Monday, June 13, 2016

A Day Late, Two Dollars Short

Sorry to miss the weekend post, but a million things to do.  Also, I wanted to see the Monday open before planning my strategy for the week.  Options expiration week will often see a low late Monday or early Tuesday before short covering kicks in, plus this week we also have the FOMC "no rate hike" meeting.

Let's take a look at the Indicator Scoreboard overall weighted index.  The intermediate term index is looking more and more like the period between Feb and May when short term declines were stopped when the 5 dy EMA (green) moved back over the mean.

The shorter term Indicator scoreboard more clearly highlights the jump in bearish sentiment the last two days of the week (now prior).  A couple more days of high bearishness should be enough to spark an options week rally, but my upside target is limited at SPX 2100/10.  For example, as I write at 1 PM EST VXX volume is over 60 mil shares, greater than everyday last week but Fri (90 mil).

Conclusion.  The decline this week is likely to stop between SPX 2075/80 with confluence of the 50 dy SMA and the TL from the Feb lows (1810) and May lows (2025).  The following options exp rally may be weaker than normal due to the BREXIT vote next week with a target of SPX 2100/10.  I still view the BREXIT vote as 50/50 with out comes skewed to the downside with SPX 2135+ for NO and 2020- for YES.

Weekly trade alert.  The SPX short recommendation from last week at 2120 is still open with the stop moved down to 2100 and a target of 2080.  I expect a strong bounce when/if 2085 is broken as a panic low (probable cover) then a retest the next day with a possible long setup at 2076/7. Updates @mrktsignals.

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