The major US Indices, SPY, QQQ, and IWM tacked on another massive bullish follow-through day, only to see price action lower in early trading this morning. All the indices are printing higher highs and higher lows, so we will examine the evidence for our game plan Thursday and Friday.
Will this winning three-day streak continue into the seasonally strongest months of the year? Or will it fail?
SPY Intraday Chart
The daily chart is a bit harder to read, so zooming into the 30-minute chart helps identify the trend. In early trading, SPY is near this ascending trendline, currently bouncing off the 305.00 (+/-) area, while S&P futures show price action stabilizing.
Wait for confirmation if you’re considering any new candidates today. Price action should rebound off this area.
QQQ Intraday Chart
The same trend and price action are reflected in QQQ that we see in SPY and IWM. Watch for buyers at the lows this morning after 10:00 AM, which would suggest institutions are active buyers.
We have a hedge in SQQQ, so we might sell some premium at the open this morning, as we’ve done the past two weeks. Then we’ll repeat and buy to close on any SQQQ retracement for a profit. The adjusted cost basis for this recent position has decreased to 20.10, so if we can sell at $2.00 or better we might initiate covered calls to collect the additional premiums.
TICK and TICKQ are rising for the S&P and Nasdaq respectively. This needs to continue if we anticipate a “V” shaped recovery will take hold.
Futures have apparently bottomed as price action rises to 3062 (+/-). S&P bottomed near 3046 (+/-), so we’ll use this level as a reference point.
Institutions appear to be buying the dips, so it is wise to wait for confirmation before taking action. We’ll do as they do this morning. Trades are smaller and more short-term.
Finally, please note that all of our indicators are distorted, so price action is our only reliable tool at this time. Extreme conditions in yields, forex, precious metals, NYMO and VIX should reverse but haven’t gathered enough momentum for us to confirm a sustainable trend.
Watch price action closely.
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