DAILY MARKET RECAP
Tuesday May 24, 2016
The following is be used for Informational purposes only. The charts are fact, however my interpretation is an opinion which I am sharing with readers. None of this is a recommendation to buy or sell anything. You must do your own due diligence.
Key Developments :
- Inverse H&S triggers for a beautiful gap and go long.
We have two choices in trading. We can be wrong and stay wrong, or we can be wrong and get out of the way quickly.
Last night I went out short the Russel due to the weak close and the fact that it made two attempts to hold above Friday’s highs and failed into the close. Remember, it still looked like the H&S top was a good possibility and I short right shoulders. When I woke this morning we were up a few handles and it was obvious to me the market had other ideas. I got out for about a 4 handle loss and flipped and traded the SPX long off the open for a 20 handle gain. Last week we were bearish as a bear could be and we even thought Friday might have been Options Expiration BS, but we had our eyes on this inverse H&S above the neckline and when we trigger it we got long. We don’t ask questions, we just act.
Looking back there were several signs the bulls were not ready to throw in the towel just yet. We saw a late bid in the biotechs and the semis which I wrote extensively about over the weekend. And then we saw a price pattern that was confirming it. We need no other information to make an informed decision that we don’t want to be short, but long.
The big observations for today,
1) The downward trendline and the minor swing highs acted as very little resistance
2) The high of the day was marked at the 61.8 fib from the 4/20 high to the 5/19 low.
3) Despite a measured move price target of 209.42, we are currently making a lower swing high. There is potential for failure here. We must remember that.
The Bottom Line:
The pattern we started talking about in the weekend journal, pointed out in last nights report and again in the morning PEP Talk triggered and ripped the market higher. There is little reason to believe just yet that the 209.42 target won’t be acquired in the coming days, but for now we must also respect the risk that this is a a lower swing high until we take out 208.54 on the SPY. We must continue to watch for reversal patterns particularly here under the 61.8 fib, but be prepared for higher prices into the 209.42 target. The writing was on the wall for this move, I hope you all took advantage of it. Plan Execute and Profit.
From a big picture perspective, I still will be quite surprised if the April highs were not the highs of this rally, but we’ll let price action lead the way. There is no great reason to be trading short here just yet. We have measured move suggesting higher and nothing else to work with except theoretical 61.8 fib resistance.
See you tomorrow in the morning PEP Talk. (Here is today’s in case you missed it)
Here was the mid-day update
Chart of the Day:
Make sure you guys and gals check out my Macy’s post. The pattern hasn’t triggered yet, but worth keeping an eye on. I make the case for it in this post.
I have no idea if I will be right or not, but from a risk reward perspective this is compelling to me. Much like last night, I had a thesis, that thesis was wrong and I changed my mind. I got long Macy’s and am willing to risk 1% of capital because the setup fits my strategy.