1/17 Recap. We Are At The Big Spot.....Again

Another day of toying with the downtrend from January 2022 in the S&P. I know the bulls are claiming victory already and while lots of internals do point to a bull market, for me, until we get a confirmation with a weekly close on the other side of this downtrend line, we are still in a rally within a bear market. With that said, the IWM broke out last week and today small caps continued their recent rally while the rest of the market was red. The Dow Jones was especially hit, but being a collection of just 30 names it isn’t of much importance to me.

The SPY

A flat day and a rejection at the top of the downtrend. We have yet been able to cross this downtrend and close there, it continues to be a battleground for months that bulls can’t seem to overcome. From a risk/reward basis getting short here is a solid trade as a close on the other side of the line is where you close for a small loss and move on.

The IWM

Small caps continue to breakout, are they leading the way? I was always in the camp that large caps wouldn’t do much this year, but this was an impressive move in the names everyone was looking at as “overvalued”, are they still overvalued? Yes, but price is price and that’s all that matters, they are being bought and we want to trade the strength for the time being. Today’s candle wasn’t the most inspiring, this could be the start of a reversal.

The Dollar

Flat on the day, but it continues to be weak and a tailwind for equities, it is very broken below all the key averages. This weekend we got a report saying this has become a crowded traded now to the short side, but the chart doesn’t show anything optimistic for now to get bulls excited about a dollar rally in the near term.

Today’s Unusual Options Activity & What Stood Out