August 20, 2017

Will the market receive a bag of coal this year?

What do you know, another late day rally today. We have witnessed four straight days of similar price action in the S&P. The S&P will open higher, sell off, trade in a fairly tight range for the rest of the day and rally towards the closing bell. Basically the market has been on a treadmill for four days. Typically, when we see sideways action like this over several consecutive trading days the market will move sharply outside of the range. I have to admit I am leaning towards the bullish camp over the short-term due to the strong seasonality and the gap overhead that has yet to close. I would not be surprised to see the gap close and then the market roll over again. The gap occurred on 12/17 and the S&P (SPX) would have to rally up to the 1468 level to close the gap.

  • Food for thought – tommorow is triple witching and according to the Stock Trader’s Almanac the Dow has closed the day higher 18 out of the past 26 years.

Our Iron Condor has once again closed within our established range set four weeks ago. This will make our fourth consecutive month of gains since we drastically adjusted our trading rules. The new strategy began on 8/28 (September expiration cycle) and has seen a gain of 25.1% over that time frame.

As I stated yesterday (and on I blog that I frequent throughout the day) the financials(XLF) will need to move higher for this rally to be taken seriously. Remember the financial sector makes up roughly 20% of the S&P so if it continues to act like a laggard than expect the upside to be limited. I am of course speaking over the short-term (1-5 days).

December has ceratinly not been kind to the market. We could be entering into unchartered territory if month ends lower. Just a few weeks ago I wrote an article titled “Bearish November Leads to Bullish December“. Basically, I went back over the last 30 years to see how December typically reacts after a bearish November. Interestingly enough there have been 8 such occurrences (bearish Novembers) and each one was followed by a bullish December. That precedent looks to be broken unless the market can rally 2.5% over the next 6 1/2 trading sessions. It is certainly not out of the question given the bullish seasonality that we are currently in, but I am starting to have my doubts. A move above 1479 on the S&P would get us there. We shall see soon enough.

Daily Market Insights

  • What do the Bears think?

Overbought/Oversold for December 20, 2007 

S&P (SPY) – 46.9 (neutral)

Russell 2000 (IWM) – 60.0  (neutral)

Dow (DIA) – 42.1 (neutral)

Nasdaq 100 (QQQQ) – 53.9 (neutral) 

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