Market Update 5-17

May 17, 2016

Good Day Traders,

Market Update: The SPX and NDX came to edge of the ledge and stopped today, but the RUT broke through. While today was a bearish day all three have yet to dramatically let go to the downside. Words for Fed Hawks seemed to be the primary catalyst today’s sell off. Notice how price action is starting to get into the rhythm of big up days followed by big down days. This is not a market in balance. Check out the SPX chart from May 2008. Mid-month the Index began its plunge that resulted in the Bear Market. Are we in for a similar ride? The Fed seems to have its back to the wall again. They want to start raising rates based on the revised data they analyze while other measurements are showing that the economy is not nearly as strong as the “cooked” data portrays. Interesting predicament!

For the SPX today’s action brought price to the edge of the ledge. The expected bullish bias for monthly expiration week is not working out as expected so far this week. A Bearish Head & Shoulders pattern has formed but the neckline is still intact. Price action finished just below the 50 day EMA but appears to be ready to bounce on the intraday hourly chart. Currently resistance at the 8/20 day EMA cluster is holding and continuing to rollover. What we may see through the remainder of the week is more of the tug-of-war between buyers and sellers gyrating price action between current support and resistance.

Because the NDX is below all the major indexes it is much weaker than the SPX. Today’s price action found support at the 4311 level. This level forms the ledge for NDX and a break of this level may lead to a drop to the 4232 level which is the 50% retracement from the February low to the April high. Like the other two Indexes signals are still mixed between daily & weekly oscillators.

I’m placing my downside focus on the Russell because did drop off the ledge today. I expect it to be a rocky road as it falls but started building a downside position in TZA the levered inverse Index ETF for the RUT. If this fall maintains symmetry with the fall in October/November of last year this trade could work out very well. The break below 1100 sets up for an initial fall to the 50% Fib Retracement at the 1074 level. I will do two things with this trade. First I will take profits as prices move in the preferred direction and secondly add to the position on pullbacks to the moving average cluster that’s forming.

SPX 5-17

SPX: Downside Market Short the SPY, SPY Puts or SPXU.
Preferred Long ETF’s: SPY, UPRO and SPXL

NDX: Downside Market Short the QQQ, QQQ Puts or SQQQ.
Preferred Long ETF’s: QQQ and TQQQ

RUT: Downside Market Short the IWM, IWM Puts or TZA.
Preferred Long ETF’s: IWM and TNA

Managing Existing Trades: Positions open for 3 strategies.

Strategy I Portfolio Building: Open—100 shares of TZA

Bought 200 shares of TZA at 41.60
T1 = 5% -10% to close 100 shares—Sold 100 shares at 43.79 for gain of 5.26% for booked profit of $219

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