Wednesday May 18, 2016
This is my opinion, and to be used for Informational purposes only. None of this is a recommendation to buy or sell anything. Due your own due diligence, this is mine, I am only sharing! Not fact, opinion.
Key Developments :
- The tug of war continues.
- Bears do not have enough to take out the neckline leaving both sides frustrated.
Not an easy day. Honestly, right here there is no short term edge either way. The overall price action is still giving us a topping a pattern, but for shorter term traders, it’s a coin flip. If you really analyze it, you would actually argue that we are at the low end of a range, so the risk/reward is in favor of the the bulls, as we hover above support that the bears can not break even with the Fed threatening to raise rates. It feels as though we are going to need a gap down to finish it off, which is the only reason I held short overnight. If we gap up, I will evaluate prices in the AM and be prepared to cut it quick until the dust settles. We could easily gap and go to 2075 tomorrow (SPX). I am saying there is no edge here except for the overall topping pattern which can go on for a while. As good as I felt about things last night, I feel equally as neutral tonight. The bears had it all today. Gap down a push lower and then blew it. They even had an afternoon waterfall lower, only to fail again. I am not afraid to admit when my edge is low at this very moment, as I know my edge and being short right into support that doesn’t seem to want to break is not it.
Want to just discuss my Russell short today.
Here we can see how I got shaken out, but got right back in. The Russel made a higher low and higher high above the neckline which by my trading rules means get out. I don’t sit around for that as a squeeze like we saw yesterday can occur. However, I am willing to go right back in if the breakout fails, which it did. That area will be my out again in the AM to re-evaluate if we get up there.
The S&P is still making lower highs and lower lows in this apparent right shoulder, that is a good sign for the bears, but we want to watch that down trend closely for a squeeze. Again the nice down gap would make things easier for the bears.
The Russell : Closed below the neckline, but higher than yesterday. I have diagrammed the bearish risk I will be watching for.
The DJIA is below the slanted neckline but still hasn’t seen follow through. It needs to hold below today’s highs or bear trap risk exists.
It looks like we could have a little H&S in the NASDAQ right shoulder. Taking out that head though, could squeeze it. So do keep it on the radar.
The Bottom Line:
The big picture remains bearish for now, so if you have a longer time frame and using last Tuesday’s highs as your stop or even the 4/20 highs, hey, nothing has changed overall.
However, for people with a lower time frame the tug of war continues leaving both sides frustrated and less and less certain by the day. Tactical is important here to keep losses on short squeeze moves to a minimum if they occur. Coming into the week we had a feeling they would try to hold it up into op-ex, and they have done so, so not totally unexpected. We must be prepared for anything here as I see very little short term edge until the range is broken above or below. I personally am still looking to sell strength and am on high alert for another short squeeze higher, where I will again, get out of the way quickly and let the dust settle.
Chart of the Day:
Sorry everyone, but I am going to talk about IYT again today because I believe it is that important. This closed back above the double top neckline. The bears better take control back right here right now or this has the potential to at the very least re-test the highs. If this doesn’t have your bearish attention, I don’t know what will.