“Bear markets have no supports and bull markets have no resistance.” –William Eng
- Wednesday was a perfect breakout entry signal for me after the bounce off the 20 day that closed above all time highs.
- Since we are now at all time highs there are no stop losses or trailing stops to be hit until we roll over. This gives us potential to go parabolic here.
- If we do have a strong move up watch for profit taking near $185, traders love to plan profit taking near round numbers and beat others out the door.
- The 20 day has held as support on three recent tests, it appears that re-tracements to that level is a buy the dip play until it is lost.
- It appears that the 20 day must be lost and closed beneath to really signal any longer term short positions in the $SPY above that level the BTFD crowd is still in control.
- The 5 day ema is where I am moving my end of day stop since we are so extended here from the 10 day sma after my initial buy Wednesday afternoon.
- Swing traders that use the RSI will be looking to take some profits above the 70 RSI and maybe even look to get short over the 70 RSI reading especially if it reverses. Shorts so far are just adding fuel to this up trend as they are forced to cover.
- For those that care about such things the MACD crossed for a potential buy signal, but a cross at these high levels is much more difficult to get a good risk/reward ratio than if it crosses during a bounce off lows. This could actually be a sign of incredible momentum and a buy signal as well.
- Consider that this move can be primarily driven by lack of sellers and short covering, all those traders that were waiting for the imminent correction were all ready out and waiting to buy a big dip. that never came. Every holder of $SPY is sitting on a profit with no pressure to sell yet. This is how we get the slow grind upwards. All the bulls sitting on the market bus don’t want to give up their seat so a ticket to get on the bus keeps getting more expensive. This will continue until the bulls decide they want off the bus.
- The current chart action looks like a slow grind up with a potential re-tracement to the 5 day ema. I look for the old break out level of $177.64 to hold as support this week as well.
I am currently fully long $SPY in my primary two trend trading accounts and $UPRO in more aggressive trading account: entries were on the break out late Wednesday afternoon. I will be stopped out with a close beneath the 5 day ema.