We saw a strong bounce off the open today in Apple which created a nice double bottom with yesterdays daily candle at 447. The rubber band finally snapped back after a 60+ point stretch to the downside.
$SPY bulls stepped up to the plate and confirmed last weeks rally by breaking us out and above the previous 167 resistance level and into the gap. But most importantly notice we have a new open gap thanks to Tuesdays action that remains to be unfilled and coincidentally lining up with the previous gap from 8-15-13. What’s this mean? We effectively created an island bullish price reversal higher leaving behind nearly 4 weeks of trading lower prices. This is typically a very powerful signal and this is one I am fully ready to embrace so long as we can hold onto this recent open gap. Coming into next week I will be looking for long setups in strong stocks and recent leaders.
This past week my account suffered a net loss 5X larger than my average trading week, my largest loss this year. Now I admit for a split second post the market close on Friday I thought to myself, there is no way I can update my performance to show a nearly 3% drawdown this week– I’ll have to lie. And immediately I thought to myself, fuck that, I am going to write a post about it so everyone can see.
All we learned from todays action was that the stock was not ready to breakout. Lots of speculative players and “emotional” trading really just means that we need to see a second day of price action to determine if the initial bearish reaction is going to stick for more than just a day. Most importantly we need to see a break from this pattern. President Obama’s address on Syria combined with China Mobile meeting tonight should keep the volatility train rolling into tomorrows session.
$SPY saw a breakdown late in the day on Monday from the rising channel we formed the prior week and then follow through selling on tuesday via a nice gap and sink lower. For the rest of the week we slugged it out within a sideways trading range between 163.25 to 165. There are now 2 unfilled open gaps to the downside that the bears have been able to protect the past 2 weeks. The stage is set, the levels have been established, now it seems we are just a few headlines away from a capitulatory dropkick lower or a bull we-wont-take-anymore squeeze higher. As I write this sunday night the futures are indicating a good sized gap higher into the top end of this range, but be aware we are over 24 hours away from the US market open given the labor day holiday on Monday. Lets see if the futures can remain positive into Tuesday morning and if so we may be in store for an upside breakout above 165 and into the first of two gaps. If this is faded into Tuesday then watch 163.25 to the downside.