Swing Trading Strategy:
Big Gaps are dangerous…
C’mon, two back to back days of 100 point gaps, and you think we are going to gap and run each time? Sure it isn’t impossible for the market to do that, but the odds of that aren’t strong, and instead of a bullish posture for the market at the close, the bulls give up all the gains on the day and finish in negative territory.
I didn’t buy either of the gaps of the last two days, and even shorted this market rally this morning for a respectable profit. Be sure to check out the chart I posted below and make sure you are respecting that massive resistance level overhead. It isn’t smart to just assume we will break through it. It was tested today and IMMEDIATELY sold off the rest of the day. Bulls were likely trapped at the highs and we even have massive amounts of June 300 SPY calls that people are buying. Guys, that is only 7.2% below where SPX started the year out at. We are literally looking at -30% GDP here! It isn’t likely we’ll be hoovering at 3000 come June. I could be wrong, and have been wrong plenty of times before, but I think at this juncture, that is a high risk assumption and trade and some crazy premium to be taking on.
In any case, I’ll have setups for both the long and short side of the trade tomorrow, but am looking for more downside in this market to add to my short exposure.
- Volatility Index (VIX) – Rose for the first time since last Wednesday to the tune of 3.2%. Still the potential to be a bull flag pattern going forward here.
- T2108 (% of stocks trading above their 40-day moving average): 3.2% higher today despite being up 50% at one point in the day and in double digits for the first time since March 5th. Closed at 8.22%.
- Moving averages (SPX): The 5 and 10-day MA’s crossed back above the 20dma. Price currently above the 5,10, and 20-day MA.
- RELATED: Patterns to Profits: Training Course
Sectors to Watch Today
Seven of the eleven sectors finished in the green today, despite the market finishing slightly lower. Healthcare and Technology were the two growth sectors unable to finish in the green. The market rally was led in by Discretionary and Real Estate. Oil plunged -7%, yet Energy managed to rally 1.1% higher.
My Market Sentiment