Let it Simmer

The strong gap higher this morning pulled back once and pumped higher in a very violent manner.  Since then, we’ve seen the S&P gently fade off 8 handles from the high.  I used the early morning dip to purchase shares of Citigroup and Zynga.  Both of these buys have moved below my basis, but have provided no reason to sweat.

The morning chatter has all focused on this gap and hypothesizing how others are positioned.  It’s really good fun to speculate on the positions of other investor’s books and it’s an interesting piece of context.  I’m still cueing off the SPY chart I posted this morning, and where we are.   This gap is pretty ugly and gaping, and it makes the chart look more like an individual stock’s earning surprise than an entire index.  It’s very possible we work to backfill these levels, but first the bears need to recapture 143.50 on the SPY, a price which would reclaim about 50% of the candles from the prior swing high.  It’s my bias line for the time being.

Buying Citigroup up high here today is at risk of riding peak-to-trough, thus I only bought a half-position.  I won’t know if I’m wrong on the swing unless we lose $39.00 so I had to position accordingly.  This also gives my dry powder to buy more should we see a pullback materialize and stabilize.

Interesting weakness in department stores and other apparel companies like LULU who saw their early pop faded hard.  I’m not making too much of these developments, nor any developments until I see how the afternoon trade pans out.

As a swing trader, the close is everything.  It finalizes or negates any chart setup on the daily timeframe.