Was That It?

Late last week I wrote about a short term pull back scenario with the $SPY coming down to the $287s.  .  Trumps Sunday night tweet provided the push for that pull back with S&P500 futures plunging over 1.5% heading into yesterdays session with $SPY hitting those $287s before embarking on a strong recovery.

Price for the $SPY came down to moving average support I pointed out last week:

before bouncing.

Is That It?

Have we seen the lows of this pull back?  Is the market ready to embark on its next journey to fresh record, all time highs?

Let's start with Small caps.  The laggards on this most recent trek to record highs have been those small caps.  While the S&P500 and NASDAQ painted fresh new highs last week, the Russell 2000 remains quite a distance from its highs it made at the start of September last year.

However it broke through key resistance and that 1600 level:

The $IWM - the Russell 2k ETF is breaking out as well from the post-election 2016 channel

From a bullish perspective small caps look ready for more upside.  Small caps led the way yesterday, outperforming through out the session.

The renewed trade war threats aren't as damaging for the domestically geared Russell.  However as I write this pre-market action has brought price back under resistance.  Which is a concern, making the break of resistance one of the false variety.

Also concerning is the momentum shift.  Yesterdays downside move has triggered a short term negative momentum signal on the $QQQ as well as the $SPY and the $DIA:

$QQQ looks to be setting up for a possible $185 test, which means that $SPY would likely come back into yesterdays lows.   $DIA has a somewhat concerning double top with price action already plunging through moving average support.

And the VIX isn't helping things.  The VIX was up some 50% yesterday morning.  By the end of the day the VIX was up 15%.  Which was not so bad considering how high it was earlier.  From 13 to almost 19 to 15.

Notice where the VIX stopped.  15.   That has been a key figure on breakouts and breakdowns.  Above this 15 level and the market is likely setting up for more downside.  I think there is a good chance we may even see that 20 handle again in the short term.  Of course when all is said and done the VIX will be back at 12.  Likely a lot sooner than everyone thinks.

For the first time in 2019, the VIX has broken its downtrend.  I'm not sure its headed over 30 or to the 2018 highs, but I think there is a decent chance we see 20 - 25.

Don't call me a bear here.  I still like this market for upside in 2019.  I believe $SPY $300 is coming this year.  We've had a terribly strong rally from the end of December.  $SPY $ 233 to $SPY $295.   In the span of 5 months we've gone from a fresh 52 week low to a new all time record high.  A pull back here will form another strong footing for this market.

Momentum and price action have turned, volatility readings are breaking out.   While there is a chance we have already seen the  lows this week, I think the odds are pointing at more possible downside over the short term.

So no... that was not it.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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