Daily Wrap

Today we got more or less exact;y what we expected as of Friday's The Week Ahead post, the only problem as some of the averages still have a rather "V" shaped base...

 While the Q's have a positive divegrence that was there Friday, they have more of a "V" bottom, imagine trying to build something and move higher and higher with such an unstable base.

The IWM on the other hand where we opened out calls last week which closed in the green today...

created a more stable "W" base and you can see it in the size and type of divergence, thus I'm glad our bounce calls are in the IWM, I really wouldn't have added to QQQ or any other like base today because of the inherent instability.

However, as you
'll probably hear, the "Bounce was because of the BEES bailout", it was really an oversold breadth condition.  I don't care about stochastics or RSI oversold, but only 24% of the NYSE above their 40-day moving averages is majorly oversold.

The intraday breadth looked a lot like a late morning short squeeze as did price which is not surprising...

After initial a.m. weakness in TICK, look at the steady trend up and in to the +1000 range, this looks a lot like a short squeeze and ironically one of out retail sentiment indicators was the most bullish ever on Friday, the buy the dip response is alive and well.

There are still some solid divergences considering on the day and I suspect we'll have more upside to cover, but again at this point other than managing IWM calls, I'll be looking for short entries such as AMZN in the coming days.

Even though the SPY didn't build a stronger "W" bottom, it still has a respectable10 min leading positive divegrence so I'd expect this to have more legs on the upside which is great for the calls and will be great for short trade entries.

There are still some long positions I'd consider ONLY if they build that larger base, take XLF or FAS for example, otherwise I'm not taking the risk and will just wait for the next pivot.

Surprisingly, breadth didn't move that much, which may mean there's more on the upside just because of that. Take the Percentage of NYSE stocks above their 40-day moving average, it was 20.99, today only 24.32, take a look...

The white trendline is Friday's breadth close, it barely moved today and this is the kind of breadth you see in a bear market.

Of the 9 S&P sectors, 8 closed green, , they were the reverse of Friday with Utilities rounding out the bottom. Of the 239 Morningstar Industry and Sub-Industry groups I track, an amazing 207 of 239 closed green, this is why I'm surprised breadth barely improved.

The Dominant Price Volume Relationship was Close Up/Volume down, this is the most bearish of the 4 relationships, but considering Friday's capitulation (short term) volume which is helpful on a reversal with all of the Doji star candlesticks, I wouldn't be too concerned about that yet and still suspect we have more on the upside so I'll be leaving the IWM calls in place until I have a good reason not too and of course looking for the larger trade set ups that are in line with the highest probabilities such as AMZN which was featured today, AMZN Trade/s Set-Up.

So, from where we stood late last week, things are pretty much on track. I'd think that breadth would have to improve a bit more than it did today before this bounce is over, but as I said last week, this is by no means a game changer, it ,ay look impressive at some point, but it's no where near a game changer, just part of a normal market which is to say something since we haven't seen that in over 5 years.