SPX started off last week making a new high, then turnaround Tuesday sellers came in ahead of FOMC day and sold things lower the rest of the week, closing quite red by Friday afternoon. We have been looking for weakness into the end of June starting near that triple witching options expiration day and it looks on track. Going into this week I am playing things cautious with new positions and likely focusing on shorter time frame trades and smaller size. Breadth showed red flags last week when most stocks were actually declining throughout the week, just a select few big cap tech names carried the Nasdaq higher thanks to the rally in bonds, pushing yields lower. With internals getting worse under the hood, its hard to see the growth tech names not eventually joining in the selling if bounces in the SPX get sold into the last two weeks of June and Q2. Seasonality does not favor the bulls for now and with the markets failing to stay above the 4250 level, it brings the potential to reverse all the June gains back down to retest the May lows near 405 on SPY.
Closing below the 50 day MA opens the door to that 412 level which is May value area low. If the SPY can’t bounce much from there its a sign of weakness and eventually 395-400 retest is coming. That zone represents a confluence of support being the YTD VWAP at 398, and original breakout level from early April, an open gap still unfilled and March VPOC untested.
3 PEAKS MARKET SIGNALS OVERVIEW:
TREND- SPX Short term trend of the 8/13/21 EMA’s = Strong bullish trend, but this should turn to weak trend in a day or two as the 8/21 ema crosses down.
Long term trend of the 21/55/89 EMA’s strong bullish and EMA’s stacked positive.
CONDITION/BREADTH- SPX Momentum now pointing down after the reversal from new highs.
Breadth quickly weakened last week as Cumulative Advance/Decline Breadth made new highs and reversed midweek. NYSI Summation index is in bearish short term mode crossing down.
New 52 week highs have been lagging with SPX near highs and last week showed the issues more so. Just 14 new highs in the S&P 500 on Friday.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment ticked up to 41.1% Bulls from 40.2% last week. Bears ticked up to 26.2% from 20.7% last week. Bulls/bears ratio at 1.57.
Sentiment data is looked at as contrarian and Bullish signals occur when Bulls drop under 35%, or when Bears rise above 50%. Bearish signals occur when Bulls exceed 55% or if Bears drop under 20%.
S&P SPY Sector Glance:
Only 5 of 11 SPY sectors are still in strong bullish trends, XLE, XLV, XLC, XLK, XLRE. The Financials XLF got clobbered after the FOMC statement and will be a key sector to watch from here as they are leading the SPX lower.
SEASONALITY ODDS:
Going into the week after expiration I mentioned its likely a bearish week and the Fed meeting was a good catalyst for that potential downside. This week is decidedly bearish odds with the week after providing potential stronger bullish odds ahead of the 4th of July holiday weekend coming quickly. Getting a few more days of selling could provide a short term low to trade against into the following week.
Bullish inside week setup: SPCE Virgin Galactic
With the market weak and likely getting weaker, being selective with bullish setups is key, a stock like SPCE usually does its own thing and is set up here for potential. Inside week last week and held up well. Trigger above 37.75 can target a move to 41 and that open gap. Stops under 34. Lots of call skew in the IV so spreads make sense.
Trade to consider: Long July 37/42 call spread at 1.70
Individual Stock Scans of note:
Weekly inside candles- PFE, LLY, ABBV, TMUS, BMY, AMGN, BDX, BIIB, BAX, IFF, YNDX, XLV, GME, CPB, DBX, WB, IBB, CLF, SPCE, JNK, FSLR, FSLY, SFIX, FUBO, RSX
8/21 EMA Daily Bull Cross- WDAY, OKTA, COUP, CDAY, CHGG, VIR, IONS, HAE, SYKE, MCRB, CAI, PRAX
Stocks compressing in TTM Squeezes within 10% of 52 week highs: MA, CMCSA, PEP, AVGO, ACN, MCD, TXN, COST, CHTR, SBUX, LMT, LRCX, MDLZ, ADP, CME, BSX, NOC, GD, MNST, PANW, HSY, KKR, XLY, APO, XLU