The market closed the week before the 4th of July strong and at new highs. With the SPX hitting 4350 and really surpassing its expected move the last week its quite extended from its 21 day EMA and ripe for a pullback or liquidation break lower at any time. The last two weeks have pretty much gone vertical instead of the 2 steps up and 1 step back normal price action tends to produce. You can see there was a bit of a chase into end of quarter evidenced by the mega cap tech names like AAPL, AMZN, GOOGL, FB, NVDA all exploding higher even while breadth overall was not very strong. The leadership of the market is narrowing and sentiment is rising back into frothy levels. Its a good time for caution and I will be looking to be nimble with fewer positions into the shortened holiday week as there are several signs that a retracement can start into mid July.
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.
Breadth still lagging overall. Cumulative Advance/Decline line struggling to make new highs. NYSI Summation index is in bearish short term mode pointing down.
New 52 week highs have been lagging with SPX near highs. NYSE had 203 new highs on Friday and this is slightly below the 20 day average of 218. Generally at new SPX highs would expect higher numbers.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment ticked up to 48.7% Bulls from 40.4.% last week. Bears down to 22.2% from 23.2% last week. Bulls/bears ratio at 2.20.
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, XLE, XLV, XLC, XLK, XLRE, XLY. Technology had a strong week leading the upside at +3.1% and several other sectors contributed for a broad based rally. Energy the weakest last week -1.2%
SEASONALITY ODDS:
July 1st is historically strong and it proved to be as the market sailed higher to start the month of July. The week after 4th of July has tended to be bullish bias but while the odds are stronger close to 60% of years up, we are extended and this could be more of a sideways week. Next week is already July options expiration so looking ahead is somewhat stronger to begin the week with Tues/Wed showing a strong bullish bias before seasonal weakness comes in the back half of expiration week.
Bullish Inside Week Setup: Snapchat (SNAP)
SNAP has been building energy above 60 the past month and recently cleared YTD VWAP and is now bull flagging inside of a larger weekly bull flag. Last week saw an inside week candle with a quiet range of just 3.50 when its usual weekly ATR is over 6.0. A move back over 69.25 likely triggers a move to the old highs near 73 for a quick trade before earnings is released the week of July 23rd.
Trade to consider: Long July 69/74 call spread at around 1.50 for a quick trade. Also the August 70/80 call spread an interesting idea to hold longer for eventual move to 80 weekly flag target.
Bull Put Spread Trade of the Week:
Disney (DIS)
Sell the August 180/170 put spread for 4.40 credit.
Max risk of 5.60 per spread with breakeven at expiration at 175.60.
61% probability of making at least 50% of the credit received.
Disney has been basing nicely at YTD VPOC and the 21 week EMA. Can likely see a pop back into the 180s especially if the market overall rotates to more value oriented names that have yet to run recently.
Individual Stock Scans of note:
Weekly inside candles- AMZN, UNH, PYPL, DIS, XOM, LLY, WFC, SHOP, MCD, C, AXP, CAT, VALE, SNAP, GSK, USB, FDX, COF, BX, FCX, MET, EOG, MNST, SLB, MTCH, AIG, MPC, AFL, SU, GLW, NET, VLO, W, NUE, SYF, TSN, HRL, DLTR, DISH, HIG, MGM, HAL, KEY, LBTYK, PENN, UAA, KSS, NTNX, AEO, DDD, FUBO, URBN
8/21 EMA Daily Bull Cross- AA, UNP, DHI, WMT, PG, CAH, UNH, PFE, JNJ, CSCO, DIS, EA
Stocks compressing in TTM Squeezes within 10% of 52 week highs: V, JNJ, UNH, MA, CMCSA, LLY, PEP, ABBV, AVGO, TMUS, MDT, UNP, SCHW, SBUX, AMT, LRCX, COP, FDX, PBR, CME, HCA, EOG, HSY, MCK, HES, WORK, OKE, MGM, AKAM, LBTYA, LBTYK, MRO, CPRI, YETI, THC, SWN, CYH