift in daily internals demonstrating palpable weakness during pull-backs, then the odds shift toward a deeper pull-back to the levels mentioned above and possibly 195.
*Last week is a good example where breadth measures helped me remain bullish in the face of falling prices and in the face of contradictory open interest information. When price was pulling back last week I noticed that breadth was not demonstrating weakness that tends to be sustainable. That increased my confidence in getting us long at 1995. Furthermore, although the best pin on SPY would have been 200, the strength of Thursday’s rally kept me flexible to remain long and not go with what would have made more sense from and options expiration perspective.
One more thing just to make it more complicated: The VIX expires on Wednesday and currently suggests a pin of 20 so watch for a possible pullback in the market Tuesday into Wednesday as VIX hedge positions are rolled into future VIX options. It isn’t a guarantee and I wouldn’t trade based solely on this, but if price goes higher Monday, then taken together with the 205 resistance level it would make sense to make note of this. Please recognize that weekly VIX options were just introduced and it will need to be monitored to see how or if it has similar affects on future prices. 
Wrapping in up: As of now I believe consolidation within an uptrend makes the most sense. Meaning I do believe there is more upside to come next week, but am also very aware of a possible pull-back due to expiration in the VIX as well as the above resistance at 205. For these reasons I believe it will be exteremly important to watch for other clues throughout the week especially if/when price gets to the support and resistance levels mentioned above. If you missed the recent rally or struggled pulling the trigger when I tweeted about the heavy support at last weeks pull-back, consider joining us where I provide daily and intra-day analysis and real time option trades. Below are two emails I received last week from subscribers.
Hello Rachel,
Just wanted to say after my first week as a subscriber, I am more than pleased with your service. I like that your twitter feed does not contain any commentary that is not directly from you, as it keeps the stream free of clutter and easy to review. I like that the trade signals have a different image/avatar so they are simple to find, and I also enjoy that you update throughout the trading day even if you are not actively entering trades. It shows that you take your work seriously and that you are actually trading the set ups that you are suggesting to others, so thank you for that. I am by no means a beginning trader, but I do work full time, so its nice to have someone else keeping an eye on the market while I’m in and out of my office. Your analysis this week also provoked my to exit some of my longer term short positions and go long a few things as well, and I’m certainly glad I did. You are doing a fine job, so keep it up!
Thanks
Jeff
Lady, you’ve called the bottom of the market at least twice during my subscription and I made more than the price of it because of your market commentary on the 5th. Your service is invaluable and when I’m settled in my new employment you will see me back on your list. In short….you are not charging enough!
Up Up and …….
Last week here I outlined a bullish thesis and recommended getting long on dips at specific levels that were outlined. Then on Wednesday when SPX pulled back to 1995 I tweeted out this:
It turned out that was indeed very good support and longs initiated there were handsomely rewarded.
As a side note, I want new traders (or even experienced ones) to know making a call like that is not easy nor was getting long. I am active on twitter and definitely felt like one of the few bulls. Putting my call out there to my followers always takes guts just as getting long when things seemingly look (and “feel” wrong). I’m sharing this because sometimes it’s easy to think other traders seem to figure things out so easily. That isn’t the case and I would presume that most lasting traders are drawn to this career choice because of how challenging it is not despite it.
Who’s in charge? Overall the bulls still have the edge. Two weeks ago the rally from the double bottom was met with strong internals, which were confirmed again Thursday of last week. If you haven’t already or need a review, go back to last weeks post and possibly the week before it as well and read the reasons I became bullish. Much of the reasoning provides an important lesson for those not familiar with what to look for when the trend begins to shift. Also, much of the prior reasoning has not changed and, in fact, has thus far has been further confirmed.
Overbought/Oversold:
SPX stocks trading at 20-day highs: After confirming the recent rally (it hit levels not seen in all of 2015) there was a decent pull-back last week that made a higher low. It is not in overbought territory and future strength would be a positive sign for bulls.
SPX stocks trading above their 10-day MA: This got to overbought levels last week and although it can remain overbought for some time demonstrating strength (as it did in October 2014), last week it did pullback to a higher low and is no longer considered overbought.
How does the weekly chart look? For several weeks I have made comparisons to 2011 and 2014, not as an analogue to predict what is to come, but as a way to demonstrate what similar (under the surface) measures have led to before during recent and similar corrections. Using the weekly 2011 example, the RSI, MACD, and stocks trading above their 50-day moving average all line up to what led to a further gains the following week (note that looking two weeks out in 2011, a pullback ensued). Again, no two corrections or recoveries will look exactly alike, but I find it helpful to see what similar looking charts have led to before. 
SPY open interest and important levels next week: As of right now the open interest suggests a range of roughly 200 to 205. Those levels align well with technical support and resistance making them even more significant. With price closing on Friday in the middle of that range at 203.28, it’s going to be important to gather clues from the price action at the start of the week. Below is some guidance:
*Last week is a good example where breadth measures helped me remain bullish in the face of falling prices and in the face of contradictory open interest information. When price was pulling back last week I noticed that breadth was not demonstrating weakness that tends to be sustainable. That increased my confidence in getting us long at 1995. Furthermore, although the best pin on SPY would have been 200, the strength of Thursday’s rally kept me flexible to remain long and not go with what would have made more sense from and options expiration perspective.
One more thing just to make it more complicated: The VIX expires on Wednesday and currently suggests a pin of 20 so watch for a possible pullback in the market Tuesday into Wednesday as VIX hedge positions are rolled into future VIX options. It isn’t a guarantee and I wouldn’t trade based solely on this, but if price goes higher Monday, then taken together with the 205 resistance level it would make sense to make note of this. Please recognize that weekly VIX options were just introduced and it will need to be monitored to see how or if it has similar affects on future prices.
Wrapping in up: As of now I believe consolidation within an uptrend makes the most sense. Meaning I do believe there is more upside to come next week, but am also very aware of a possible pull-back due to expiration in the VIX as well as the above resistance at 205. For these reasons I believe it will be exteremly important to watch for other clues throughout the week especially if/when price gets to the support and resistance levels mentioned above. If you missed the recent rally or struggled pulling the trigger when I tweeted about the heavy support at last weeks pull-back, consider joining us where I provide daily and intra-day analysis and real time option trades. Below are two emails I received last week from subscribers.
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