Week 30 Major Markets Review

The earnings releases were better than expected. The Fed raised the rate as expected and was neither dovish nor hawkish about the future. The economic data came is also mostly as expected. More importantly, they did not go in the wrong direction. So, overall, there was everything to like for the markets.

Trending Heat Map

The MACD histogram turned negative for the SPY and RSP this week. They were at risk and risk came through. Note that the QQQ price was below the 10-day but went above this week.

Week-by-Week Performance

All the markets except for the QQQ have now been up 3 weeks in a row. That is just a data point. No real inference can be made from that. I have seen markets go up 7 weeks on a row recently.

Month-by-Month Performance

The SPY and QQQ have only been down in the month of February. That is up 6 out of 7 months this year (assuming they do not fall by more than -3% on the last day of July).

Next Week Expected Moves

I track this to review where price stands at any given point in time over the week from their original expected moves. Note that the expected moves have a probability of about 68% meaning 68% of the time the price will close the week within that range. It is basically the price of the “at-the-money” option straddle.

Strategy

From a short-term perspective (1 - 4 weeks in my world) the markets seem to be caught in a potential transition mode. It is trending bullish and at the same time looking vulnerable as seen from the MACD. For trend-following folks like this is the most difficult periods to trade.

On the one hand the trend is clearly bullish so one should play to the upside. On the other hand, the market strength seems to be weakening. We should also not forget the bearish engulfing candle we saw on Thursday. I do not consider the Friday bounce back as very definitive.

The only reason markets can fall is if the market participants start feeling the markets are overvalued and beyond this point it could get frothy.

I am going to be very short-term and tactical in my trading. Play within the ranges.