Saturday, May 2, 2015

May 2 - Strong close for the indexes but will market find direction?

I faded the close by going short SPY based on the last 3 spikes up in similar situations coming up red the next day.  It isn't a huge edge so if we gap up, I will probably let go of this one.  Beyond Monday, I wouldn't be surprised to see continued chop and more frustration for the bulls and bears.  On a longer time frame, the increased daily volume and general choppiness leads me to think a summertime correction is around the corner.  In the meantime, though, I won't be placing bets on such and continue to play ping pong buying dips and shorting spikes with small bets until a trend appears.  A lot has been made of the dip in small caps but they are generally high volatility and could be just having a minor correction within an uptrend.  The other indexes like SPY, QQQ, DIA still are intact.

It is hard to say DIA looks bearish at this point.

Biotech is definitely flashing warning signs although it is set up to bounce this week.  This sudden increase in range and volume don't bode well.  I will be very actively watching this one in case a strong bearish scenario appears.  This one has home run potential.

IWM dropped out of its channel/ wedge to much delight of the internet bears but I would like to see its reaction Mon/ Tues before getting too excited here.  If it does follow through, SPY/ DIA might be good shorts.

QQQ made a vigorous bounce Friday and has a chance of putting in another leg up.  If there is an index that has upside, this is the one to track but the false breakout should give warning to those going long.

The SPY fade scenarios.  The oversold spikes have given back some the next day, especially the strong ones.  There are lots of possibilities here so it's best to be very nimble.  I am working primarily with 15-30 -60 min frames to line up entry points.

SPY could easily continue in its slightly upward froth for a while.  An ideal situation would be an overshoot out of the wedge that fails as a short entry.  On the long side, I would want the choppiness to diminish to feel more confident about scaling up.

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