The 'Urge to Surge' - Can Bulls Takeover For a Bit?
The bulls are due a bounce.
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Technical Edge —
NYSE Breadth: 68% Downside Volume
NASDAQ Breadth: 81% Downside Volume
VIX: ~$30
Trade the market long enough and you get a secondary “feel” for what’s going on. You can “feel” the fear when the market is going down; “feel” the tension when it’s choppy, “feel” the exuberance when we’re in a raging bull.
You can also “feel” when the rubber band gets stretched too far in one direction. Yesterday that tension neared a breaking point. We saw ARKK rally 10% at one point in the session, with many growth names flying 15% to 20% at one point.
They eventually halved those gains by the close as the ES traded to new lows at 2:30 pm, but they still finished higher on the day. I know those stocks are still broken, but you can feel the market’s “urge to surge” and tear up those who have flipped from long to short and gotten too far offsides with the short trade.
Could we be looking at some type of dead-cat bounce?
Game Plan — S&P, Nasdaq, Bitcoin, Individual Stocks
With the VIX above $30, I have not spent much time on individual stocks. It’s just not the right environment and as much as I hate sounding like a broken record, the reality is simple: We have avoided a lot of pain in these names and that’s worth a lot — both financially and mentally.
When the volatility comes down, like it did in late April, there will be trades to take again. For now though, a bulk of my effort is going into mapping S&P 500, which is going to be a major driver of individual stocks anyway.
S&P 500
Unless we take out 4099 today, it will market the S&P’s sixth straight weekly decline. That hasn’t happened in many years, so we are due for a bounce on the long side.
Above you can see that I have (quite literally) traced the recent trading action, drawn in blue. In each of those scenarios, we achieved the 50% retracement — the halfback trade. However, we did not achieve the 61.8%.
So I think that’s something we need to be looking for if the bulls can gain steam. In Globex, the ES is contending with and pushing through that two-day low area we talked about early in the week, between 3953 and 3970. It’s also worth mentioning that yesterday’s high was in this zone too.
If we can build above 3970, then 4000 is on the table. Above that puts 4050 to 4055 in play — which is last week’s low and resistance this week. That’s also where we find the declining 10-day.
If achieved today, that would be a 125 point move from yesterday’s close, a 3.2% burst. The 50% retrace is up near 4080, with 4100 just above it. Man, there are so many overhead hurdles.
The risk today is obvious: We are gapping up. A gap-and-crap situation will be a big blow to the bulls’ case.
SPY
It’s crazy we could rally 3%+ from Thursday’s close and more than 5% from yesterday’s lows and…just get back to last week’s low at $405 and this week’s resistance.
If we get to the $405 level in the next day or two, it will be a huge test for SPY.
On the downside, a break of $395.80 has our attention if the gap starts to lose strength. Below $389 and this week’s low is back on the table near $385.
QQQ
Tech wants to rally. The question is, can it?
Above is a four-hour chart. Let’s see if the QQQ can clear yesterday’s high at $295.75 and the declining 10-ema. The same really goes for the SPY, by the way.
If it can, $300 is in play. That’s followed by a potential push to $305, which was resistance this week, last week’s low and it’s roughly where the declining 10-day moving average comes into play.
NQ
Doji-daily-up formation setting up on the daily. If the NQ can stay above yesterday’s high at 12,133, bulls can gain momentum. In that case, it could put the 12,500 area in play next.
Go-To Watchlist
*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.
AR — Was looking for $35 on First Target. Hit $34.90. Anything above $34 was good for a trim. → Now B/E stop-loss on this one.
ABBV — Weekly up → $148.75 seems like a reasonable stop-loss level. $150 for more conservative traders. On the upside, I’d love $160 to $162 as our first time. More conservative traders can trim at $157.
Relative strength leaders (List is cleaned up and shorter!) →
AR
WMT
PEP
KO
MCK
BMY
JNJ
DLTR
DOW
Economic Calendar
