AM: Another day of quiet trade

AM Update

Stocks are holding recent levels in quiet trade.  AAPL is holding support at $460, but technicals still indicate a downtrend.  AMZN is building a trade around its 50dma, we just have to wait and see what that trade is.

MARKET BEHAVIOR

Stocks were up in early trade, but hit their head on 1525 and are down midday.  1525 seems to be resistance and 1515 support.  We will watch to see which of these levels gets taken out first but I wouldn’t buy/sell a break through either level because the probabilities of a head fake are high and these are minor technical levels.

MARKET SENTIMENT

The low volatility drift higher continues.  While the market is bouncing up and down, it is doing so within fractions of a percent and more likely the result of random noise than meaningful trade.  What we know for sure is the market continues creeping higher through these gyrations and the trend remains intact.

TRADING OPPORTUNITIES

Expected Outcome:
While this market is closer to topping, don’t try to short it here because the rally is still alive and has some upside left.  On the other side, longs need to start building a plan to lock in profits.  I find it easier to sell into strength, but trailing stops work too.  If you are sitting out of this market, it is a bit late for anything other than quick day trades.  The market could rally sharply from here, but that will be the end of the run, not the start of the next leg.  If the market consolidates and/or pulls back slightly, that will refresh the market and make a good entry point, but if it races ahead, resist the temptation to chase.

Alternate Outcome:
If the expected outcome is caution, the alternative trade is reckless abandon.  While a several percent move higher seems likely and could be profitable if timed exactly right, it will be part of a topping pattern and not the start of a new leg higher.  If someone needs to trade this market, stay nimble.  The more comfortable people become with this market, the more nervous we should be.

INDIVIDUAL STOCKS

AAPL is down, but still holding above $460.  Volume tapered off the last couple days as both buyers and sellers are taking a break.  Technicals show the downtrend remains intact as the stock continues making lower-lows, and lower-highs and is solidly underneath the 50dma.  Without a doubt this stock will rebound at some point, but when in doubt stick with the trend.  As for a trade, sell a break under $460 and buy a pop above $485.

AMZN is dipping but still has a several dollar cushion above the 50dma.  If someone bought the break above the 50dma, they still have some breathing room, but get out if the stock cannot hold the 50dma.  Holding the 50dma is obviously bullish, but a break under the 50dma could be shorted, but only for a couple of days because it is likely to bounce.  Failing to hold the 50dma for a third time setup a longer short trade.

Stay safe