Don't pop that champagne just yet bulls.
Looks like the bull case won out huh? I mean i know i cited Jpow and irrationality as part of the thesis but geez. We haven't seen a 100 point SPX day since we got a confirmed reversal back in late March. Majority of that was in the overnight session after Jpow went on 60 minutes and basically, through his teeth, said that he'll do whatever it takes to save the stock market. He said economy, but he really meant stock market. I think part of that optimism is that we're in uncharted territory for Fed intervention. So we may be pricing in the possibility of the fed buying other assets, such as stocks, if the train truly does come off the tracks. Pair that with "the market" cheering the success with Moderna's vaccine. That won't be ready to roll until 2021... IF it is successful and doesn't kill anyone. But like i said ANY good news is and will be capitalized on. I laid out the path back to $294, but was not expecting to get there overnight.
Now let me talk to you about $297.50.
Technically we still have a lot of interference in the way before we go for the gap fill at $304, which i still feel like is the most plausible at this point. But i'm not convinced this is it just yet. We have a confluence of resistance just from the last dip, not even mentioning historical resistance. And that is the daily 100 period MA at $297.50, the daily 200 period MA at $299.50, and the bottom of the gap at $297.50. The bulls HAVE to hold this level. If they don't, and they fumble here the bears will bring it back down into the $285ish level to fill this huge gap we just created. Now what has me not sold on this breakout, if it even is one. Is volume, and price action. Specifically the quickness of it. We went too far too fast and it may not be sustainable, market profile and structure is important. Now pair that with the fact that we only traded 114m shares as opposed to 134m 100 period daily average. Now, factor in that over 10 million of that was traded in the last ten minutes of the cash session, with another 1m after the bell. And it was all heading for the exit. So one, that leads me to believe we didn't have institutional participation in this breakout (that's a big part of my skepticism). And two, the fact that the only what i consider to be be money we saw the entire day was in sell volume in the last 10 minutes. That's just my analysis. If you have any other theories let me know.
The one thing this breakout does have to support it though is: safe havens selling off, and the broad participation of the market. One thing that was unhealthy about the past couple weeks was the fact that majority of the action was just in the large cap tech stocks. Today i'm pretty sure almost every sector was in the green. Let's take a look
Reversal on 5 min SPY chart
Hourly showing we broke and held the key level of $294
ES looking less convincing than SPX
IWM, RUT, and RTY having a massive day which scores a point towards the bull case
But notice IWM is retesting a broken wedge
RUT clearing its last breakdown candle high but still has a ways to go
But both RTY and RUT back inside their channel
VIX finding trend line support even after today's 90 point day
NDX failing to break it's last breakdown candle high
DJI also at a critical level
XLF having a 5% day
XRT having a 4% day with its breakout only being interrupted by the 100 period MA
Even beaten down REITS having a 6% day
Transports having a 7% day
And here's the kicker to me - 10 yr Treasuries. Broke trend and not looking healthy at all. If bonds are loosening up that is a clear signal of a risk rally coming. But still needs confirmation
Silver on its way back to pre virus levels apparently. but granted the spread between it and gold was massive.
Basically at this point i'm about 55-45 bull, just for the simple fact that the rally was so broad, and we did see proof of a risk appetite with bonds starting to sell off. Tomorrow and wednesday will be confirmation days. Again, i'm, expecting that gap fill at $304 at least. And if the happy talk keeps up with the virus i wouldn't be surprised to see us challenging the highs from Feb this summer. Like i said it's possible to see $400 before we see $150. Irrationality is driving this bus and we're starting to fully dislocate from reality. But hey, don't fight the trend, and don't fight the fed. Right? I will point out after the move like today it would be perfectly normal to retest the top of the channel we're trying to leave. If we retest, and successfully hold that's a good sign we're going higher. If we retest and break back into the channel and close on a daily basis that's a fumble for the bulls.
Again keep your head on a swivel and happy trading.
