S&P 500: Brutal Week, What’s Next?

The S&P 500 (NYSEARCA: SPY) made a new high of 293.94 on September 20th, 2018 but the entire move higher lacked momentum and also leadership.

The monthly RSI was at or nearing 90 which is extreme reading. The S&P 500 (SPY) made a lower high on October 3rd in what turned out to start the brutal move lower during the past week.

Prior to the decline, there seemed to be irrational exuberance from many market participants with some extreme complacency. A few such readings to mention here were the Equity Only Put / Call Ratio ($CPCE) and $VIX to $VXV ratio which were consistently showing complacency.

The question now is whether or not the pain is over for market participants.

Let’s take a look at some charts.

spy etf percent declines stock chart investors year 2018

The first chart depicts the percentage decline during 2018 during various corrections. (Courtesy: Brian Shannon – @alphatrends)

  1. February – 13.53%
  2. March/April – 10.11%
  3. October – 8.72% (so far)

Note: If $SPY retests February lows, that will be a 16.22% decline

spy stock market investing chart vwap year to date october 15

The next chart is the daily chart of S&P 500 ETF (SPY) with Year To Date VPOC.

The current decline from February lows to All Time Highs made in September came close to tagging 61.8% retracement (Fib retracement drawn with weekly chart). The current lows made on October 11th is 270.36 and 61.8% retracement sits at 268.59 which are likely to be tested. Price closed below 200 SMA on this timeframe and this happens to be the first time since 2016.

Additionally, $SPY held the Year to Date VPOC (Virgin Point of Control) at 272.73 for now but closed below the lower Bollinger Bands. On the weekly timeframe, $SPY has held it’s 50 SMA so far.

Most of the rallies seen across many years have started with such extreme readings below the 200 SMA and lower Bollinger Bands. Some of the extreme readings to mention were seen in RSI, Williams %R, $TICK. The New Highs vs. New Lows were at nearing

stock market tick indicator chart year 2018 through october 15

Additionally a sentiment gauge that some of the experienced traders look at is the CNN Fear & Greed. Intraday on October 11th, it had a reading of 4. Bounces occur in the indices at such extreme readings.

Potential Bounce:

s&p 500 spy stock chart 30 minute trading candles rally higher october 15

Where do we go from here? Does this bounce continue? Let’s take a look at a few potential levels where this bounce can fail.

  1. 5 day moving average (65 SMA on 30 minutes) is at 281.64. The posture is declining still and hence this can be the first hurdle to cross.
  2. 50% retrace from October 11th lows of 270.36 is 282.15. That will be the next level to watch.
  3. If the above two levels are surpassed, then look at 284.93 which aligns with 61.8% retrace from the October 11th lows.

Final Thoughts: October 11th lows will be visited again some point. Extensive technical damage has occurred in many charts in the shorter timeframe from this move lower. It is prudent for market participants to stay patient and disciplined and manage their position size and their risk.

 

Note: Author has no position in $SPY or $SPX at this time.

Twitter: @sssvenky

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

The post S&P 500: Brutal Week, What’s Next? appeared first on See It Market.

S&P 500: Brutal Week, What’s Next?

The S&P 500 (NYSEARCA: SPY) made a new high of 293.94 on September 20th, 2018 but the entire move higher lacked momentum and also leadership.

The monthly RSI was at or nearing 90 which is extreme reading. The S&P 500 (SPY) made a lower high on October 3rd in what turned out to start the brutal move lower during the past week.

Prior to the decline, there seemed to be irrational exuberance from many market participants with some extreme complacency. A few such readings to mention here were the Equity Only Put / Call Ratio ($CPCE) and $VIX to $VXV ratio which were consistently showing complacency.

The question now is whether or not the pain is over for market participants.

Let’s take a look at some charts.

spy etf percent declines stock chart investors year 2018

The first chart depicts the percentage decline during 2018 during various corrections. (Courtesy: Brian Shannon – @alphatrends)

  1. February – 13.53%
  2. March/April – 10.11%
  3. October – 8.72% (so far)

Note: If $SPY retests February lows, that will be a 16.22% decline

spy stock market investing chart vwap year to date october 15

The next chart is the daily chart of S&P 500 ETF (SPY) with Year To Date VPOC.

The current decline from February lows to All Time Highs made in September came close to tagging 61.8% retracement (Fib retracement drawn with weekly chart). The current lows made on October 11th is 270.36 and 61.8% retracement sits at 268.59 which are likely to be tested. Price closed below 200 SMA on this timeframe and this happens to be the first time since 2016.

Additionally, $SPY held the Year to Date VPOC (Virgin Point of Control) at 272.73 for now but closed below the lower Bollinger Bands. On the weekly timeframe, $SPY has held it’s 50 SMA so far.

Most of the rallies seen across many years have started with such extreme readings below the 200 SMA and lower Bollinger Bands. Some of the extreme readings to mention were seen in RSI, Williams %R, $TICK. The New Highs vs. New Lows were at nearing

stock market tick indicator chart year 2018 through october 15

Additionally a sentiment gauge that some of the experienced traders look at is the CNN Fear & Greed. Intraday on October 11th, it had a reading of 4. Bounces occur in the indices at such extreme readings.

Potential Bounce:

s&p 500 spy stock chart 30 minute trading candles rally higher october 15

Where do we go from here? Does this bounce continue? Let’s take a look at a few potential levels where this bounce can fail.

