No Blowoff Yet As Stocks Close Higher Again

The SPY closed up another 1.19% as that brings it’s total gain since the 5/14 low of $277 up to 14.5%. Intraday it had another push into the close which leads me to believe it wants to go to $325 tomorrow – possibly fueled by a positive jobs number in the morning.

It makes sense that the market would want to test gap window with it this close already.

The FOMC will make a statement Wednesday and Powell will speak after. My prediction is that the market will put in a short term top after no new stimulus is announced. The Fed has done so much for the market over the last 2 months including corporate bond buying and increasing the monetary base by 80%. Since then the SPY is up 33% off of the lows therefore new stimulus should not be needed as clearly things have been stabilized for now.

A few things could coincide with this such as airline stocks that are extended and coming into the resistance, and underperformance in tech and semiconductors which have been leading indicators in the last 2-3 months.

In the last 4 session BA has been up 11.5, 6, 10, and 12 percent respectively but appears to be running out of steam. It remained flat for the last 5 hours of trading despite the rest of the market punching higher once in the afternoon as well as into the close. A move into gap window tomorrow should be a good place for a swing short. Remember, a TON of retail money is in airliners right now and any sort of correction could actually cause an over-correction as the newly made Robinhood accounts will begin panic selling after the the stock is already well off of the highs.

FB was a leading indicator before the rally started as it had moved up 15% from the 5/14 low to as high as $240 by the 26th. Since then it has been range bound and has not made a challenge of the highs nor has it been able to stay above $231. I feel as if this is again a leading indicator and that the market will want to consolidate in the near future.

SMH printed a topping tail on Friday.

I got into SMH on Friday after the pierce of the double top at $152.52. The index ended up closing below the high and formed a topping tail on the daily. Today it was able to bounce off of the lows but still remained suppressed and could not catch a bid with the Q’s or the SPY. This tells me that any sort of selling pressure in the overall market will cause this to drop with much more velocity than the the rest of the broad market. In the near term, I expect it to retrace to around $140.

For tomorrow, the levels to watch are SPY $325 and NDX $10,000. A pierce of either of these can present us with opportunities on the short side. Many stocks are coming into the gap window area made on 2/25 and a tag of that level should coincide with the levels on the indices.

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

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