Splash Zone Weekly Wrap Up: 5/22/16

It is a common theme for the market: S&P 500 gets to a key breaking point, everything is lined up for a big sell-off, but bulls and dip buyers come to the rescue and thwart the big breakdown. 

I mentioned in the last update, that I wouldn’t be surprised to see us sell-off early on in the week, followed by a rally to close the week out. In essence that is what we got, as on Thursday the bears were in the midst of selling-off for a fourth straight week before the bulls came in strong, and nullified a breakdown at 2039 and nearly rallied back into the green to close the day, followed by a respectable rally on Friday that ultimately faded a bit some itself. 

As a result, SPX had a Up/Down/Up/Down/Up that saw the market finish a smidgen higher for the week, and snapped the three week sell-off. 

What continues to help us is the fact that we strive to take profits along the way and not waiting for one major “swoon” event to take the profits. By doing this we avoid trading for weeks at a time without a profit. We can always get back into the market, but once profits are lost, they can’t always be made back. 

There weren’t any massive gains last week, and there were a number of flat trades like IWM, MA, FFIV, AMZN, but a few nice solids with SPXU, ORCL and GOOGL. 

The key was avoiding any big losers. When you can do that during a week that was as topsy-turvy as last week was, that is a big accomplishment. 

Going forward, the ideal move would be a push below 2040 again. SPX rally on Friday was unimpressive, and a continued sell-off here would get us out of the nasty 2040-2138 range that has plagued the market for two years now. If that happens, it gives us the opportunity for some very strong and continuous profits throughout the week.