Monday's Caution Pays Off. Now What?
We were fortune with our start the week.
Technical Edge —
NYSE Breadth: 68% Upside Volume
NASDAQ Breadth: 64% Upside Volume
VIX: ~$24.75
Game Plan: S&P 500, Nasdaq, Semis, AAPL
We had decent upside breadth by the end of the day (68%), but considering we were clocking in at 90% upside volume into the early afternoon, yesterday’s action was discouraging.
It’s clear they switched from buy programs to sell programs after the Apple headline regarding its slowed hiring.
Regarding Apple specifically, shares reversed sharply on the day as a result of the headline. We were fortunate to come into Monday's session cautious across the board on tech (QQQ), Semis (SMH) and ironically, AAPL!
*Anyone who took short setups in these names, it’s now imperative that you do not let these positions go green to red (from profitable to a loss!)*
S&P 500 — ES
The ES held the 10/21-day combo on Monday’s reversal, with a decent 25 handle bounce this morning.
Short-term traders → For the bounce to have any meaning, the ES has to clear the 3865 to 3875 zone (the 50% to 61.8% retracements).
If it does, we could make a push higher into the 3900 to 3910 zone. Above that puts 3920 to 3925 in play (last week’s high and the 50-day moving average).
On the downside, yesterday’s low at 3821 is key. Losing that and failing to reclaim it opens the door back up to the 3700s.
S&P 500 — SPY
The SPY was rejected by the recent supply zone over the recent weeks near $390. Now $380.50 is again being called back into action, as it roughly marks Friday’s low and Monday’s low.
Keep it simple: Does the SPY reject a breakdown below $380.50 and stay above it? Or does it break this level and start to accept below it, putting $372 to $374 back in play? That’s all we really want to know.
Above $380.50 keeps $390 on the table. Below $380 puts more downside in play.
Nasdaq — QQQ
Beautiful sale off the resistance zone in the QQQ, as the 10-week and 50-day moving averages combined with the multi-week high near $296.50 to reject it.
Now $288 is key. Breaking that level and failure to reclaim puts uptrend support in play and could open the door to last week’s low near $280.
On the upside, I want to see if the QQQ can clear $293. That’s the 61.8% retrace of yesterday’s range and the 50-day moving average. Above it could put $296.50 back in play.
AAPL
We knew why Apple was in a precarious position yesterday, but it ended up being the market leader on Monday. That makes it a key one to watch today.
Shares are trading down into the 10-week and 10-day moving averages. This would be a keen area to hold as support. If it fails, the $143 to $143.50 area could be on the table but more importantly, it will likely weigh on the market as a whole.
On the upside, watch $148.50, then $150 to $152.
SMH
I keep the semi stocks on close watch, because I believe they are a good economic barometer.
In any case, yesterday was a high risk/reward short with the SMH trading up into prior support near $219 and the declining 10-week moving average. The initial reaction was a “sale” but will there be follow-through?
The level to watch is last week’s high at $214.86 — let’s call it $215.
Above that keeps this week’s high and the $219 area in play. Below it suggests a little more caution. A break of yesterday’s low at $212 could put $200 in play.
Go-To Watchlist — Individual Stocks
*Feel free to build your own trades off these relative strength leaders*
Numbered are the ones I’m watching most closely.
Bold are the trades with recent updates.
Italics show means the trade is closed.
Trade Sheets: Down to 2 individual holdings against B/E or profitable stops. Good position to be in.
MCK — We have hit two trim zones so far on MCK. Feel free to cash the last ⅓ of the position as you see fit. $335 to $340 is a potential upside target if it continues higher. Moving stop-loss up to $315
$335 hit on Monday, up to you on how to manage from here. I’m holding the last ⅓ against a profitable stop-loss.
MRK — Target No. 3 Hit on Friday’s push, now down to ¼ of a position and looking for $100 and riding against a $92 stop (profitable vs. our basis).
Last ¼ stopped at $92 yesterday.
DLTR — Hit our second target of “$169.50 to $170+”
Down to ⅓ position and looking for $175 to $177 as our final target. Riding against a stop-loss at $162.50. More conservative traders who want to guarantee a profit can ride against a $165 stop.
Relative strength leaders (List is cleaned up and shorter!) →
DLTR
MRK
COST
PEP
ABBV
UNH
JNJ
XLE
VRTX
DG
IBM — Gapping down to the 200-day on earnings this a.m.
MCK
Economic Calendar
