12/5 Recap. The Reversal Is Playing Out

Last Thursday when I made that post about closing everything out and going short, my timing was great, even the next morning when I sent out the note closing the short SPY under 402 worked out because we reversed hard Friday and even went green at one point. Today we got the follow through and I closed the remained of my 12/30 430/435 call spreads I had sold, you can see the big volume in those as I closed out 1000/1000 shortly after the opening. I expected the market to reverse at the downtrend and it did to the penny.

If you look at this daily chart of the SPY you’ll see the reversal candle we put in Thursday, just below the year long trend line and the follow through we got. Today we closed below A TON of big technical levels: the 200 DMA, 200 EMA, 8 EMA, and 10 EMA. More than that the MACD on the daily is now likely bearish tomorrow. The setup to go lower is there and I highlighted the big open gap from a few weeks back at 380 as that is now our natural target. We have a lot of catalysts in the next 2 weeks that could send us there. CPI and the Fed speech next week come to mind. The bottom line, with the RSI now pointing south, this isn’t the best setup to be gigalong.

The dollar(below) had a nice reversal today, but look where it got rejected, right at the underside of the 200 EMA. Until it gets over the 8/10 EMA, the blue and yellow lines, I wouldn’t be bullish the dollar.

The VIX(below) finally recovered the big 20 level. As I’ve said for some time now, below 20 is just not where you buy stocks, moreover, when it aligns with a VIX sub 20 and stocks treading near the top of the range on a year long trend, that’s ESPECIALLY where you don’t go long.

Today’s Unusual Options Action & What Stood Out