Technical Outlook:
- SPX has rallied three straight days and taken price all the way up to the 50% Fibonacci retracement level.
- Volume has returned back to average levels on NYSE:SPY, falling for a fourth consecutive day.
- Considering the 50% retracement, and if this truly is just a dead cat bounce, the resumption of the downtrend should begin here, but no later than 2048.
- With the gap down tomorrow, the bear's objective should be, at least, a push below Thursday's lows at 1942.
- The bulls will need to close the likely gap down the market is facing this morning, and push SPX closer to the 20-day moving average.
- VIX has leveled off some of late at the 26 level, only dropping 0.2% on Friday.
- T2108 (% of stocks trading above their 40-day moving average) has continued its rally, by moving up 16% to 18.5%.
- SPX 30 minute chart shows a nice level of consolidation at the bounce highs. A break below 1948, would confirm a double top in the pattern.
- Be very careful of the market levels here. The tendency is to start buying out of fear that the rally is being missed only to find out later this was a dead-cat bounce that you went long at the end of.
- End of day rally occurred on Friday in the last 15 minutes to actually push the market into the positive by a hair, rallying 13 points in the last 15 minutes.
- Here is what you should be asking yourself - in six days, SPX drops 234 points non-stop - over 10%. Are we really to assume the sell-off is now over in just six days and we are all going to be back on the road to new all-time highs? I think not.
- Trade nimble, be careful about holding positions overnight, because the volatility is still at extreme levels and much of the daily moves are happening before the market ever opens.
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My Trades:
- Added one new short position to the portfolio on Friday.
- Did not close out any positions on Friday.
- 10% Short/100% cash
- I am using a ultrashort ETF for my position.
- I am expecting to see the current rally run out of steam here at the resistance noted below and at the 50% Fibonacci retracement level.
Chart for SPX:
