Bears Take Day off, QQQ Tags ATH, Gold hits key level

In the face of terrible news the US Equity markets were up again today and continuing with the trend it was on very light volume. The bears seemed to have given up on their daily failed takedown attempt and perhaps are looking to retool for tomorrow now that the market is fully extended. SPY was up 1.33% while the Q’s made more marginal gains at .45%. The DIA had much a more robust session thanks to stocks like BA (+12.95%), CVX (+2.63%), and MCD (+3.04%). The market now seems to be bullet proof as nationwide rioting, China/US tensions, terrible economic data, and the wake of coronavirus continue to dominate the headlines. Despite this, the S&P 500 is up 12.5% in the last 14 trading sessions. Let that digest briefly. If you had bought June 280 calls 14 days ago, you’d probably be up somewhere around 10x in just over 3 weeks.

Pundits point to economic optimism, the reopening of the economy, and foreign government stimulus as the reason for the market shaking off absolutely atrocious news. The truth is that this is nothing more than a liquidity rally. Price action here is more or less similar to much of the last 9-10 years – a major event causes a big move down which causes a liquidity crisis. The Fed then steps in and extends everyone’s credit limit. Markets remain uneasy for a month or two but once the liquidity begins to trickle in, things stabilize and the market becomes complacent. On a day to day basis, volume decreases, trading range tightens, and any move by the bears is quickly defeated. It’s not unlike watching a drug addict become indifferent to everything falling apart around them – so long as they get their high, they’re not concerned with the details.

Note the huge gap on 5/18 and 5/22. Also, the declining volume as price action move higher unabated.

I don’t mind trading a market that is irrational or a market that seems to have an upside bias. However, a market with no volume and a tight trading range that simply goes higher every day without any sort of retracement or even an attempt to fill the massive gaps left on the chart is concerning and is very difficult to navigate. As such, I think we are finally approaching some resistance here that could cause a much needed pullback.

QQQ tied it’s all time intraday high of 237.47

With the Q’s into all time high resistance and the SPY tagging a major pivot top at $313, it could finally be time for, I don’t know, a single negative trading session? Don’t forget, the Fed will be continuing their OMO into June so any short positions should be thought of as quick, in and out plays.

Onto Gold. Again pre-market I indicated the trendline on GLD was an area to watch.

I did end up taking Jul 161 calls on a pierce of my trendline at $159.75. GLD flushed further to below $159 before bouncing back above and remaining largely stable throughout the rest of the day. I would have liked to see it close above $160 but the fact that the someone stepped in and stopped the algo’s from taking it down twice intraday is promising for tomorrow. Add this to the SPY and QQQ hitting key daily levels and you could have a case for a short term reversal as gold has been somewhat inverse to equities lately.

Lower wicks on the intraday look like rejected algo takedowns
If gold reverses tomorrow expect a big move in the opposite direction after the failed breakdown

GLD has addtional support at $158 and $157 pivot low, and pivot top respectively though if it flushes below $158 I will likely move out of the trade. It is also possible that it gaps down below $159 tomorrow then reverses higher so that it something I’ll be watching for.

In any case, take care and be careful with your trades. This is a volatile trading environment, and not in a good way.

About Aaron Basile
Day Trading and Swing Trading Ideas, Certified Personal Trainer, Power Bodybuilding, Avid Sports Fan (NBA, NFL)

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