Markets Float Up Again On Low Volume

Following up with yesterday’s move the SPY traded $1.67 higher on extremely thin volume. This is typical of the market during a week that leads into a holiday, and is even more so the case during the 4th of July weekend as so many people are on vacation and not executing trades. The 1250 level on the S&P is one of the most critical levels on the charts in the last 3 years and it is no surprise that the market is not letting that level go easily. I would be amazed if the banks let that level break the week before 4th of July, the markets are enjoying the little news out of Greece, and the favorable housing data we received this morning.

Next week may be a different story as everyone will come back from the holiday and may attempt to take profits off of the floating rally we’re having this week. Also, don’t think that the market won’t fall next week because it’s a shortened week, the last time we had a four day trading week, the SPY went from 134 to 128 which was one of the only sharp down moves we’ve had all year.

The SPY closed above minor resistance at the 20 MA on just 165M shares. It is still in a box between $129.80 and $126.70 but I think it will get up to $130 by the end of the week before stalling out in that area. If you are waiting to short the market, Friday could be the best day to look for a setup because we could gap much lower next Tuesday on news over the weekend regarding Greece, or just sheer profit taking. If you allow the market to gap lower you may lose your entry point and will have to start over so look for opportunities Friday afternoon.

GLD finished marginally higher on light volume after selling off hard for three consecutive days. The top has been put in at $152, though it could rally back to $148 on a bounce off of the lows. Currently, there is a bear flag in play which could take it down to $142 though a fall that sharp would be surprising.

As I explained a few days ago, you don’t need to know what the news is to know how the market will react, the reason I decided to call the top in gold for that exact day was because the chart had telegraphed it, and the IMF deal with Greece coincided perfectly with gold’s market cycles.

The top call in silver has worked out exactly the same and SLV bounced off of $32.50 which was a support level that I had provided when I made that call. I think if it goes a little bit higher this week I’ll buy ZSL for a swing trade.

I will probably be looking to enter ZSL when SLV gets near $33.15 – $33.20 because the depreciation of the leveraged ETF’s can sometimes cause an incorrect correlation which is why it’s sometimes best to use the original ETF as a model for entry and exit points. In any case, SLV is headed in the $30 area and a pierce of the 200 MA. After that, I’ll look to go long AGQ as a swing.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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