Tightening Up Long Exposure After Today’s Reversal

SPY_2_29

$SPY most market days are just noise within a larger context but occasionally there are sessions that should be paid close attention to and today was one of those days.

Members and I came in relatively heavy on the long side this morning and our plan was to be scaling out of positions into further strength. Luckily the first half of the session gave us that opportunity and we were able to take profits in $TNA above 48 and $SON above 44. But it was the second half of the day that brought about a reversal turning us from green to red AND a close back below a very important 194.50 level in the SPY.

This action, coupled with overbought $NYMO and various other oscillators caused us to lighten up our long exposure by exiting the rest of TNA and another of our winning long positions. We also added a new short position bringing us to a more neutral weighting in our overall portfolio.

This doesn’t have to be the start to a major crash, it could just mean we need to spend the rest of the week between 190 and 195 consolidating sideways before the next directional move. Also keep in mind that fast moving averages are still in bullish alignment and until we break below last Wednesday’s reversal low of 190 there’s nothing extremely broken on this daily chart.

For us this reversal and close back below an important area in the market told us it’s time to get off the heavy long exposure and get more tactical (neutral) until we get more clues thrown our way.

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Evan Medeiros

Evan is the founder of the Trade Risk. With 20+ years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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