Today's Trading Plan: April Showers
Technical Outlook:
- SPX had a major sell-off yesterday that saw the index drop back below the 5 and 10-day moving averages. More importantly the 20-day moving average was breached yesterday with close below the MA.
- SPX close to trading below the lows from last week. It would be a first for the index in the last 11 weeks.
- SPY volume saw a notable uptick yesterday and close right at average levels.
- VIX saw one of its biggest moves in a very long time - rising 10.5% to 15.22 and a break of the downtrend off of the February highs.
- T2108 (% of stocks trading above their 40-day moving average) dropped 6.9% - will need to see further decay to call for a breakdown in the indicator.
- Most important development yesterday on the chart was the confirmation (just barely) of the head and shoulders pattern on the 30 minute chart of SPX by closing below 2077.
- Another sell-off today and close below 2059 would result in a negative month for April for SPX - not even considered a possibility just two days ago.
- Dip buyers were present in the early going for the market yesterday morning, but noticeably absent yesterday afternoon.
- Commodities, notably Gold, Silver and Crude, continue to surge in a major way.
- Advancers have been incredibly strong of late despite weak or minimal moves from the market as a whole. This is a rare phenomenon.
- It is very important to be aware of the potential for a strong pullback here and to manage your long position risk accordingly.
- April has been bullish in nine of the last ten years.
- Yellen's dovish outlook as it pertains to rate hikes has been, in large part, the reason for the massive rally off of the February lows.
My Trades:
- Added one new short position to the portfolio yesterday.
- Currently 30% Short / 70% Cash
- Remain Long: SPXU at $27.67 (Bearish ETF)
- Remain Short: IWM at $114.05
- Will look to add 1-2 new short positions today if the market seeks to push lower. Will flip to the long side if price action can break out of the current trading range.
Chart for SPX:
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