It was another great week for the bulls and short sellers seemed to be punished extra this week with some spectacular moves in individual stocks. The video below takes a look at trends, key levels of support and different scenarios for the market. Markets trends only end badly for those who fight trends, chase trends or ignore good money and risk management principles. Don’t be part of the “dumb money” have a plan and be disciplined about implementing it!!
Markets continue to follow their “path of least resistance” and those who short (or buy $GLD) against the primary trend experienced another punishing week. The trend is your friend unless you fight it. There is a danger with a market which appears to be bulletproof and that is complacency. Complacency sets in when people believe every pullback will recover quickly until one day the pullback becomes a reversal. To protect against becoming complacent and even cocky, you need to listen objectively to the market and let off the gas a bit when trends appear vulnerable and then position yourself in strong stocks when the trend resumes. It is up to you to know what timeframe you are on and to provide the discipline, that is the toughest ingredient to consistent market success. The video
$SPY- held above the key level of 15325-15350 and surprised many (including myself) to rally up to new highs. Short term it is extended and 15550-15600 looks like it should be support. More proof that the benefit of doubt goes to buyers when market is above rising 50 DMA and holds important support levels.
$QQQ – this market has been a choppy mess all year. The recent weakness held the 61.8% retracement of the year range. It also flirted with eh YTD volume weighted average price. Tough to say what is next here, good ETF to avoid trading.
$IWM – broke important support at 9300 and now the 9300-9325 area is potential resistance. This market should be treated with caution until it can definitively recapture 9325. Closing above 9325 would likely get some shorts to panic. Notice how the pullback found support
Markets showed some volatility this week but the mantra of “innocent until proven guilty” continues to be the objective way to look at the trends. Markets can correct by pulling back in price or they can correct through time. Time corrections are a period when we become more selective in new purchases and monitor key levels of support to measure the health against. Do not let news headlines influence your decision to enter or exit a position, it is impossible to ignore news and not have an opinion of it but markets simply do not care about our opinions.. The truth is in price.
Markets are still in primary uptrends but are showing short term reason for caution, below are some levels to keep an eye on.
$SPY tested support near 15400 yesterday, breaking below that level brings about the possibility of a further decline down towards 15300 which is prior resistance and a 50% retracement of the Feb low to last week high.
$QQQ broke below 6840 and dropped to the bottom of the prior range of 6780-6800, this area is also a 38.2% retracement level.
$IWM still holds up very well as prior resistance was tested and held as support near 9365, a break of that level would likely lead to a move down towards 9310
$XLF holds up above the prior important level of 1820. The bigger level of potential support is down near 1795-1800
click charts to enlargen
There is no reason to be looking
Markets are still in primary uptrends but are showing short term reason for caution, below are some levels to keep an eye on.
$SPY tested support near 15400 yesterday, breaking below that level brings about the possibility of a further decline down towards 15300 which is prior resistance and a 50% retracement of the Feb low to last week high.
$QQQ broke below 6840 and dropped to the bottom of the prior range of 6780-6800, this area is also a 38.2% retracement level.
$IWM still holds up very well as prior resistance was tested and held as support near 9365, a break of that level would likely lead to a move down towards 9310
$XLF holds up above the prior important level of 1820. The bigger level of potential support is down near 1795-1800
click charts to enlargen
There is no reason to be looking
The correct focus for these markets continues to be to monitor the health of the rally by the ability of support levels to hold, not to try to pick a top. The market has given us clear levels of meaningful short term support and as long as those levels hold, the trend remains intact.
Key levels outlined on the charts below are $SPY 15515, $QQQ 6835, $IWM 9315 and $SMH 3530 A break of these levels would be reason to be more cautious as it would likely lead to a somewhat deeper pullback. Even if support is broken, the primary uptrend on longer term timeframes remains intact and should be viewed as a pullback only until proven otherwise.
After the volatility we saw 2 weeks ago it appeared some consolidation was due for the markets but buyers showed up once again and longer term uptrends continued to exert their strength. The higher we go it seems that more people are focused on picking “the top.” The correct focus should continue to be objective observation of the market action for clues of weakness and to manage risk, but that is ALWAYS our job, to manage risk!
The market outlook continues to be bullish and the video below outlines some crucial levels of support in $SPY $QQQ $IWM $XLF $SMH to measure the strength against. A strong uptrend doesn’t mean throw caution to the wind and just buy anything at anytime, we still have to be aware of low risk entry levels and not expect to be
