Last updated on November 17th, 2020
Markets got off to a hot start this week with Monday morning’s positive vaccine news. With Covid-19 numbers spiking all over the country, traders cheered the positive news that a vaccine might be close. SPY rallied on this news up to a new all time high at 364.38. However, markets pulled back throughout the day on Monday at stayed quiet through the rest of the week until late afternoon on Friday when we got another push to the upside.
The volume contracted throughout the week as SPY found it difficult to hit the 50-70 million share range on a daily basis. This makes sense with markets again reaching overbought levels. We ideally need to see a pullback over the next week or two to build some energy for another wave to the upside going into the end of the year.
We would love to see a pullback into the 8 EMA on the SPY daily chart which is currently at 351.70. That would be the first support level on our radar. Below that we we have the 20 EMA down at 346.15. I would expect the bulls to put up a fight at these levels should they be tested next week.
On the upside, Monday’s high at 364.38 is the area of resistance that we would be tracking. On any move higher or lower we would like to see volume pick up to confirm the move. If we can get 80-100 million shares traded on SPY that would be good confirmation of a break higher or lower.
It’s hard to be anything but bullish here give price action and how much the market has ignored any bad news. We are cautiously bullish at the moment but looking for a pullback in the near term that would better set us up for the next wave higher. The tricky part is we remain in an active news cycle. Any news of more potential shut downs due to Covid-19 or any additional vaccine headlines could change our plan of attack in a hurry.
This continues to be a market that requires patience and caution. We continue to look for more credit spreads as they allow us to reduce the risk and give us a more forgiving trade with 5 ways of making money on the trades.
Going into next week we will be looking for new setups on a number of names. Our watch list for early in the week includes SPY, QQQ, MSFT, AMAT, LVS, ETSY, BABA, and FB. We review these charts and the trades that we are looking at in this week’s recap video which you will find below. Take a look and let us know if you have any questions that we can help with. We will be back on Wednesday for our next midweek update.