As I discussed in my video market wrap up on Friday, the broad market is acting constructively. The bears had every opportunity last week to take this market down hard given the Goldman Sachs and Greece news, in addition to all of the calls that we had rallied too far, too fast. However, the charts indicate that we consolidated in a healthy way for most of the week before making a marginally higher high on Friday. We also tested the 20 day moving average (blue line above) twice last week successfully. Going into this week, it is important to remember that we remain in earnings season, so make sure you check the earnings schedule for each of your holdings.
I would also become cautious on the long side if we test the 20 day moving average again this week. When you test one of the major simple moving averages (20/50/100/150/200), you would like to see a sharp bounce off of it. When you start to see churning or a general hanging out at a moving average after a nice rally, it usually is a harbinger of a correction to come. With that said, however, I will not fight this trend. I just want to point out scenarios that may unfold in advance, so you can mentally prepare what you will do if faced with them. I am either long or in cash, but not short at all.
Besides the $SPX, if you are looking for possible leading indicators of which way the market is going to go next, here are three charts worth keeping an eye on. I chose them because of their respective reputations as bell-weathers.
Below, you will find my top individual setups for this upcoming week. Feel free to pick and choose whichever ones best suit your trading style. Also keep in mind that even the best setups can fail, so please use stop losses as a way to manage downside risk.
Finally, if the market weakens this week, keep an eye on these marquee names for shorts, as they have been breaking down.
DISCLOSURE: I am long $AES, $GLW, $COCO and $YSI.
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Nice job! Appreciate the effort you are putting here. Some nice setups there.
Awesome work Cheese(errr Chess) 😀
I might take a stab at GLW. Really nice looking set up.
Thanks, guys. I like the work that you three do too.
you like SORL here or too low volume?
Volume is decent, but its had a nice pop already. I would just day trade it at this point.
Hey Chess,
I notice a sub-dollar stock up there. Do you take any special precautions with those? Or do you just follow the chart?
Awesome work as always, thanks!
Depends on the volume. $YRCW trades pretty thick for a micro cap, so I trust the chart more so than the thinly traded names. Thanks for reading.
Thanks Chess. I keep a list of high-volume sub-$1 also, but I’m always leery about pulling the trigger. Then I watch them fly 25%+ half the time. Then again, I also see them drop 25%+ a lot too 🙂
Chess,
I’m enjoying your blog tremendously.
So you saying watch for too many test of the 20 day on the s&p and check out DD for the 40 level and GE for the 20 day.
OK, so I get the 20 day s&p and of course GE is a bell weather, but I’m not sure I understand why DD is so important.