Swing Trade Approach:

Big day for my long positions – the smaller amount of short positions that I held previously overnight didn’t fair too well, all but one at least. I closed my short on the biotechs (IBB) for a -3% loss. It was a great pattern that was showing a lot of weakness, but when the market rallies 70 points in just two days, ETFs like IBB are likely to bounce pretty damn hard under such conditions – so no surprise there I needed to go ahead and get out of that trade. It was broken. But the rest of my positions, which were all long did exceptionally well for me. 

Indicators

• Volatility Index (VIX) – To say the move in VIX from last week is getting crushed this week, is a total understatement. Trading above 19 on Friday, it is now hitting 16, and likely to see the 14’s today. While it managed on Friday of last week to break the declining trend-line off of the December 2018 highs, it couldn’t sustain the move beyond one trading session. VIX currently sits at 16.05, following yesterday’s 11% decline. 
• T2108 (% of stocks trading above their 40-day moving average): SPX is setting up to hit new all-time highs today, and less than 50% of stocks are trading above their 40-day moving average. This continues to be the major bearish divergence for this market as has been the case since October of last year, but not real impact to market pricing has occurred. 
• Moving averages (SPX): Back to trading above all the major moving averages and reclaiming the 5, 10 and 20-day MA yesterday. 
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Sectors to Watch Today

Utilities was the only sector to see any selling yesterday, which isn’t all that surprising when the market has an appetite for risk. Industrials found the support this week it needed at the November levels of last year. Materials finally showing some life and a willingness to bounce following the double top pattern. Technology and Discretionary poised for new all-time highs. 

My Market Sentiment

Day three of the bounce unfolds today, following a two-week sell-off and likely to hit new all-time highs. With the pullback, a better formed rising channel has been created to provide guidance to the market going forward. Headline risk still hangs a cloud over this market that you need to be mindful of though.