Is Spring finally here? When considering the market, I often think of it in terms of seasons. For the past month and a half the market has been in a choppy, slow grind higher kind of season with lots of false breakouts. It’s been the kind of season to be selective and predominantly sit on our hands. Is the market finally ready to shift into a stronger uptrend?
To answer this, a great way to start is by looking at the major indexes across monthly, weekly, and daily timeframes. This will let us know where the longer term picture is at and how things are beginning to turn.
When we looked at the monthly timeframes, the S&P 500, NYSE, and Dow are all at fresh highs. The NASDAQ and Russell 2000 are consolidating but aren’t far behind. We saw predominantly sideways action on the weekly time frames and a split decision on the daily timeframes.
“Split decision on the daily timeframes?? How???”
The Russell 2000 is in an odd spot where the daily chart can be interpreted as both a sideways trend and an uptrend. Given the breakout above the 50sma and the descending trend line, I’m leaning a bit more on the side of uptrend, but you’d have a fair case for it to still be sideways and to wait for price to follow through.
The last time we saw the indexes like this was the week of February 6. The result…more choppy market action.
Back then, the number of stocks making new highs was in the high 300s on the NADSAQ and in the mid 200s on the NYSE. Now they’re barely hitting triple digits. Is that a tell? Well, if we’re looking at the market like we do the weather, I’d take an umbrella with me and drive carefully.
On the plus side, I am seeing significantly more setups this week than in recent weeks. Many have some more tightening up to do (see the “Trade Ideas” list in the MARA Lists above) but I do think we’ll see some explosive moves. However, explosive moves could also end like Ubiquiti (UI) did last week. Taking quick gains would have worked out extremely well. Holding for a bigger move wouldn’t have.
Given everything I’m seeing, I think we’re still in a “nail down quicker gains” environment vs a “let it ride” environment. It’ll be worth paying attention to how price responds around prior highs, around fib extensions, and major round numbers. If price gets extended, I’ll be looking to take quicker profits. Should the market get into a strong uptrend, there will be plenty more trades setting up and this will only be the beginning.
Selling out of the money puts last week on NFLX, PTON and IWM worked quite well for short term cash flow. If we get a pullback early next week, I’ll entertain using this strategy again. I’ll be posting them inside the Trader’s Mindchat Room.
Have a great trading week and I’ll see you in the room!
Checkout the charts of the indexes below for a closer look at the action.
MONTHLY CHARTS (indexes) Overcall Direction = Up: https://www.tradingview.com/x/WdevYh3X/?aff_id=15325&offer_id=10
WEEKLY CHARTS (indexes) Overcall Direction = Sideways: https://www.tradingview.com/x/U4ek1q6J/?aff_id=15325&offer_id=10
DAILY CHARTS (indexes) Overcall Direction = Uptrend: https://www.tradingview.com/x/5vmxMg2J/?aff_id=15325&offer_id=10https://www.tradingview
(on the lower right is the image of stocks hitting new highs vs new lows on the NASDAQ & NYSE)
Deep Dive Video