We wrapped up the holiday shortened week last week with more low volume price movement. This has been the story the last few weeks as markets continue to grind higher towards all time highs on lack luster volume. For most of the week SPY struggled to trade 50 million shares on a daily basis. We would like to see this number closer to the 80-100 million share range. We did hit 80 million shares trade on Friday but it was monthly options expiration so that number is elevated due to expiration. The big test will be to see if we can get some volume to come back in next week. In order for that to happen we will need to see some selling pressure kick in.
SPY tested the 8 EMA on the daily chart twice last week and bounced off that level each time. That is clearly the line in the sand as the support level that will need to break if we are going to get a much needed pullback. That level is currently sitting at 390. Below that level and we have a decent air pocket down to the 20 EMA and SMA which are between 385.50 and 386.50.
Should we reverse back higher off these support levels we have the all time high up at 394.17 which is the nearest point of resistance. Above that level and we will be tracking 395 and 396 as the next areas of resistance. There still is talk of the S&P 500 hitting 4000 before the next pullback. Unless we get some volume to kick in I think it will be difficult to get up to that level.
The VIX closed the week above 20 again after briefly trading below 20 at the end of last week. It closed above 22 which indicates some uncertainty remaining in this market. We would like to see the VIX remain above 20 going forward as it opens up more options strategies for us to use. Should it break below 20, markets tend to get much slower and become more difficult to trade.
The Average True Range (ATR) on the SPY daily chart continues to downtick cover to 4. We need this number to reverse back higher closer to 5 if we are going to see better intraday price action to work with. As the ATR gets smaller, markets become dull intraday which is not what active traders want to see.
In this week’s Options Recap we take a look at how our Overnight Pop Trades performed this week. We closed another perfect week this past week going 3 for 3. This trade continues to perform really well for us as our winning % is now at 75% going back to last year. If you would like more details on how this trade type works for us make sure you review the video at the link below.
In the recap video below we also take a look at a few of our favorite set ups going into next week. We cover trades on the index ETF’s, SLV, USO and ZM. 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.