Market’s Correct, Precious Metals Show Weakness, Zoom Waterfall Looms

As predicted yesterday the markets pulled back the finish negative for just the 2nd time in the last 9 trading sessions. SPY was more or less flat finishing down just .26%. The DIA was up .06% on the back of the extended airline rally but the big story was the pierce of, and ultimately the rejection of the QQQ all time high intraday of $237.47. Nevertheless equities still showed signs of strength as they got a bid into the close and are trading significantly higher after hours.

To quickly touch on what’s happening in gold, if you have been following me, you know I have been harping about the lower trendline on the daily chart of GLD and that I had yet again entered a long on the most recent pierce of that trendline yesterday.

This trendline has been ignored by all of the technicians I’ve been in contact with yet it has been a no-brainer long entry since 4/21

During the last hour of trading today I reluctantly cashed out my GLD Jul $161 calls for a solid 18% gain in the last 2 trading sessions. I would have liked to see GLD punch higher in the last hour with a close at or around $162 which would have given me the green light to hold into tomorrow for a potential gap up. However, after the mid-day pop around 2:20, GLD seemed to decouple from it’s inverse SPY price action and from there on out it appeared to be soft and weak for the rest of the trading session. Cutting here was unfortunate but agreeable as holding into the close without any sort of conviction via price action would have been more or less the same as playing the roulette tables at a casino. In any case, gold remains in a up trend if it can stay above $158 on a daily closing basis though it is showing some signs of softness as of late which should be taken into consideration.

Note the weakness after the 2:20 pop. It’s as if the algo’s just take over and there is no confirmation of any sort of bullish price action

The Q’s were led lower by underperformance in AAPL (-.86%) and MSFT (-1.32%) as well as the large daily reversal on ZM (-6.04%). Thought the markets were able to show strength into the close and are currently trading well above the intraday highs I still think there is a chance for further selling in names like ZM specifically. The stock is up over 100% in the last 3 months, was up 29% in the last 4 days before their earnings announcement and though it was down about 6% today, it still never saw the waterfall selling that I had expected to see. ZM has thrived and has become a household name as ‘stay-at-home-stock’ during the lockdowns but now that their earnings are known and the economy is reopening, a decrease in demand for their service is inevitable. Not only this but based on the lack of volume and volatility, there hasn’t yet been massive profit taking yet on this stock which begs the question – when will that happen? I think there is a good chance tomorrow. It only takes one institution to move out of their position in order to create a rush to profit taking which then becomes a waterfall effect. If ZM does push lower tomorrow the support levels to watch are $205 and $200 respectively.

Big reversal pattern on the daily for ZM
This consistent grind lower intraday looked to precede a waterfall effect that never came

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

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