Since the Thanksgiving Holiday there has been continued market weakness heading into the end of year. Virtually everyone has expected the seasonal rally to occur. Similar to how many expected "$100K BTC by End of Year"(Will get to that shortly).
$SPY has shown more pronounced weakness than tech heavy $QQQ and as many pullbacks and corrections occur they create emotional responses.
Trade Suggestion: Those yet to go long $SPY can look for a break and close above $465 to go long. Use a rising trend-line or $451.84 as a stop. We would not short this market heading into FOMC and a seasonally bullish period. The Risk/Reward and overall probability is just not there. Can do small position sizing/hedges if you still want to participate in some potential downside.
Longer Term Approach: Although we do not trade off 50MA it is something to take note of along with 200MA as various funds and their strategies trade based off these MAs. Typically what you see is equity purchases with Out of The Money Call writing 3-6 months out. Surprise surprise we got a spike low on Friday that we were expecting. That does not mean we won't go lower. The 3 areas marked with an X shows that not every bounce results in a V shaped rally or continuation. IE Buying the dip will work until it doesn't so position size accordingly.
This rally off the 50 MA appears to be occurring as of now despite the potential for $SPY to mirror what $DJIA and (Oil) have done in their sell offs.
$DJIA Sell Off - Gap down below 50 MA
Oil Sell Off - Flush below 50 MA
There's a reason why professional traders have multiple screens up at once. It is to view correlations with the various sectors and the price actions. Some sectors may lead the price actions of others. Similar manner for stocks.
Longer term Oil still has the potential to reach towards a $104 Price Target if it can gain traction off a near term support level.
Our second Price Target for Bitcoin was not reached. However, for those who stopped out using our stop loss rules they secured significant gains and can look to add once again as price action picks back up.
The sentiment and order flow in Crypto is getting close to an extreme. This is notable for both long and short traders as volatility tends to spike in these areas and compounded returns increase. Longer term traders have seen continued opportunity to add/scale into their longs heading into spring time.
$QQQ has been the strongest thus far. There has been virtually no instance where a bounce to new all time highs has occurred from the 50MA. If there was any point in time that scenario would occur it would be during this seasonally bullish period.
First area of support has held. Now we will see if continuation to the upside will occur without much of a spike low. Longer term we are bullish. If you feel the need to hedge your positions look to do so via spreads or puts 4 strikes or so below support levels. Talk soon!
-J