My Stock Market Levels for this Bearish Tape 6-3-19
SPY ETF Chart 6.3.19
Stock market levels typically come in two types: Actual significant reference points where buyers or sellers took a stand. Or projected levels where we expected stock prices to move, or stop moving.
Today I'm going to focus on a projection, specifically the SPY ETF and a bearish price point that means things could get ugly for investors.
Something to keep in mind, there is a difference between “clean charts” simply moving as a function of supply and demand, versus a news driven tape. The current stock market has a healthy mix of both with a slight edge to the news (thank you Mister President).
The reason I bring this up is because too many rookie traders fail to understand that news trumps charts (no pun intended). Significant news can destroy the best laid game plan, and steamroll obvious support/resistance.
Today's Game Plan
The stock market clearly has extra bearish juice because of negative trade war news. The recent close below the 200 sma and longer-term head and shoulders top pattern should make the buy and hold crowd sit up and take notice.
The correct side of the trade shows short selling. As long as my stocks are below the open price I plan to short. ** Please read that again. It's a critical part of the game plan = below the open. Don't get caught shorting a stock trading higher.
Having a bias is only the first part of the trade. You also need to know if today's order flow is in sync with long-term order flow. (A key distinction many miss and blindly look for entries without regard to the current tape)
I keep my analysis simple, and I recommend you do too. One of the first signals I learned (way back in 1995) is the 50% retracement. It's a profit target generator or entry target area.
Using the move the in the SPY ETF from late December 2018 to the high of 2019 we have roughly $234 to $295. A $61 advance. Fifty percent of that move is $30.50.
Subtract that number from the high and I am looking for prices to decline to roughly the $265 level. So how does this translate into trades? I will be looking to sell short into that level.
Could the stock market rally instead of going down? Of course. But that's not the point. The point is you MUST have a gale plan. A Roadmap. If price action does what you planned, you trade the heck out of it.
If it doesn't you step aside and game plan again. And that is the difference between chart reading and trading. I'm looking to get paid, not to be right.
Pete
Wall Street Warns of Mounting Recession Risk From Trade War
Wall Street’s biggest banks lined up to warn investors of growing recession risks from the escalating trade war between the U.S. and China.
A global recession could start within nine months if President Donald Trump imposes 25% tariffs on an additional $300 billion of Chinese exports and Beijing retaliates, according to Morgan Stanley.
Jobs report, Apple WWDC — What to know in the week ahead
It is a busy week ahead for market watchers.
Monday through Friday, tech giant Apple (AAPL) will be hosting its Worldwide Developers Conference (WWDC) in San Jose, California. Apple’s annual WWDC is typically regarded as one of the biggest events of the year for the iPhone maker.
This week, Apple is expected to be making key announcements about new updates for its different operating systems.
The Fed will also be releasing its Beige Book at 2 p.m. ET on Wednesday.
Finally on Friday, the Labor Department will release the May jobs report. Economists polled by Bloomberg are expecting that the U.S. economy added 180,000 jobs during the month, down from the 263,000 jobs added in April.
