Trading The $SPY | Weekly Recap 10-1-16

$SPY 9-26-16 | Monday

$SPY price action formed a “swing high” on Friday.

With lower lows and lower highs a short-term change of momentum unfolded. A close on the lows gives the bears a cherry on top. Lack of volume makes the analysis taste empty, but I remain stead-fast in my call of a stock market top.

Based on the distribution produced in the churning immediately following Labor Day.

A quick trading lesson — >> My market call does not mean to abandon the long side and short-sell with abandon. A potential change of trend and a new trend are different scenarios. I am simply reading the tape and letting the market tell me what to do.

When we spot accumulation or distribution, it represents a potential change of trend. A trading range is the most likely follow up price action. This means I will lower expectation for follow through.

This means I will be in a cash flow mode. If the $SPY breaks $212 support with a “fuel” energy type candlestick (large red body with volume), then traders can increase position size and hold longer.

$SPY-9-26-16

$SPY-9-26-16

$SPY-Heatmap-9-26-16

$SPY-Heatmap-9-26-16

$SPY 9-26-16 | Tuesday

$SPY “swing high” and close on the lows gives the bears a reason to be happy.

The long-term uptrend remains valid unless prices penetrate the $212 level with conviction. If the $SPY produces multiple 100+ million shares days, with large red candlesticks through that level, there is plenty of room to go lower.

Below $200 is not out of the question. The $SPY hovers this morning at the up trend support drawn from February. With last night’s debate and a clear support level in play today, we most likely get an indecision candlestick today.

Expect sideways, be disciplined. Set alarms for the $212 level.

$SPY-9-27-16

$SPY Heatmap-9-27-16

$SPY Heatmap-9-27-16

$SPY 9-28-16 | Wednesday

$SPY price action travels back into trading range territory…

Your stock picking skills need to shine in the current stock market. If you believe you see a trend, you are wrong. The tape we are trading has no fuel.

So how does a trading range affect your trading decisions? You have opportunity, you simply need to adjust your time frame.

The current tape calls for short trends. Change from the open gives day traders the safest option. Look for opportunity when your stock, and the $SPY change from the open, are in sync.

With so much news, incredibly challenging to feel confident about a long-term bias. Tighten up and trade for cash flow.

$SPY-9-28-16

$SPY-9-28-16

$SPY Heatmap-9-28-16

$SPY Heatmap-9-28-16

$SPY 9-29-16 | Thursday

$SPY price action changed in four days from well-offered gap lower with volume, to well-bid gap fill…

Post Labor Day stock trading gave us the Holy Grail this year, volatility. I didn’t say easy, I said volatile.

The $SPY traded on either side of the open price yesterday making it a day for patience. Buying below the open price is a sound strategy, but only if the order flow is obvious.

Order flow is not obvious.

Essentially the market gave us a bullish headwind the last two hours of the day. So what does this mean?

Traders who struggle at break-even or worse, trade actively when the edge is small. To earn a solid P&L the remainder of 2016 requires patience.

Be prepared and don’t over trade. Keep an eye on oil related stocks.

$SPY-9-29-16

$SPY-9-29-16

$SPY Heatmap-9-29-16

$SPY Heatmap-9-29-16

$SPY 9-30-16 | Friday

$SPY trading range continues. $212 support gives us the level to monitor.

Day trading mode for those focusing on the indices. Quite a few traders in ES futures are in cash or significantly reducing their activity.

Thankfully we can spread our game plan over a bigger list. I don’t want to produce a big smart sounding analysis on the $SPY this morning because, quite frankly, there isn’t much to analyze here.

But that provides a trading lesson. To trade at higher levels, you must know when to push, and when to trade for cash flow.

Otherwise everything looks the same.

$SPY-9-30-16

$SPY Heatmap-9-30-16

$SPY Heatmap-9-30-16

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