This was one of two premium posts for members posted before week starting 4/25/16
Once again as extreme as it may seem the lack of selling pressure continues to support the bull thesis and thus buying the dip is more attractive then shorting. With that being said, last week at least brought in some selling in individual sectors and momentum stocks that suggest cracks are beginning to show up. Thus, the straight up action that has been in place for over 2 months is likely coming to an end (at least for now). The good news is that if we get pullbacks they offer better entries then breakouts anyway.
With lots of big names reporting next week and with the poor performance of momentum stocks recently, I think a very patient approach is going to serve us well next week. Although there could be some mean reversion in that area (hence the QQQ long we took at the lows on Friday), at this point taking breakouts is not very recommended and instead I think we should concentrate on grabbing pull-backs (hence why we may need to be patient depending on how we open next week). Also with so many companies reporting next week, plus the set-ups I found below, there will be more than enough opportunities next week (probably too many). Thus, if we are not patient we may jump into some so-so opportunities and miss the ones that have the best risk to reward.
SPX levels of importance:
Under 2081 (Friday’s low): 2075, 2069, 2062, 2053, 2040 (there are a lot because, well, there are a lot of support levels) In a down move, depending on how bad breadth is we can determine how far the down move can likely go.
Over 2094 (Friday’s high): 2100, 2104, 2111, 2116, 2134. (Again based on breadth we can determine if there is enough strength to take out multiple resistance levels or not).
Just for next week a close below 2053 could bring in some heavier selling.
Set-ups on the watchlist: