Last week followed through on the previous week’s sudden surge in the market. There was plenty of reason to be skeptical of rally initially, particularly with the premise that it was built and bottomed on an incorrect headline out of the Wall Street Journal saying that OPEC was willing to cut oil production. Then of course you had the holiday on Monday, followed by the re-opening of the Chinese markets after one week off, and that they would have two trading sessions before the US equity markets ever opened up – and the same was true for oil too.
This made the week, extra challenging, because of being able to put some starter positions on prior to the three day weekend, I had to go cash to preserve capital until I saw how the market would play out on Tuesday. There were a couple of times on Tuesday and Wednesday, where it looked like the market might try and fade but instead it held strong and I took quick and small losses on those trades. But for me the best sign that this rally may in fact may continue much longer was the price action on Thursday and Friday (2/18 & 2/19) where SPX did try to pullback but every time, it had support underneath and panic never ensued. There was always a floor under the price action. This was even more evident on Friday, which was an extremely dull trading session, but very valuable in the insight it provided. Price on SPX pulled back to the 5-day moving average and held perfectly, while demonstrating extremely light volume. This was the entry opportunity I was looking for to finally add some new long positions. I’ll be looking to add additional positions this week to take advantage of this renewed strength in the market.
I’m very optimistic about the week ahead, and look for more the long side to provide some profitable trading opportunities.
