A few weeks ago I wrote What The F%^$ is Going on Here (Part I) and I just read the introduction. I could probably just copy and paste it here, since not much has changed. High growth momentum names are still getting crushed, utilities are still outperforming and the SPX isn’t selling off in the same manner as the IWM and QQQ‘s (yet). One change that has taken place is we now have another negative factor to consider since earnings season began. We have seen that several high growth companies such as NFLX, FB and NOW have come out with earnings beating street estimates, and selling off hard. That is not something that should be taken lightly. I’m not going to bore you with the details of what is going on in the markets because I have already been stating the same things for weeks on end so I will instead reiterate the message that this market is not acting healthy by any means.
This Market Takes No Prisoners: If the market is unhealthy then should you just short everything? Wouldn’t it be great if it were that easy? If you are a trader you already know that without impeccable timing, trying to short stocks in a bull market can be disheartening and destroy your confidence. Oversold bounces and the choppy nature of this market will destroy traders that aren’t nimble and risk averse. Next weeks heavy economic calendar, the FOMC minutes and more earnings releases will only further provide catalysts to challenge even the most seasoned traders.
Levels to Watch: SPX failed to make a higher high and is now sitting near a convergence of the 10, 20 and 50 day moving averages. The 10 and 20 day are both near the 1852 level, which will be the first place to look for support going into next week. After that is 1834 and then the previous low of 1814 made on April 11th. Beneath there and the likelihood of dropping below 1800 becomes very prominent. Levels of resistance to the upside are 1872, 1884 and 1897.
As I have for several weeks, I maintain that the SPX will be paying a visit to the 200-day MA in the near term. With the recent churning, the 200-day MA is now only 5% away making it ever more likely. Whereas in previous weeks I assumed the markets would be facing a large correction, I have become open to the possibility that the markets may continue to remain choppy and price may correct over time rather than price. If that scenario plays out then the markets will remain choppy and difficult to trade as individual stocks and indices digest the solid gains that have taken place over the five year bull market that began in 2009.
At the end of last week when we closed with the strength from a large market bounce I noted here that I didn’t believe we were in the making of another V-shape reversal to new highs and that “perhaps in fact this time is different.” As you can see above and now below with the QQQ and IWM, this is so far proving to be the case.
Navigating Next Week: Keep an eye on the SPX support and resistance levels I mentioned above. Often price will align with those prices at the same time as a large catalyst such as the FOMC statement at 2:00pm on Wednesday or the release of the monthly jobs report before the bell on Friday. So for instance, if the market is trending down and hits support going into or right after one of those catalyst it may shift the trend from down to up. And if it doesn’t, then it will help confirm the downtrend. Another thing to watch throughout the week is the TLT. If it continues to breakout over 112 then expect the market to continue to sell off and vise versa.
Regardless of the difficult nature the market is presenting us with there is still areas that you can trade both long and short. On the long side many energy, material, utility and airline stocks are still breaking to new highs. On the short side keep your focus on the discretionary and tech sector as well as stocks that fail after their earnings are released.
If you are looking for ideas, I have great set-ups that my subscribers and I have been benefitting from so check out my premium service.
What The F%^$ is Going on Here Part II
A few weeks ago I wrote What The F%^$ is Going on Here (Part I) and I just read the introduction. I could probably just copy and paste it here, since not much has changed. High growth momentum names are still getting crushed, utilities are still outperforming and the SPX isn’t selling off in the same manner as the IWM and QQQ‘s (yet). One change that has taken place is we now have another negative factor to consider since earnings season began. We have seen that several high growth companies such as NFLX, FB and NOW have come out with earnings beating street estimates, and selling off hard. That is not something that should be taken lightly. I’m not going to bore you with the details of what is going on in the markets because I have already been stating the same things for weeks on end so I will instead reiterate the message that this market is not acting healthy by any means.
This Market Takes No Prisoners: If the market is unhealthy then should you just short everything? Wouldn’t it be great if it were that easy? If you are a trader you already know that without impeccable timing, trying to short stocks in a bull market can be disheartening and destroy your confidence. Oversold bounces and the choppy nature of this market will destroy traders that aren’t nimble and risk averse. Next weeks heavy economic calendar, the FOMC minutes and more earnings releases will only further provide catalysts to challenge even the most seasoned traders.
Levels to Watch: SPX failed to make a higher high and is now sitting near a convergence of the 10, 20 and 50 day moving averages. The 10 and 20 day are both near the 1852 level, which will be the first place to look for support going into next week. After that is 1834 and then the previous low of 1814 made on April 11th. Beneath there and the likelihood of dropping below 1800 becomes very prominent. Levels of resistance to the upside are 1872, 1884 and 1897.
As I have for several weeks, I maintain that the SPX will be paying a visit to the 200-day MA in the near term. With the recent churning, the 200-day MA is now only 5% away making it ever more likely. Whereas in previous weeks I assumed the markets would be facing a large correction, I have become open to the possibility that the markets may continue to remain choppy and price may correct over time rather than price. If that scenario plays out then the markets will remain choppy and difficult to trade as individual stocks and indices digest the solid gains that have taken place over the five year bull market that began in 2009.
At the end of last week when we closed with the strength from a large market bounce I noted here that I didn’t believe we were in the making of another V-shape reversal to new highs and that “perhaps in fact this time is different.” As you can see above and now below with the QQQ and IWM, this is so far proving to be the case.
Navigating Next Week: Keep an eye on the SPX support and resistance levels I mentioned above. Often price will align with those prices at the same time as a large catalyst such as the FOMC statement at 2:00pm on Wednesday or the release of the monthly jobs report before the bell on Friday. So for instance, if the market is trending down and hits support going into or right after one of those catalyst it may shift the trend from down to up. And if it doesn’t, then it will help confirm the downtrend. Another thing to watch throughout the week is the TLT. If it continues to breakout over 112 then expect the market to continue to sell off and vise versa.
Regardless of the difficult nature the market is presenting us with there is still areas that you can trade both long and short. On the long side many energy, material, utility and airline stocks are still breaking to new highs. On the short side keep your focus on the discretionary and tech sector as well as stocks that fail after their earnings are released.
If you are looking for ideas, I have great set-ups that my subscribers and I have been benefitting from so check out my premium service.
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