Markets have been enjoying a nice rally since last Friday’s EU summit, even though it seems like 95% of the news has been negative since then. The markets have ignored it all, and hopes for more stimulus and market mechanics have been in control. Tons of guys were caught short during the end of the quarter mark ups and new flows.
So far this morning, futures just got a pop as the Bank of England leaves key rates alone but says it will do more QE. China did cut rates, and now all we need is the ECB at 7:45. Once all this news is out, perhaps the market will take a rest.
I do think it will be better tactically to short the SPY above $137.50 up to $139.50, as my oscillator is +80ish – higher than we’ve seen all year. So if you aren’t caught short from last week, this last squeeze can be a nice opportunity to sell some left over longs and tactically short the SPY. We do have three pieces of jobs data today as well as the big one tomorrow, so it won’t be easy.
Tuesday’s high on the SPY is $137.51, and then the major zone starts at $138.66 up to $138.99 above the open gap. The measured move of the inverted head and shoulders pattern is to right around there, but stretches up to $139.50ish
The go-to stocks we talk about have all had $10-$30 moves this week, so booking some profits, or selling, or hedging in some way makes sense. Even the laggard sectors had spirited moves that lasted for more than a few days.
Disclosure: Scott Redler is long FB, NFLX, FIO, VMW, V, AAPL, and GLD and short SPY.