Market Outlook

Yesterday the S&P500 opened at a record high to start the week, and proceeded to slowly drip lower as the trading session wore on closing  near session lows.

It was not a dramatic collapse of prices.  It was a terribly slow, deliberate, decline, that is currently getting reversed pre-market today.

Downside continuation has been fickle at best the last few years.  Rarely does the S&P500 find itself sharply lower two sessions in a row.  Today follows that trend.

Earnings this morning are helping to fan the price recovery flames.

$CAT is over $140 at new all time highs.

$MMM is sharply higher trading at new all time highs and a sticky note away from $230.

The VIX is getting clobbered pre-market down 5%.

However, despite the morning recovery I think odds are growing for some sort of correction.

Yes correction.  Pull back.  Decline.   Downside.

As I pointed out on Friday, and was confirmed yesterday with the near 2% decline for some of the FANG names,   FANG is rolling over heading into some key late week earnings reports.

Watch the FANG!

Friday Focus: Watch The FANG


Now all is not lost just yet.  Perhaps this decline is enough to spark yet another buying frenzy to record highs.  Perhaps the decline for $AMZN will lead to a massive recovery and $1,000+ price after earnings on Thursday.

However the FANG weakness could be a prelude to a more broader decline as momentum wanes.

Small caps, despite the  pre-market recovery, have already shown a break from its recently positive momentum ways.

$QQQ and $SPY are close behind.  In each case a momentum roll over has led to at least a brief decline.  And in this market the moves to fresh record highs have come after  a move lower in prices.

Let's keep an eye on $QQQ and $SPY for a possible end of month sell-off.

$QQQ nearing a momentum sell signal


and the shorter term S&P500 futures chart is a decent guide.  If the morning rip gets sold - sets up a nice H&S pattern:

The last time the $SPY suffered a red month was last October.


and finally a decent trade set-up regardless of where the market heads>

$XLE.  I will be looking for puts as the recent action was rejected at long term resistance/support

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.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)

Leave a Reply