For weeks now I have been commenting on the fact of how relentless the market has been with any pullbacks short lived. Even in week 9 as the market pushed up to its highest highs once again, and caution remains to loom in the market at the highs, key events ahead may be just the catalyst that we need to pull back and correct the market to its nearest open gaps.
While remaining open gaps may be an entirely other article to write, I mention it here briefly in awareness that the US indices while sitting at some very comfortable levels upside, will at some point need to close out “unfinished business” before rallying higher. Now, some of you may disagree with me and that is fine and your right to do so, however when it comes to the indices, 100% of ALL regular trading hour open gaps EVENTUALLY get filled. Simply that and you should be at least prepared that it WILL happen at some point. Not a matter of if, but when. What concerns me more is that while the further we pull away from these lower levels, the drop at one point will be more substantial and “painful” to some. For the long term trader, a fantastic opportunity to average in at lower price. Be mindful of stops and that markets move in both directions.
Week 9 seemed to focus on POTUS Trump’s address to Congress, numerous Fed speakers with Yellen topping off the week and the SNAP IPO. Don’t even get me started on the IPO. Markets gaped up on POTUS Trump’s address and rallied higher to only pullback and close out the open gap on the NQ. Indices remain at the highs of Murray Levels upside in what continues to be a relentless uptrend holding above each index’s perspective 50/144 ema and key moving averages (10, 50, 200) to close out the week upside of it’s weekly opening prices.
Now, I don’t know if it’s just me and my crumb trader perception, but it seems that intraday interest in the markets have waned based on simply observation of twitter feed and lack of solid volume day in and day out. It still amazes me at the amount of articles/posts/tweets that I do see, to continue to flood the market of hatred and despair of how can this market continue to move up and perhaps this may be the reason that intraday traders have backed off some. Why should their be any logic to this market as some have pointed to reasons of insanity of this drive up? I rest my mind and remove the emotion by focusing on the best for me is to sit comfortably in my “Squeezing of the Orange Juice” analogy. I realize that when the orange is truly squeezed and what left is the scrapes of pulp, the hunger will come back when the next fresh orange comes along. Till then, eyes on the current “orange” until it’s squeezed for every last part.
Week TEN is one step closer to contract rollover and non-farm payrolls report on Friday. The obvious prospect for a next rate hike are on plenty of traders radar and will be monitoring for any “clues.”
Technically, we remain near the highs after a midweek pullback with serious open gaps remaining below as highlighted above. VIX levels still remain low and almost pointless of indicating when the market will turn as it doesn’t seem to be correlated to one another most recently (VIX & Markets running in the same direction). The daily charts on the indices clearly paint that picture as we hold above the respective 10/50/200 ma’s. The 4 hour MML charts which support the bigger trend on a lower time frame also remain at the highs and continue to remain in a very tight range. Watch for the SPX 2400 strike calls Open Interest mid month as I can see the ES retesting the upper levels. As we continue to push at the highs, and looking to the smaller time frames for every inch of how much more it can go, has been my most reliable indicator by use of the Heikin Ashi trend bars on both the range charts and 15/60m MML levels. Throw in a daily/weekly and monthly VWAP for good measures.
Bottom Line
Until the market shows evidence of distribution, there is only one TREND at this point. Probability of at least a pullback to close out last week’s open gap is in play before moving higher.
Technical momentum probability CONTINUES to remain at this point to lead us higher on the indices on the bigger pic in my opinion if all things remain constant and nothing occurs to “shake things up” downside. It STILL won’t take much!
I state with caution as seen in the charts that we are at a technical momentum decision time on the bigger picture as we have been week after week based on my strategy that puts price action at these upper levels in a tight range. I resort intraday to the 60/15m charts for any alert of the change in trend or continued movement upside through social media and my daily outlook; posted 15 minutes prior to the US open.
For the Indices ETF or long term holder, different rules may apply as quarterly re-balancing is my preference for managing such markets. Option to move trailing stops to key MML, Fibonacci or moving average levels can lock in more profit if and when a pullback may occur. Placing a 250 sma on your daily/longer term range charts can be one useful indicator before institutional support and taking in more profit.