Short term downtrend extends.
In yesterday’s post I presented a 5-minute chart of SPY and argued that what we had seen into Tuesday’s close was a short squeeze and nothing more. I also said that that the late afternoon buying pressure could not last into the close.
Well, we got confirmation today that it really wasn’t some silly fund manager chasing the market for value. Now the question is: where are the bears? We have three days of selling (the 1st three-day selling in row since March lows) and volume just isn’t there. Today’s selling was very broad, but felt rather orderly and well-paced.
Volume was OK, not huge. Breadth was terrible as selling was broad-based
As I said, breadth was very poor today.
Despite the bad breadth, S&P made its low mid-way through the session and after that, neither bulls nor bears could move it very far
Cash index got down to the lower boundary of my road map and stopped there
880 area is also the top of a prior rally point and can be viewed as support
As I posted intra-day today, I decided to cover some. It’s just me being cautious and paranoid.
Will I go long if we get a bounce? Absolutely not!
Will I short more if we get a bounce? I am not sure at this point, I may, but I don't know yet.
June contract chart is also showing the price resting on a channel line.
In last night’s post, I had pointed to a congestion zone between 900 and 910 on the above chart. Price comfortably moved below that area and confirmed the short term downtrend. I would now keep the same area in mind in coming days for any possible sign of short term trend reversal. If this is the pullback that finally clears the index of froth and frenzy, price has no business being above 912 for any material length of time. In order to move and stay above that congestion zone this week, price has to climb above a broken trend line and the center line of the channel that has contained the move since late March. I would be worried for the bears if that happened.
Nas100 blues continued today.
21 EMA could not contain it any longer. Volume has been below average these past 3 days and that’s about the best thing tech bulls can find these days. The chart above does not look good at this point.
Not much else to say. So, to wrap up:
It’s OpEx week, expect all sorts of crazy games by all sorts of market characters. It may end up being a non-event really, but I prefer to err on the side of caution when options are about to expire.
Volume has been OK, but not spiking high, it may be interpreted as well-paced selling, and not yet the bang that ends the downdraft.
Nas100 appears broken
Short term trend is down. Mid-term trend is up. Long term trend is down
Resistance is 912 (pivot), 920, and 935 (Jan 2009 top). Support is 880-885 neckline, and the frequently contested 850
I will leave you with this chart
This is not a broken index – Not yet! But it is very close.
Again, if this is the beginning of a meaningful pullback, index has no business staying above 912 area
If this is a real correction, the high of Thursday May 7 should not be violated
If the MACD cross widens, I will take it as a sell signal for a trade – to be invalidated with another cross up. No, I don't always take MACD crosses for my trades, but I'll take this one.
Have a nice evening!