June Swoon, but First…..

Last week here I outlined levels of importance and what to expect based on those levels. That worked out perfectly. I said below SPY 209.5 odds increase of a touch to 207 (check). Then I said above 210 and good chance we see 212 (check). Then I said that we could easily keep gravitating to 210 all week every time we stretch away (check). So what’s next you ask? In sum, my belief is a dip, a rip and then a much bigger dip (actually more like a correction, but dip rhymed).


SPX stocks making 20-day highs: We are back to oversold readings that have typically led to a small bounce in 2015. This helps validate that there is a good chance we see a bounce early next week (although as I said I think we have good potential to go a little lower first). Screen Shot 2015-06-13 at 12.05.12 PM

SPX stocks above their 50-day MA: This got more oversold last week than it has been since February. What’s interesting is even with the bounce last week it has quickly come back down to levels rarely seen in 2015. Hence, we are starting to see a change of character. Screen Shot 2015-06-13 at 12.04.38 PM

SPY open Interest and road map for next week: As you can see there are lots more puts than calls and 210 (a level that has been important for months) begins the high open interest puts. SPY closed right at 210.01 Friday (surprise surprise) and I believe it is likely that we dip below there early in the week. My bias would be to buy that dip into support as I believe we will bounce hard next week (possibly to new highs). Having said that, I wouldn’t look for a long term swing position because I think toward the end of next week (possibly Friday or early the following week) the market will begin to pullback. More significantly, I believe that pullback will  be the  beginning of a correction (one that is deeper than what we have thus far seen throughout 2015). spy

VIX Open Interest: VIX expires on Wednesday morning and there are lots of calls starting with 17. That isn’t of much help given VIX is already low (13.78 was Friday’s close). However,  if we do get a dip early in the week and the VIX pops, it will give further support to the likelihood that buying the dip is the right move before Wednesday. vix

Final note: Using the indicators I do on a daily basis, I find that I am fairly accurate when it comes to the general picture of how the market will trade on a short term time frame (and regular readers I presume continue to read my post because they agree with that). With that being said, when my bias has such a precise trajectory, I remind myself the importance of keeping an open mind and remaining flexible. If SPY cannot bounce or stay over 210 next week then I will have to adjust my expectations quickly. Furthermore, if we do go much higher early in the week without a dip I will also have to adjust my expectations. Thus, I have parameters set to let me know when I am wrong. Finally, as a reminder there is the FOMC meeting and possible Greek news next week. I presume those will end up being the ‘excuse’ for potentially large moves.

Next week has the potential to be a big week for making profits. If you are interested in how I am going to play it and through what sectors consider subscribing.

Good luck!