Good evening StockBandits!
Seemingly defying gravity once again, stocks rallied for the sixth time in seven sessions today, adding to already impressive gains coming off last Tuesday’s lows. That represented a 14.4% NAZ rally, a 17.3% RUT bounce, and a 13.5% gain in the S&P in just over a week – hardly a sustainable pace.
The nearly straight-up move has left the indexes short-term overbought long before today’s session, serving as a cleansing mechanism for aggressive shorts (much like last week’s breakdown did for the bulls following a hefty decline). It also serves as a reminder to us that while we can expect the proverbial rubber band to snap back at least partially, the fact remains that overbought and oversold conditions can persist beyond what many might deem logical. Stated otherwise, the market is not to be argued with, so when momentum is present, it’s wise to respect it.
With all of that said, we did see a bit of profit-taking late in the day today which might indicate some fatigue has finally set in. The NAZ actually retreated enough to threaten the opening gap, going out at its lows of the day. I’ll run through some notes on the indexes here and then share more thoughts on their charts below, along with the trades I’m eyeing for Thursday’s session.
NAZ – Marked its 2nd-best recovery high today at 2629, just 14 points shy of the 9/20 high. Volume picked up slightly, but remained below average. This index held the important 2600 level at the close, but not by much, so even minimal profit-taking would see this index quickly surrender that level and return to the range. This index is very stretched, so some rest and/or profit-taking at this point is to be expected.
S&P 500 -Failure at 1220 (intraday highs from 9/16 and 9/20) intraday, and a failure at 1208 (fractionally) on the close. Afternoon selling in this index also suggests profit-taking may finally be starting, although the coming days will be the biggest tell.
RUT – Created a higher high today by eclipsing the 9/27 high at 694, but remains shy of key resistance at 718.
DJIA – Got 90pts from the 9/1 recovery high and then failed to hold 11529 on the close. This, along with increased volume, points to possible fatigue at this point in the run. Rest is needed.
The current lack of setups will at some point come to pass, but for the time being we have to respect it and I think cash is a great place to be at the moment given all the uncertainty this market is facing. Stay patient out there, because we will see some good opportunities emerge from all of this, perhaps in as little as a few days if the market will rest for a few sessions.
Tonight I’m going with the written format as I know some of you enjoy being able to skim the setups. My notes and trade levels are provided on the charts below.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Swing Trading Candidates:
NONE TONIGHT
Day Trading Candidates:
These are the trades I’m eyeing for potential plays tomorrow. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades. Please see the Day Trading Strategy for more details on how I manage these trades.
The Hit List will not be posted tonight as I am 100% cash overnight and there are no new swing trades for Tuesday. The Hit List typically contains stop and target levels for my swing trades.
