Keep on the B-E-F-D Train

Last week here I made it pretty clear that my premise was to buy every dip. I actually didn’t think the market would pullback as much as it did, but for those that were buying it was a gift. Next week is monthly OPEX and at the moment SPX has nothing to contend with except all time highs.

Breadth: For now it’s keeping up with prices and if that continues then it’s the opposite of what it did all last year when price was making new highs. The SPX isn’t overbought or oversold so nothing really to say there. Finally, the strength the market is seeing tends to lead to more strength.

SPX stocks above their 200-day MA: This is not a short term indicator, but seeing this expand with price would be a positive development. Screen Shot 2016-07-09 at 12.41.18 PM

SPX stocks above their 10-day MA: This crossed above 93% on Friday. Using index indicators to backtest the last five years results show that in 100% of instances higher highs were made at some point in the next 10 days. The average return after 10 days 0.63% and 2% for 20-days out. Thus expect some back and forth in the near term.Screen Shot 2016-07-09 at 2.22.44 PM

Nasdaq 100 stocks above their 5-day MA: The QQQ’s have finally begun to move and the move is very likely not done. Although the QQQ’s may be short term overbought, a backtest over the last five years shows that when over 93% are above their 5-day MA 90% of the time a higher highs are made in the next five days and 100% of the time over the next 20 days.Screen Shot 2016-07-09 at 12.58.34 PM

SPY Open Interest: Because this is a monthly the open interest tends to shift less. On the put side there really isn’t support till 205. Resistance however is not far above starting at the 215. This will likely prevent price from moving much higher than that level this week, but doesn’t prevent the possibility of all time highs at some point in the next five trading days.spy

In Sum, the SPX nearly hit all time highs last week and the likelihood that it does this coming week is high. Furthermore, internal strength is currently supporting that this move has a high probability of leading to further strength in the not to distant future. With that said, there probably is limited gains to be had next week and anything over 215 will likely lead to a small pull-back/consolidation. In essense, shorting is not recommended and dips should be seen as gifts.

For those that are interested in further analysis as well as real-time updates throughout the week, set-ups and real time trade alerts consider joining us.