Here’s a link to our Morning Call webinar recording:
https://register.gotowebinar.com/recording/1018530794031073542
As we noted the past few days, the market was trapped and listless but at the same time the rising wedge we’ve been charting was narrowing. This morning brought a weak opening that’s been overdue. Like a fine Swiss watch, the SPYs found support exactly where we expected them to do so if a drop through the rising wedge support were to occur. That level, of course, was the 100 SMA. The 10 SMA is right below there and there are many other forms of support just below it.
So far, the SPYs are holding. We did see a piece appear this morning that echoed our suggestion that most of the known and expected “good news” is out as of this week and not much remains to keep the rally going (that we know of!). Again, another reason why our cautious take this week may make a lot of sense. Nothing can be ruled out either way and we still allow for the mild pullback we believed was due to be followed by a more rallying. However, we can’t point to a driver for that. Does the China trade news finally break? Without news, it’s hard to fathom what pushes the markets much higher given how far they’ve come from the lows.
And do remember, the past 2 rising wedges we spotted 2018 brought monstrous selling in their wake when they broke. That could happen at some point and that will provide the “retest” of the lows many are still clamoring for all these weeks later.
So, we remained trapped in an overbought market that’s finally backing off a little with ample support levels just below and mid $270.00s resistance just above. However, recall that rising wedges do give way more quickly than other patterns. That’s where we are…
For now, stick with DE and A as bear mentions, at least to look at. They would be counter-trend reversal trades if taken so be careful. They do have room to drop which is why we mention them! We’re still scouring for more bearish names should the markets finally break back down in a more significant way.
More when warranted.
Cordially,
Wayne