Tickers discussed: SPY, QQQ, IWM
The post provides key levels to watch and trading locations for the indexes along with trading plans and timely commentary to keep you on the right side of the trade
Market Summary
Aside from a little initial weakness on the open, markets seemed to be on cruise control until about 1pm when the algos grabbed onto a headline that the China tariffs will remain until the election. It didn’t really matter that the “news” wasn’t news at all since all the information was already known. Regardless, the market lost it’s footing and did not recover. While the losses were minimal, the way the day played out hinted at a change of character. Additionally, because of the narrowing wedges on price, some key levels are closer than you’d think they are . Let’s take a look.
$SPY 60 min Chart
Price has been contained within a narrowing, rising wedge since the end of December. Now price is at the narrowest part of the wedge. Today, they parked price right on trend line support. To my eye $327 is the key level tomorrow. Below $327 and price will have broken below the wedge and first support. The first logical spot to look for support below $327 would be gap support at $325.50. The gap there is about $1 wide. Below $324.50 and the snowball only grows. If price holds $327 and heads higher, then it was much ado about nothing. As far as a trade, I like the idea of a swing short against $327 should that level break. That trade may be short term if the sell off is contained at $325 or so, or it could morph into some thing more if things get more serious.
$QQQ 60 min chart
The same thinking and set up apply to the Q’s. A break of trend and support at $219.75 open the door for a fast move to $218 where there is a ledge of support and a gap. If that gap fills and price breaks below, then $216 comes into focus. In my opinion a break of $219.75 would be a great place for a short term swing short with a stop above either as a directional play or a hedge against you long book.
$IWM 60 Min Chart
Here price is a different animal. Today, price gave a nice breakout above that instantly failed when that news broke. Here the situation is not as critical as for SPY and QQQ. Here price has been a trading range for a while. Above $167 and traders can look for a move to challenge the 2018 highs near $172.50. Below much more than $166 you’ll probably see price make a move to the lower part of the recent range. The trap door on IWM is $163.8 which is the top a decent sized gap. A break below $163.80 and I think you’d see a fast move to $162.50.
Pulling it all together
The market is extended and overbought. Despite a minimal loss today, price for SPY and QQQ are very close to triggering sell signals on the 60 minute charts. Remain vigilant to protect your gains from the recent run. They can evaporate quickly, especially if everyone heads for the exits at the same time.
In an earlier blog post, I detail both the possible market topping events on the horizon plus the bullish factors at work. If you care to dive deeper, you can find that post HERE
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