Market Analysis


slappedFinally a two way market again with glimpses of volatility. This is the action real traders love: Up, down, every which way. Despite all the bullish gloating on twitter by some, traders do not like 2-3 handle ranges. They are boring and not exactly conducive to nailing killer trades. My clients know I thrive on volatility and I love grabbing moves long and short and this week has just been splendid.

Last week I positioned very aggressively short into Thursday’s close as my chart work signaled more critical warning signs. Fading the recent move has been challenging and I’ve been scaling in and out of various positions, but I also know when to press and last week was clearly a time to do it.

This week and weekend I’ve been pointing to various chart set-ups that pointed toward imminent downside. The Russell got slapped with a over 5% correction within days and European markets have gotten trounced hard as well with the #DAX taking out 6 weeks worth of trading range within 4 days:

Markets do not move in straight lines and we’ve been playing the action nicely in both directions this week. Previous months have shown an inclination for markets to make a weekly low the Thursday/Friday prior to OPEX and what we are seeing today may just be that. We have seen some very reflexive bounce action, but let’s not kid ourselves. There is some technical damage being done to charts. The $RUT has a solid double top in place and one just doesn’t bounce right back up after getting hit with a 5% smacker:

$RUT daily

For now the $RUT bounced off of the 50% Fib line, the 50MA and the lower Bollinger band. As readers know from my writings the larger charts point to a potential much larger correction to come. But I play it day by day with a longer term strategy in mind so we’ve been playing the Russell long and short this week with nice results. Got to love volatility.

For now I note that the weekly $SPX chart shows a failed break-out above the weekly trend line. Unlike previous break-outs the 1,900 break-out area has yet to tested:

$SPX weekly

Given the stretch above the monthly 5EMA a re-test of this area would make sense sooner than later, but we’ll judge the action at key levels to guide us. OPEX is upon us again next week and expirations have tended to be bullish and Yellen is conveniently scheduled to opine her usual obliviousness to inflation, risk or otherwise. We shall see.

Process keeps us flexible and analysis keeps us sharp.

Categories: Market Analysis

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