Don’t Be Surprised If We Grind Higher

After a big gap down on Tuesday on a flurry of worrisome news from over the weekend, the bulls have responded by bidding up the market without pause. Anybody that’s tried to short has gotten run-over. We even filled the big gap that everyone was worrying about Monday night. The markets have a funny way of trying to screw people over as much as they can. Luckily, we (Stocktwits bloggers) are here to help.

I believe we will see little selling in the following 3-5 trading days (barring any disastrous news). I really think we will see a new 1 month high later this week, early next week. While we are still nowhere near YTD highs, we are well off our lows-which if I had to bet right now, would in my opinion be the lows of the year (NOT investment advice!). However, my thoughts are less important than what the charts and price action is saying.

The Chart

$SPY- SPDR S&P 500 Daily Chart

Looking at the big picture, we are still in a bear flag/pattern/wedge type of formation. However, looking inside of the pattern, it is pretty bullish. We are making higher lows (very important) and are (so far) making higher highs. That is a sign of a recovery, but dont forget that until we consolidate and break higher above the longer term moving averages, no way can I label this a healthy bull market.

I fully expect us to grind higher in the next few days and not only make another subsequent higher high, but also to hit the 50 day SMA. I would easily be a seller there, the risk/reward to the long side is not justified if we do get there quickly. So my advice right now would be very cautious if you are short or planning to short the market. We have A LOT of room to run (~4 points) if the bulls do feel like pushing it more, especially since the RSI(14) is only reading 51 (not even close to “overbought”)—meaning we can easily see a grind up 4 point squeeze higher.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: $SPY, $SPX, $DJIA

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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Jerry Khachoyan Blog