Monday May 9, 2016
Today’s price action
Key Developments :
- First of 2 unfilled down gaps filled.
- Very little edge, big picture still looks bleak, but may take time to develop.
If you read the weekend report, you know we came into the week looking for some follow through on Friday’s bounce off the 2043.99 target acquisition. This was a trade only idea.
The reasons were mainly
1) A major technical target was acquired at 2043.99
2) The market was heavily oversold.
Today we got some of that follow through as we filled the SPX gap at 2063.46 early this morning.
I took profits there and am sitting flat until I have an edge in the price action.
The cleanest picture I see right now is on the ES futures, but needs a resolution above Today’s highs, to be long. So we’ll see if that gives us a trade tomorrow.
That being said, I did a little more work on the SPX chart today.
If we look at the left side of the chart in what appears to be a H&S formation (the 3rd of it’s kind in this pullback btw), it took 13 trading days to form it.
13 days from Friday’s target acquisition, puts us on 4/23/2016 which will be the Tuesday after OPEX. OPEX week tends to be bullish to neutral more than bearish, so we need to keep that in the back of our heads. As the most likely scenario is choppy up and down action in this range to let the right shoulder form. It is very possible that two weeks of this can get the market closer to overbought than oversold and give us a very nice short entry, we just have to wait and see.
In order to be more bullish, we need to start seeing a bullish pattern develop and take out that 211 high. At the moment, I see much more of a bearish pattern than anything bullish particularly on the big picture. So that tells me to look for a spot to sell short.
We must also watch Friday’s low closely, as a move below it, particularly on a closing basis could see things unwind rather quickly.
The Bottom Line:
The oversold bounce off of the 2043.99 target acquisition has been very much expected and today we saw some follow through on that thesis. I remain very much focused on the larger H&S pattern that appears to be developing. Personally I would like to see more of a bounce to re-establish shorts, so am remaining patient, to let things develop. It looks to me like any strength will be temporary, and other than a quick tactical long trade here and there, I continue to see strength as an opportunity to sell short, but again, I am remaining being patient. I continue to say the dream trade would be to fill the 208 gap first, we’ll just have to wait and see, bu other than the minor pattern on the future, there is very little edge in the SPX. We don’t need to be positioned everyday to be profitable.
Chart of the Day
The momentum Factor appears to be topping out. Keep a very close eye on this one guys and gals. This is looking very similar to the last top it created back in Jan. For the record, this is also a lower high on the weekly.
Take a look at both charts below.