markets continue to climb the wall of worry

$SPY the path of least resistance prevails and the uptrend continues with a firecracker of a day on Friday to end the week. A 1% gap up on some surprise easing from our friends overseas caught the market by surprise and created a bit of a buying panic in the futures market Thursday night. We opened the regular trading session on Friday at the highs of the day and proceeded to melt lower as the session progressed. The technicals have told the story ever since we came into November making new all time highs; it’s been nothing but speculation trying to short this market from a price action point of view. While breadth does appear to be narrowing significantly under the market index hood, there still seems to be enough rotation going on to keep this market chugging along. I think it’s important to be aware that warning signs are flashing when analyzing breadth, just remember those signs can stay warning us for a long time before the music actually stops. I’ve continued to rotate in and out of long names for the past 4 trading weeks, finding pockets of opportunity by being nimble. Focus on individual names that are emerging from healthy bases and wait for the indices to start breaking support before getting worried. And don’t forget we’re heading into a holiday-shortened week in the US which tends to come with a bullish bias.

$QQQ higher lows and higher highs, this index continues to perform to the upside with clear levels of support underneath. The upside gap on Friday was faded and closed but the bull case is very much in tact here. Similar comments apply to the $SPY so keep an eye on support levels and don’t get caught up trying to fight the trend until you’re given a reason to. $NFLX we finally saw this one breakdown from this unusually tight 4-week range this week. We were stalking this inside the Trade Risk for some time and we were there to capitalize on the breakdown initiating shorts around 377 for a quick winning trade. We locked in partial profits at the end of the day for a 14 point gain and then got stopped out on the remaining position the following day on the opening bounce around 368. On Friday, Netflix rolled back over and closed the week out on the lows, threatening lower prices. The trend is down here making lower lows and lower highs so give it some time if you’re an interested long to base out or reclaim the breakdown level around 375.

$BABA saw some selling pressure this week after it broke below the 114-115 high level support. Alibaba has had a hell of a run since mid-October from $90 all the way to $120. I’m happy to see some sideways to down action set in here to hopefully offer a nice opportunity to get back involved in this name. 107.50 to 112 is the immediate range to have on watch and hopefully we can get some more filling action in this range to offer us a base to break out from and retest highs. I’ll have this on watch, not ready yet for me, but momentum can return fast.