The SPX finds itself at new highs into a very busy week of catalysts after starting last week with a big gap down Monday it recovered all of those losses by the end of the week. The common theme on these selloffs has been buyers coming at the 50 day moving average for months now and sentiment quickly shifting bearish too fast to sustain much of a drop. If the market falls for a week and sentiment stays bullish then its more likely to continue falling for a larger correction eventually. But if everyone is getting short after a day or two of pullback, its so much more likely to bounce back. Heading into this week will be interesting to watch if profit taking comes in at these new highs ahead or after the FOMC meeting Wednesday and lots of big earnings reports coming from tech names. Last week’s lows on SPX were 4233 and will be a key level going forward the rest of summer to see if prices can sustain the rebound, on the upside when you see prices V bottom like this to new highs, those previous highs near 4390 become important to see if price is accepted above for more than a few days and eventually value building above 4400 on the profile would be bullish for longs. The weekly chart on right below shows how often the SPX has tested and bounce off the 10 week MA (equal to the 50 day MA) this year and until it closed a weekly candle below that and confirms the following week you can’t get too bearish on this market for more than a quick trade. Watching the VIX this week will be key as usual since it did not make new lows as the market made new highs. Options market expected move for this week in SPX is about +/- 68 point range.
SPX daily and weekly chart view
US Econ calendar this week a busy one, highlighted by FOMC interest rate statement midweek
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 MACD Momentum is trying to curl back up and RSI is 63, although lower than it was the last SPX made new highs. Bearish divergence.
Breadth Cumulative Advance/Decline line broke to new recent lows early last week with the selloff and rebounded but still failed to make new highs with SPX. This continues to be a warning as well as NYSI Summation index not bouncing back up with this recent snapback rally. New 52 week highs have been lagging with SPX near highs. NYSE had 147 new highs on Friday and the 20 day average is 145.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment ticked down to 30.6% Bulls from 36.2% last week. Bears up to 30.6% from 26.8% last week. Bulls/bears ratio at 1.00.
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:
8 of 11 SPY sectors are in strong bullish trends as shown below. Communications sector led the rally mostly thanks to strong action from internet stocks and social media names. SPX closed up +1.96% for the week
SEASONALITY ODDS:
The last week of July has a weaker last several days of seasonality the last 25 years. Dow has shown the most weakness compared to the other indexes. All in all, with a lot of catalysts this week and a market at fresh highs, seasonality doesn’t really favor piling into longs up here. The first week of August is also quite mixed but a slightly bearish start to the month is what history shows. Remember these are just tendencies and I always let price action confirm any trade setups.
Inside week setups: Lots of earnings reports could move related stocks in similar industries and with the large reversals last week, there are very few inside week candles.
Bullish inside weeks: V, CNP, TEAM
Bearish inside weeks: FSLY, BABA, TDOC
Bull Put Spread Trade of the Week:
Zoom (ZM)
Sell the August 350/340 put spread for 3.60 or better. Earnings not due out til end of August after Aug Opex.
ZM has been pulling back to its 21 week EMA after a strong rally up to 400 during June. Near a spot of support around the 50 day MA and held 350 the last week. A good spot to sell a put spread and expect it to stay above 350 into August and perhaps take another shot higher towards 400.
Individual Stock Scans of note:
Weekly inside candles: BABA, V, TEAM, TDOC, EXAS, CAG, CNP, CTXS, GME, FSLY, EDIT
8/21 EMA Daily Bull Cross: GS, AMAT, SNAP, DE, LRCX, CSX, BSX, WDAY, KLAC, PINS, CNC, EA, DHI, YNDX, MDB, TSCO, FFIV, FIVE, AA, GOOS
8/21 EMA Daily Bear Cross: TSLA, NFLX, JD, ANTM, NTES, EDIT
Stocks compressing in TTM Squeezes within 10% of 52 week highs: WMT, VZ, AVGO, WFC, TXN, BMY, LOW, AXP, RTX, GS, MMM, VALE, CVS, LMT, SPGI, MO, GILD, TJX, FDX, ITW, COF, TEAM, CRWD, EMR, MTCH, CNC, EA, DFS, AFL, DDOG, SWK, SWKS, YNDX, URI, KMX, TSCO, AKAM, CAH, CNP, CBOE, DBX, NRG, DKS, JNPR, YETI, THC
55 day Highs with strong closes: MSFT, GOOGL, MA, PYPL, NKE, LLY, PFE, CSCO, PEP, ABT, TMO, ABBV, DHR, SHOP, ACN, COST, MDT, BMY, SBUX, MRNA, AMT, TGT, EL, NOW, ZTS, MDLZ, MMC, ABB, BDX, ICE, EW, ROKU, BSX, ETN, WM, DASH, DG, JCI, EBAY, TT, LHX, A, CARR, APH, OTIS, RSG, NET, FAST, INVH, EXPD, LB, BILL, DRE, ROL, HOLX, DT, NUAN, UDR, CHGG, PFPT, CUBE, VRT, DKS, G, IAA, BJ, MGP, MIC