Set-ups and Game Plan for 4/11/16 – open

This was one of two premium posts  for members posted before week starting 4/11/16

The market has basically been in a range of 2040 to 2070 for two weeks. You could say it’s consolidating gains and creating a bull flag, but for now (and in the short term) I am leaning more bearish than bullish. The low of last week was 2033 so that is basically the short term bull line in the sand.

As you will read and see in the open interest post many of the momentum stocks have high calls above them. Furthermore, they were not acting very bullish on Friday. Of course that could have been because of pinning and I do want to keep an open mind that they may run up into earnings, but I think they have a lot to prove next week. The other thing that I am seeing which points to a pullback coming (maybe not immediately, but in the next couple of weeks) is warning signs in overall breadth. For instance, 20-day lows are starting to tick up, which usually begins a week or two before a pullback. 

Thus, it is possible the market continues to trade up, but there is evidence pointing to a looming pullback so even if we do trade up early in the week, I think we need to be careful chasing. I know that ends up feeling like we are missing out, but in the end we also don’t want to be caught holding the bag. Now if the market does in fact push over 2075 then we can re-evaluate, but as of now there is a lot telling us to be careful being long.

SPX levels:

• Over 2075 edge to bulls, but only in the short term with targets at 2082 and 2090/2095
• Under 2033 targets 2024, 2011 and 1996

If we fall below 2040 and then pop back to it we can initiate a short. We can also use the support zones to buy ETF’s for a scalp if the risk/reward is good in terms of premium. I wouldn’t buy any ETF’s long with price over 2040, but would be willing to short into resistance.

Set-ups: