Before I get into the Trade Idea, I’m going to review the context of the S&P500 from a structural standpoint and a typical deviation standpoint. First of all, structurally, the Weekly and Daily charts show higher highs and higher lows, the very definition of an uptrend. In November of 2016, the SPY completed a $20 wide trading channel of which currently price is a stone’s throw from its high resistance. The channel would suggest that buying potential is limited.
Now, anyone who hangs around the comments has seen that I use 5% simple moving average envelopes around a 100MA as a measure of movement potential (oversold, neutral, overbought). Where are we now? Yep, hit it on Friday. Again. (Click on any chart to see a larger version).
I don’t normally monkey around with leveraged ETFs, but I was so enthralled by energy’s weakness, I had built up a big long position in ERY (as mentioned in my Lake Erie post on Tuesday). Last night, I calculated the measured move on it, drew a horizontal line, and watched it closely. Wednesday morning, before the inventory report, ERY nailed its target, so I GTFO in a big hurry. Thank goodness, eh?
Oh, and, umm, this tweet from this morning kind of sealed the decision for me:
Yeah, yeah, I know. Record highs. NASDAQ zooming into the stratosphere. SNAP is going to be a blowout IPO. And so on.
Meh. I’m focused on my own shorts, thank yew. More and more, it’s all about the energy shorts. Happily, the XOP broke – – as ZH might say – – “moments ago”……..
There has never been a more consistent financial instrument ever created in the history of the universe – – and another lifetime low today, folks!
I’m very pleased with the breakdown in crude oil and in Mexico (EWW), both of which I’ve written about quite a lot lately. One trade that hasn’t blossomed yet is my DUST (triple-short on precious metals miners) long, but I’m keeping the faith. Looking at the big picture of, say, NUGT, this seems quite bearish. It might get a little more strength, sure, but I think in the end it’ll work out.