The SPX closed Friday of the shortened week at new highs after the snapback from Thursday’s liquidation break rebounded nicely. We got the one day sharp pullback that was a risk this week, and it sent the VIX up into the 21 level where it fizzled and turned out to be a good volatility spike to sell premium on. Friday’s bounce was strong from the opening bell as Breadth readings expanded fast and the TICK showed a trending day up from the start as I alerted on twitter. The coming week is July options expiration so volatility has a tendency to pick into and after expiration week. There is also a lot of Econ data out this week with CPI, Retail Sales, and Powell testifies midweek. Also the start of earnings season with banks reporting should be something to watch with bonds influencing financials each week lately. Overall, now Thursdays lows near the 21 EMA that were made at 4290 are a line in sand going into mid month and any crack below that would likely increase selling towards 4200 on the SPX. Holding above the 8 ema now at 4330 is a short term sign of possible momentum expanding to highs.
3 PEAKS MARKET SIGNALS OVERVIEW:
TREND- SPX Short term trend of the 8/13/21 EMA’s = Strong bullish trend
Long term trend of the 21/55/89 EMA’s = Strong bullish and EMA’s stacked positive.
CONDITION/BREADTH- SPX Momentum is positive and pushing back higher since 6/24.
Breadth still lagging overall. Cumulative Advance/Decline line still slightly below new highs. NYSI Summation index pushed to the May lows Friday as the SPX hit new highs. This continues to be a yellow flag showing the narrow leadership in this market. All of these internal signals weakening might take a few weeks to play out but are warning of sharp downside risk.
New 52 week highs have been lagging with SPX near highs. NYSE had 152 new highs on Friday and this is below the 20 day average of 176. At new SPX highs would expect higher numbers.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment ticked down quick to 40.2% Bulls from 48.7.% last week. Bears up to 24.5% from 22.2% last week. Bulls/bears ratio at 1.64.
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:
6 of 11 SPY sectors are in strong bullish trends, XLK, XLV, XLY, XLC, XLRE, XLI. Real estate had a strong week leading the upside at +2.7% but is the lowest weighting in the SPX. Energy the weakest last week -3.4%.
SEASONALITY ODDS:
This week is already July options expiration and seasonality for July tends to peak this week. Stronger to begin the week with Tues/Wed showing a strong bullish bias. 81% of years recently have been up Tuesday of expiration week. Seasonal weakness comes in the back half of the week, perhaps after the VIX expires Wednesday at the open it could be a time for a pullback to begin, especially looking ahead to next week where historically the market softens up into end of July.
Bullish Inside Week Setup: Coinbase (COIN)
COIN had a strong week and closed near the highs above its 50 day MA for the first time. Somewhat correlated to Bitcoin which has stabilized and seeing a basing pattern form. COIN is coming out of a downtrend post IPO but firmly above the 8/21 ema since it had a bull cross and has seen lots of buyers support it in the 230-240 range. A move through 257 high last week can target 270-275. Stop level could be 230.
Trade to consider: Long August 260/280 call spread at 6.75
Bull Put Spread Trade of the Week:
Tesla (TSLA)
Sell the July 23rd 650/640 put spread for 3.80 or better. Earnings due out the week after so options before that date will decay faster. Also potential great trade with less gamma risk in the August 650/640 put spread for 4.40 credit.
TSLA has been basing nicely at 21 week EMA. Can likely see a pop back into the 700 level before earnings and above that could gain momentum towards 730. The ideal spot to sell put spreads was last week on that gap down but if that turns out to be the swing low off an oversold RSI 5 day then upper bollinger band at 705 seems like a target.
Individual Stock Scans of note:
Weekly inside candles: COIN, MS, DD, NRG, SWKS, EBAY, PM, MA, BSX, WMT, EA, CAG, ED, SO, MRK, AVXL,
8/21 EMA Daily Bull Cross: JWN, AA, TECK, UA, FL, KMI, PCG, XLI, MMM, EPD, MCD, CSCO, CNP, CL,
Stocks compressing in TTM Squeezes within 10% of 52 week highs: MA, ASML, CSCO, PFE, AVGO, TMUS, PM, BMY, SE, GSK, MDLZ, COP, FDX, COF, BX, VMW, BSX, GD, ALGN, EOG, MNST, PXD, DFS, IFF, VFC, MCK, ANET, SYF, WORK, OKE, LNG, AKAM, CAH, CLF, MRO, CIEN, JBL, CPRI, YETI, SKX, THC, SIG, SWN, CSTM, CYH,
55 day Highs with strong closes: AAPL, PYPL, AVGO, COST, SBUX, NOW, ZTS, CCI, ADP, MMC, ABB, ETN, LULU, TROW, LHX, A, TT, APH, PAYX, WELL, CHWY, EQR, OKE, INVH, DRE, UDR, AMH, NRG, CUBE, ARCC, FR, NSA,