S&P Levels Are Defined | Trading ARKK, AMD, DOCU, DLTR, More
We have clear levels to watch in the SPY, QQQ and some growth names.
We were looking at our fourth 80%-plus downside day in six sessions until Friday’s late-day rally. While the S&P still finished notably lower on the day, at least the breadth figures improved.
Volume has been robust lately, with the S&P futures hitting its highest volume week since March 2020. The same can be said for the Nasdaq futures.
I had mentioned some seasonality last week, which said that December had the second highest winning percentage month for the SPY since 1990, positive 75% of the time. A further dive on that analysis says that the second half of December is generally stronger than the first.
However, that does not mean we should put all of our faith in Santa Claus coming to save the market. But the S&P 500 is down just 3.5% from the highs and at worst, was down just over 5% at last week’s intraday low.
The Nasdaq was down more than 7% at its intraday low, but the futures are doing a good job holding the 50-day moving average. The problem here? Tech. Specifically, high-growth tech as ARKK and others get buried.
Can they reverse?
I hate saying that we’re in a “wait-and-see” market, but that is the truth. Going out on a limb can get you crushed if a proper risk plan is not in place. We could be near the end of the decline or still in the middle of it. The index futures will roll this week (with quad-witching next week) too.
I will always be looking for the setups. But until the environment improves, it’s hard to be aggressive right now.
Technical Breakdown
NYSE Breadth: 24% upside volume
NASDAQ Breadth: 23.5% upside volume
SPY
Friday’s dip went right down to the 21-week moving average and the daily anchored VWAP and bounced hard, back to the 50-day moving average and breakout area.
The $450 area was pretty key last week. Longs want the obvious: for the SPY to stay above last week’s low at $448.92. For the futures, that’s 4492.
On the upside, they’d love to see a move back over $460.30. That’s Friday’s high, but it would also put the stock back above the 10-day moving average, which has been active resistance.
For the futures, that’s a move over 4606.50.
If the S&P can do that, it will have traders potentially looking at the 21-day moving average and last week’s high, at $466.56 in the SPY and 4670 in the futures. It’s hard to imagine a push above this area right now, but it’s something to keep in mind if we clear $460.30/4606.50 and the 10-day moving average.
On the downside, a close below last week’s low could open up some of the downside gaps we have on the chart from the late-October rally.
Like I said earlier, it’s the start of a new week. There’s no need to go in full tilt at 9:33 am ET on Monday. Let’s let the market tell us its intentions.
QQQ
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Individual Stocks
I always hate being “that guy” who’s reminding people of the setups that are working, but it’s the truth. The XHB finished lower on Friday, but down just 35 basis points to the SPY’s 87 basis point decline.
Its relative strength — and many of its components — continues to shine. TOL, HD, TREX, LEN, BLDR, LOW, etc.
Dollar Tree continues to trade really well and has now given us back-to-back inside days.
Home Depot was a newsletter play on Friday that gave us a punch up to our $415 target. There are good trades right now, but traders can’t flinch when it comes to taking their profit and can’t be scared at stopping out.
DLTR
A two-times daily-up rotation over $137.75 could put the gap-fill area in play near $140.50.
Sorry! DLTR is the freebie, but the DOCU, ARKK, AMD and the rest of the individual setups are for premium members only.
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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!