This is not trading advice. This is my own personal opinion based on my own personal TA
Looks like the bull case won out huh? I mean i know i cited Jpow and irrationality as part of the thesis but geez. We haven't seen a 100 point SPX day since we got a confirmed reversal back in late March. Majority of that was in the overnight session after Jpow went on 60 minutes and basically, through his teeth, said that he'll do whatever it takes to save the stock market. He said economy, but he really meant stock market. I think part of that optimism is that we're in uncharted territory for Fed intervention. So we may be pricing in the possibility of the fed buying other assets, such as stocks, if the train truly does come off the tracks. Pair that with "the market" cheering the success with Moderna's vaccine. That won't be ready to roll until 2021... IF it is successful and doesn't kill anyone. But like i said ANY good news is and will be capitalized on. I laid out the path back to $294, but was not expecting to get there overnight.
Now let me talk to you about $297.50.
Technically we still have a lot of interference in the way before we go for the gap fill at $304, which i still feel like is the most plausible at this point. But i'm not convinced this is it just yet. We have a confluence of resistance just from the last dip, not even mentioning historical resistance. And that is the daily 100 period MA at $297.50, the daily 200 period MA at $299.50, and the bottom of the gap at $297.50. The bulls HAVE to hold this level. If they don't, and they fumble here the bears will bring it back down into the $285ish level to fill this huge gap we just created. Now what has me not sold on this breakout, if it even is one. Is volume, and price action. Specifically the quickness of it. We went too far too fast and it may not be sustainable, market profile and structure is important. Now pair that with the fact that we only traded 114m shares as opposed to 134m 100 period daily average. Now, factor in that over 10 million of that was traded in the last ten minutes of the cash session, with another 1m after the bell. And it was all heading for the exit. So one, that leads me to believe we didn't have institutional participation in this breakout (that's a big part of my skepticism). And two, the fact that the only what i consider to be be money we saw the entire day was in sell volume in the last 10 minutes. That's just my analysis. If you have any other theories let me know.
The one thing this breakout does have to support it though is: safe havens selling off, and the broad participation of the market. One thing that was unhealthy about the past couple weeks was the fact that majority of the action was just in the large cap tech stocks. Today i'm pretty sure almost every sector was in the green. Let's take a look
Reversal on 5 min SPY chart
Hourly showing we broke and held the key level of $294
ES looking less convincing than SPX
IWM, RUT, and RTY having a massive day which scores a point towards the bull case
But notice IWM is retesting a broken wedge
VIX finding trend line support even after today's 90 point day
NDX failing to break it's last breakdown candle high
DJI also at a critical level
XLF having a 5% day
XRT having a 4% day with its breakout only being interrupted by the 100 period MA
Even beaten down REITS having a 6% day
Transports having a 7% day
And here's the kicker to me - 10 yr Treasuries. Broke trend and not looking healthy at all. If bonds are loosening up that is a clear signal of a risk rally coming. But still needs confirmation
Silver on its way back to pre virus levels apparently. but granted the spread between it and gold was massive.
Basically at this point i'm about 55-45 bull, just for the simple fact that the rally was so broad, and we did see proof of a risk appetite with bonds starting to sell off. Tomorrow and wednesday will be confirmation days. Again, i'm, expecting that gap fill at $304 at least. And if the happy talk keeps up with the virus i wouldn't be surprised to see us challenging the highs from Feb this summer. Like i said it's possible to see $400 before we see $150. Irrationality is driving this bus and we're starting to fully dislocate from reality. But hey, don't fight the trend, and don't fight the fed. Right? I will point out after the move like today it would be perfectly normal to retest the top of the channel we're trying to leave. If we retest, and successfully hold that's a good sign we're going higher. If we retest and break back into the channel and close on a daily basis that's a fumble for the bulls.
Again keep your head on a swivel and happy trading.
This is not trading advice. This is my own personal opinion based on my own personal TA
