Sharp Retest or Failed Breakout?
Markets kicked off this week in a bit of a panic as the S&P500 and Nasdaq traded lower by more than -1% and the Russell 2000 small caps saw -2% at their lows on Monday.
Panic is a relative term, but seeing as though it’s been a couple of months since we’ve seen some broad selling like this, we’ll allow it.
Here’s what matters to us in the short term:
Will the breakout that we saw in the S&P500 out of a tight 6 week range turn into a bull trap? Or will today’s sell off simply be a sharp re-test of that 227 breakout area?
We know intermediate and long term trends are higher, but we also know that failed moves over a highly traded area can often see sharp moves in the opposite direction (in this case lower).
We were stopped out of a few names this morning, and we’re back to a rather tactical position, mostly watching to see how the day closes, and how this action develops around 227 in the SPY.
If we finish the day under 227.50 , we don’t see much of a reason to be heavily long in the near-term.
Good luck out there.
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