Decision Week

Who saw that rally coming last week? With early weakness on Monday I was looking for one or two more days of downside before we could get a bit of a dead cat bounce. Is the bounce we saw more than a dead cat bounce and enough to turn into a full blown reversal of this down trending market or what? There certainly are a lot of questions we can ask at these levels, but I think one thing for sure is that going into this week we need to have a clear and open mind with no set bias for one direction or another. I have two game plans coming into this week and right now the overnight futures action isn’t enough to make me think otherwise or derive any real insight from at the moment.

Scenario #1 – With 4 days straight up it would make sense that we get some pullback from here, and if that is the case then I want to let the market do so with stopping points along the way at 4405.25 and potentially even back into 4350. That however will be the LIS where I will start looking at the potential for shorts on the week if we are able to break under that level with confirmation closes. If we do get that pullback I’m going to be watching for relative strength names and if/when the market is able to react from these levels and flip into a smaller time frame uptrend then relative strength names will be my focus.

Scenario #2 – We try to push higher early on in the week to say Tuesday. The buying pressure continues and at this point I can’t continue to go long up here after 4 days straight up so I’ll start to build a weak list of names that aren’t participating in the rally or starting to roll back over into a downtrend while the market continues to climb higher. Then if the market can find some resistance and start to roll over from highs into say late Tuesday or early Wednesday then I’ll start looking at those weak names for short opportunities.

There is always the chance that we just go sideways from here and a couple of inside days with small pokes to the upside and downside just to trap in some novice trigger happy traders. That isn’t what I think will happen just because of the volatility we have seen lately, but if that starts to hold true into Wednesday then it could be a risk off type of week where breakouts and breakdowns just fail and it’s just a stop hunting nightmare. I don’t typically like fakeouts so will be extra patient with confirmation closes if this starts to be the case.

Every chart out there looks almost the exact same which is 4 days straight up but a few names stand out to me here at the moment and those are $AAPL $AMZN $ABNB $COST $HD $TSLA & maybe $BABA $BIDU for some weakness potential.

Let’s have a great trading week and follow our rules!