Greetings! This week's Market Prep will be short and sweet in an attempt to get my stubborn brain to follow my own plan...
I had a really solid plan last week and traded it like crap. Despite having one of my best day trading days of the year this week, I prematurely shorted the market towards the end of the week and I shouldn't have. I don't mind the short QQQ swing trade I started, I think there's validity there, but shorting SPY was a really dumb trade that I regret:
From a daily perspective, the market is still in an uptrend and therefore I had no strong thesis for shorting other than not trusting the breakout. I had Friday off and some time to think about my decisions and I think it was a byproduct of the S&P500 being stuck in a range (ES 4100-4172) for so long I became conditioned to assume we'd return to the range...
We didn't and the market is breaking out.
At this point, I think it's reasonable to assume SPY will at least make a run for this trendline overhead. Similarly, it would be strange for AAPL to come this far and not make some headlines with new All-Time Highs:
I mentioned not being upset about the QQQ short and I'm not, I'll probably hold that swing position for a while longer knowing a bit more upside is likely in store; however, almost every megacap Nasdaq name is printing overbought on the daily RSI and a pullback would make sense...especially if we get more volatility in the bond markets post-Debt Ceiling Debacle.
The FinTwit consensus from Vol Experts and Retail Wannabe's seems to be that we're in for a "Blow Off Top" and I've seen the level 4390 thrown around several times now. I'm not sure if that's going to happen or not, but I do know there's no point aggressively shorting a market that looks "Blow Off-ish" before you see that first aggressive down day, so my plan this week is to do a better job at staying out of the buyers' way until I see serious sellers step in...and that very well might not happen this week either. We've got no Fed Speakers this week (which should help the Bulls) and the big decision everyone's waiting on (FOMC) is the following week. In other words, if the stock market wants to get "excessive" then this coming week is the time to do it before we hear from the Fed.
My plan this week is to give the buyers the benefit of the doubt and set my Weekly Pivot to 4205, or the -0.25 Fib Retrace from last week's range:
Even though 4236 was last week's Midpoint (and a solid natural Pivot), I like 4205 because it represents SPX 4200 as well as a key 50% retracement from the recent swing low-to-high:
If the market does pullback this week, I don't think it'll be without a fight. The first area I'm watching for a rebid will be this newer trendline that previously acted as resistance:
On the 1hr ES_F Chart above, we can see the breakout over the trendline happened on high Relative Volume (blue bars on the bottom of the chart); therefore, it makes sense to watch for the buyers to step in an defend the 4240-4250 area.
If the Bears step in with force, I like the Weekly Pivot at 4205 because it would allow me to short (without a guilty conscious) under the Pivot to capture the single prints left in the wake of last week's bullish pump. [Insert "It Ain't Much but it's Honest Work" GIF]
Above is a Daily Chart of NQ_F and the key Pivot level I'm watching there at 14500. In all honesty, I'll be focused more on the Nasdaq this week than the S&P500. I do think we have a good chance of seeing notable divergences between the indices this week, especially if the OPEC rumors/rumblings end up causing significant moves in energy. Therefore, NQ might end up being the more "clean" trading vehicle this week.
Breadth improved across the board on Friday, but it's still not very impressive to me yet with only 46.6% of stocks above their 200DMAs. Whatever you do this week, be careful. It feels like a "when the cat's away the mice will play" situation to me and we're likely to see some serious volatility (despite the VIX being in the 14s). Remember, crashing upwards is still volatility.
In summary, my goal this week is to stay on the right side of price intraday and hope my day trading performance is good enough to allow me to stay in this Nasdaq swing short a little longer. I hope you have a fantastic week, thanks for reading!
Horse