Break Out Timing With the Generals Month End
In the previous commentary for 7/21 I said that the obvious thing for the “herd” to do was to buy the new highs in the SPX and INDU above 956 and 8878 this week, which were certain to follow the existing new highs in the QQQ and COMPX.
The SPX had closed for the first 3 days this week at 951.13, 954.58 and 954.07, but the 4th time through is a charm as the SPX hit a 979.42 intraday high yesterday, before closing at 976.29. The new continuation highs above 956 forced most buyers into the market, as expected, and now the previous upper range resistance is a new support zone. The trader position buyers of the previous -9.1% decline to 869, in the key time zone, have not been jiggled out, and are riding this move with comfortable trailing stops.
I also said in the last commentary that if the market were basing below the upper part of SPX and INDU range highs, a B/O would have a better short term risk reward, but because it was a vertical move and ST-O/B condition before the B/O, I expected the SPX to quickly fall back below the previous range highs for the SPX and INDU, and then the second trade through B/O though 965 and 8878 would be a better play for those after the fact “herd chasers.”
The SPX is now +12.4% off the 869 low in 11 days, with the 5RSI at 91.70 which is the highest reading since the 92.26 on 10/26/06, after which the SPX declined for 5 days, and then resumed its uptrend. However, with the SPX up +7.5% YTD, and +6.2% MTD, with only 5 trading days left in the month, I don’t expect the Generals to let this extended rally pull back until after the month end.
Have a good trading day!
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