  1. 5 day moving average (65 SMA on 30 minutes) is at 281.64. The posture is declining still and hence this can be the first hurdle to cross.
  2. 50% retrace from October 11th lows of 270.36 is 282.15. That will be the next level to watch.
  3. If the above two levels are surpassed, then look at 284.93 which aligns with 61.8% retrace from the October 11th lows.

Final Thoughts: October 11th lows will be visited again some point. Extensive technical damage has occurred in many charts in the shorter timeframe from this move lower. It is prudent for market participants to stay patient and disciplined and manage their position size and their risk.

 

Note: Author has no position in $SPY or $SPX at this time.

Twitter: @sssvenky

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

The post S&P 500: Brutal Week, What’s Next? appeared first on See It Market.

2 Bullish Stocks: Twitter (TWTR) and Michael Kors (KORS)

Today I want to share 2 trading setups that I have my eye on.

The stocks are Twitter (NYSE:TWTR) and Michael Kors (KORS). Charts and commentary are below.

Twitter (TWTR):

The company needs no introduction as most of the fintwit people thrive on this platform. The company has a market cap of $34 billion.

The company reports earnings on July 25thbefore market open and the short float for the stock is 6.17%. January 2019 – 70 calls were bought today (June 26th) although there has been constant buying in this name.

twitter stock research trading forecast chart_27 june 2018

After the recent run to make a 52 week high, the stock has been consolidating on lower volume to let the short term moving averages catch up with price. Stock is holding both its 8 EMA and 10 EMA on the daily timeframe and has formed a bull flag. Inside Day printed today (June 26th). Trigger over Monday’s highs of 45.52 with a stop at either 43.33 if one wants a tighter risk or room to 21 SMA near 41.77. Targets are 50.55 and 55.01. Always take profits near targets. July 45 calls or August 50 calls are attractive although a spread will be more risk defined (45/55 call spread).

Note: The author has a position in TWTR at the time of publication. Any opinions expressed herein are solely those of the author for educational purposes only and do not in any way represent the views or opinions of any other person or entity.

Michael Kors (KORS):

Michael Kors is a luxury apparel and accessories manufacturing company headquartered at London, United Kingdom with a market cap of $10 billion. The company’s Annual ROE is 38.8% and last quarter’s percentage change in sales was 11%. Company’s next earnings is on 8/29/2018 before market open and the short float is 3.27%.

michael kors stock research trading forecast chart_27 june 2018

The stock has been consolidating sideways on much lower volume and has held relatively well compared to what the indices have been doing. Range break awaits over 68.58 on daily timeframe. Risk is at 65.20. Target 1 at 71.38, Target 2 at 75.20.  July 68 or 69 calls look decent or August 68 calls.

On the monthly timeframe, the stock has formed a bull flag and has held extremely well during the chop in June. It is above all moving averages on this timeframe. Traders can get involved this name on this timeframe on a break out over 70 with a stop under either 10 EMA which currently is at 59.55 or the monthly lows of 57.10. This is a long term swing with first target at 77.97 and additional targets at 84.58 and 90.87. A bullish risk reversal will be an ideal play (short August 60 or 57.5 puts and long 70/80 call spread or just 70/80 call spread if margin is not available).

Note: The author has no position in KORS at the time of publication but will consider a long position based on the monthly breakout. Any opinions expressed herein are solely those of the author for educational purposes only and do not in any way represent the views or opinions of any other person or entity.

Twitter: @sssvenky

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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S&P 500 Technical Update: 4 Reasons For Caution Into Month End

The S&P 500 (NYSEARCA:SPY) had been consolidating to form a bull flag at the 2780 zone… until additional trade war related news between the US and China took center stage once more.

The reaction to the news was that price broke intermediate and important price support levels around 2751-2740 on the S&P 500 Index.

Range expansion to the downside took price down to an important support level on the daily chart – 2700, which also marks the 50 SMA on the daily chart. This support held.

Quite a bit of technical damage occurred on this move lower but there is some positive divergence on Williams %R, a momentum indicator.

Price confirmation one way or the other is required on Wednesday June 27th with month end and quarter end looming.

So what gives?  Let’s look at the chart and point out some things traders need to be aware of.

S&P 500 Chart

s&p 500 price chart analysis value buying zone june 27 2018

From a technical perspective, there are a few pointers that one needs to be aware of.

1.  Price stalled again at the 2780 zone which is the Year to Date Value Area High (VAH). Price stalled similarly during the last week of February and again during the week of March 12th.

2.  Inside Day or Week is a pattern that is quite powerful on either side of the tape, whether you are playing for a break higher or break down. The candle formation Monday (June 25th) and Tuesday (June 26th) is surprisingly quite identical to the ones on March 19th and March 20th when S&P 500 printed an Inside Day – a very tepid bounce after a big red day. Price broke down then. The same scenario need not occur but one needs to be aware that an inside candle can go either way.

3.  The Equity only Put/Call ratio ($CPCE) printed a reading of 0.52 today (June 26th). Similar readings have been noted during the entire month and this throws utmost caution as there seems to be a lot of complacency. Of course, what price does from here can be totally opposite of what has been mentioned but after a big red day, the Options Flow indicated a lot of call buying instead of put buying. In fact, there were massive put buying in $VXX. Overall caution warranted.

4.  Last but not the least, the Open Interest for tomorrow’s expiry and Friday’s expiry for $SPY indicates a potential for Delta Hedging.

Note: The author has $SPY 270 puts expiring June 29thFriday as potential hedge

Twitter: @sssvenky

The author has a position in SPY at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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