Last updated on December 15th, 2020
As we settle back in to normal trading after the shortened holiday week last week we are seeing the bulls hold on to control of this market. We are seeing overbought extremes all over the place but every dip continues to be bought up quickly. We had a lower open this morning but the selling only lasted 15 min before the buyers stepped in to take us right back to the upside.
Until we see across the board selling we will continue to see the market grind higher. Volume was very light today with only 43 million shares traded on SPY. This is another sign of a late stage move. We would love to see a much needed pullback over the next week to reset for a year end rally.
The new area of resistance on the upside on SPY is the all time high made yesterday at 367.68. Should we break that level on the upside we are looking at 368.00 and 368.50 as the next areas of potential resistance. On the downside the 8 EMA on the daily chart has moved up to 362.81. The 8 EMA has held as support 4 times the last 2 weeks so that support level will need to be broken if we are going to get anything going on the downside.
To start the week we had more vaccine news which the markets cheered. Add to that the news today of progress being made on another stimulus package and we are seeing overbought markets get more extreme. This makes it challenging to chase the upside as we expect a pullback very soon. However, patience is key here as overbought can stay overbought longer than any expects.
In this week’s Midweek Options Update video we take a closer level at the technical levels mentioned above on SPY. We also walk through some of our favorite markets that are setting up new trade opportunities going into the end of the week. We also took a look at another Overnight Pop trade that we closed out first thing this morning for a nice profit. Take a look and feel free to ask any questions here on the blog. We will be back on Friday as we wrap up the week with our Weekly Options Recap.