SPX had a very quiet week again closing at new highs as the melt up from 4400 continues into mid August. I have been looking to lighten up bullish positions into this 4450 zone if it got there before options expiration and it has so the prudent plan going into this week is to take gains off the table and look for potential mild pullbacks towards 4400 which is very strong support until it breaks. There has been a lot of “gamma” or option open interest building up at 4400-4425 on ES_F futures the last several weeks. We saw price grind its way through the upside of that zone finally but as you can see from the SPY chart below its above the 2 ATR band (blue line) which generally has led to a pause or pullback to the 21 EMA (dashed line). I like to look at these Keltner Channel bands to see when the market is extended from its mean, or the 21 EMA, which now sits just under 440 SPY (or 4400 on the ES futures). With August options expiring Friday this week it could lead to some unwinding of positions ahead of the Jackson Hole Econ meeting Aug 26-28th. The VIX volatility index has been under big pressure with the contracting realized volatility in the market so that will be key to watch again if it starts to level out near this 15 area. Earnings reports quiet down this week but still some key growth and large cap names reporting like NVDA, SE, WMT, HD, LOW, TGT, RBLX, CSCO, AMAT, HOOD.
3 PEAKS MARKET SIGNALS OVERVIEW:
TREND- The short and long term trend of the market being bullish biased increases the odds of pullbacks being good buy opportunities.
SPX Short term trend of the 8/13/21 EMA’s = Strong bullish trend
SPX Long term trend of the 21/55/89 EMA’s = Strong bullish and EMA’s stacked positive.
CONDITION/BREADTH- SPX MACD Momentum is above zero and RSI is rising to 67, still below previous highs and showing bearish divergences.
Cumulative Breadth Advance/Decline line still below new highs slightly. NYSI Summation index saw a positive cross above the 8 day MA. New 52 week highs on NYSE had 169 new highs on Friday and the 20 day average is 144. There were 44 new 52 week lows, which has slowly been increasing, unusual to see with the market at new highs.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment stayed low at 37.0% Bulls from 36.1% last week. Bears to 31.5% from 31.7% last week. Bulls/bears ratio at 1.17.
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:
10 of 11 S&P sectors are now in strong bullish short term trends as shown below. Basic Materials joined the party last week with strong move up which just leaves Energy as the laggard in a downtrend, but one of the smallest weightings in the index also. The highest weighted sectors ( Tech, Healthcare, Discretionary, Financials, Communications) hold the key to the market as a whole going forward. Transports had a large bounce back last week also which is a positive. Overall Materials led the strength this week up +2.8% with SPX up +0.71% for the week.
SEASONALITY ODDS:
August options expiration week shows good potential for bullish bias into early to midweek before Thursday weakness. Nasdaq has tended to be strongest during August OPEX week so maybe see some more follow through from last week’s Nasdaq bounce helped by Bonds rallying. Next week after options expiration shows potential weakness to start week then somewhat stronger by end of week. Seasonality odds are just tendencies based on historical patterns but always let price action confirm any trade setups.
Inside week bullish setup: Stocks that stayed within the high and low of its prior week. A break above these highs could trigger larger moves for fresh opportunities.
Pepsi (PEP)
Consumer Staples started to break out last week as the XLP showing strength. Its a boring name PEP can move to 160 out of this bigger weekly breakout that is underway. Inside week candle last week and staying above 154 a bullish sign. The Sept 155 calls at 3.00 a cheap way to potentially play new highs.
Bull Put Spread Trade of the Week:
Netflix (NFLX)
Sell the Sept 515/510 put spread for 2.25 or better.
NFLX has been a rangebound stock much of the year spending time between 490-540. It has tended to bounce off low 500s and head back to 540 so trading the range through bull put spreads is a good way to play the choppy bounce potential. The daily and weekly chart is forming a compression squeeze which looks to be pointing higher with momentum rising so eventually this could break higher longer term also.
Individual Stock Scans of note: Sorted by Market Cap
Weekly inside candles: NVDA, PG, PYPL, NKE, NFLX, PEP, TMUS, MCD, AMD, AXP, RTX, SQ, SPGI, MDLZ, UBER, GM, COP, FISV, CI, CL, ADI, NTES, KHC, HOOD, EA, XLNX, PSX, VFC, LVS, WMB, VLO, VIAC, HRL, ETSY, OXY, EXPE, CLX, AKAM, ON, HAL, LYFT, AMC, CPB, DBX, CTXS, PENN, WYNN, BHC, JNPR, MAT, WOOF, FSLY, SEAS, SPWR, CWH
8/21 EMA Daily Bull Cross: AMT, BSX, EBAY, KMB, RKT
8/21 EMA Daily Bear Cross: SHOP, AXP, SOFI, PENN, CREE, FSR, MVIS, GPRO, BLNK
Stocks compressing in TTM Squeezes within 10% of 52 week highs: AAPL, UNH, CMCSA, KO, VZ, PEP, SHOP, AZN, TMUS, TXN, HON, BMY, AXP, AMT, IBM, MMM, GE, MO, GILD, CME, ITW, VMW, DOCU, HSY, OKE, IP, THC, URBN
55 day Highs with strong closes: MSFT, GOOGL, JNJ, ADBE, PFE, CSCO, NVO, DHR, ABT, TMO, ACN, COST, NEE, LIN, PM, UNP, INTU, GSK, INFY, PLD, GILD, SNOW, CB, COF, MMC, ABB, DASH, WM, ECL, AON, UBS, AMX, TEL, A, EBAY, EXC, BCE, AEP, APH, CDNS, PAYX, CTSH, DFS, YUM, IFF, STM, RSG, U, PEG, ES, SYF, O, FTV, HIG, AEE, PPL, IR, CMS, ACGL, LBTYK, LBTYA, CNP, EVRG, LNT, MRVI, CCK, FNF, DAR, VER, XPO, FSLR, CROX, PLAN,