My SKF long and BK short suggestions worked out very well, as did my HYTM short if profits were taken timely. My IIF short worked out for one day as I thought, but did not trend as I expected the next few days.
Today’s market opened well above yesterday’s close, based on Washington Mutual’s positive news, but declined throughout the day to close just above yesterday’s close. Again, the market movement was on low volume, the lowest this month has seen, in fact.
After hitting an intraday high of around 138.90, SPY shot back down. This significant level falls right in that 138.80-139.20 range that has been tested as resistance twice now. It certainly seems like short-term negative price action is imminent, as the late day sell-offs prevalent last week and today show people taking profits and the bulls losing energy as they reach this resistance. We’ll have to wait for a significant pullback to the 50 DMA to confirm that price is heading back to support, but short-term price action does suggest short-term selloffs coming soon.
The last sell-off from this resistance level was near the end of February, and its pattern and volumes are very similar to the price and volume action of the past few days. Volume has been in an overall downtrend since mid-March, which happens to be the last “low.” This all points to the market in being a consolidation trend, with a short-term sell-off back to support. I’ll look for a sell-off back to around the 50 DMA, which is also around a significant short-term support/resistance level, and if it breaks that level, a sell-off back to mid-March lows. The market will not be in a bullish uptrend unless and until 140 levels are broken, retraced to, and bounced off of in the SPY, and the 200 DMA starts pointing upwards. Today’s big sell-off of solars is another indication of negative price action on its way for the next week or two.
Here is today’s SPY chart:
So I’m bearish for tomorrow, but the low volume across the board keeps me away from overtrading. Cash is king in markets without defined trends. However, one short/put possibility I like is Nuveen Perf Plus Mini Fund (NPP). NPP witnessed the 200/50 DMA bearish “death cross” and is also bouncing off of resistance around 13.60.
I’m not looking to be long on anything tomorrow, and even my favorite bearish play long of SKF (UltraShort ProShares Financials) is out of the picture as financials are gearing up for a breakout, based on the rising triangle wedge visible in XLF (SPDR Financial ETF).
It’s a waiting game from here. We have to wait for a trend to develop, some volume to intensify with increased institutional activity, and we will take it from there.