Click here to get a PDF of this post


sc

 

  1.  The $SPY is currently in a short term range with $199 as support and $201.50 as resistance. These levels have held for the past two weeks.

  2. $SPY is in overbought territory having gone too far too fast and needs to build a price base at these levels to enable it to continue to trend up. On the daily chart $SPY has not been able to close above the overbought 70 RSI level.

  3. The 10 day simple moving average has acted as end of day support since August 13th.

  4. This market environment still favors dip buying at the key support level of $199 and the 10 day sma.

  5. A deeper dip that would provide a high probability long entry and a great risk/reward is the 50 RSI or the 50 day sma if fear can bring us back to those levels next week I would be a buyer.

  6. Selling a weekly bearish credit spread at or above the 70 RSI is another trade I would consider that has a high probability win rate with the $SPY.

  7. The all time high is acting as resistance here at $201.58 the more times it is pressed the higher the probability that it breaks out but it is  in need of rest before an attempt to go parabolic. I am not chasing at these lofty levels I am waiting for a pull back.

  8. We can not let a green up day like Friday make us think that the market is still trending straight up. Friday only took us back to short term resistance.

  9. We need to be aware that Tuesday, Wednesday, and Thursday all started higher and ended lower and that price behavior is the first sign of a potential coming pull back in the short term time frame.

  10. The long side is still where the edge is here but I will be looking to take profits on long positions into strength and buy weakness and also sell option premium into the 70 RSI.

Design a trading system with an edge and trade it with discipline while managing risk and you will be profitable. I wish everyone good trading next week.