6/25 Best Charts For The Week Ahead

Looking back at the past week and going over some scans for relative strength this morning, what I’m seeing is tech is probably not going to lead us in the short term. Last week saw alot of defensive type names moving up while the market was cooling off and I have some charts below to show you what I mean.

As for the SPY as you can see below, the target is still the October trendline I’ve had up for months, markets love to deviate from the trendiness, but they always find their way home eventually. We gapped down everyday last week and finally got out first close Friday below the 8/10 ema. We haven’t done this in a long time and likely signals a trend shift. Now, it doesn’t mean forever, and we tend to get a pre-earnings run up, and earnings begin in 2-3 weeks, so if I had to guess maybe some weakness for those next few weeks? But I said that last week so that’s nothing new, I just expect it to continue as you can see the MACD finally turned red after a month, and the RSI isn’t bullish. Just don’t over lever here. They key to market is levering in strength and not using leverage during periods of weakness. Until that line I circled in yellow breaks, we remain in this now 9 month long uptrend but caution is warranted.

As many of you who have been here for months know, I used alot of leverage the last few months before I stopped trading. The reason being as I said many times, when we are in an uptrend, there is nothing to fear, it’s the moment we break trend that you have to de-lever and stop. Markets never just crash, they break trend first and as long as you respect that you won’t get hit. I’ve said this before but there are so many new people here now that I will say it again, even Covid, markets did not just crash, they broke trend first and you had ample time to get out look below see that white trend line? The day the trend was violated, that was the day you should have exited your positions or leverage. That is why I pay attention to these and ignore the noise of “why”, that part is not relevant, what matters is we trend up in uptrends and when they end, we go down until we find a new bottom.

The bottom line is I try to focus on strength, that is a strong chart showing buying not selling. That is not what we saw last week in tech stocks, many put in bearish engulfing candles which should be a warning sign.

So what had strength last week?

Not many names. Lots of new relative lows made. Very few names had a green candle last week meaning they closed higher than they opened. Weeks like this are great though because it makes it easy for us to see where the relative strength was. What names were green while the market is red, those are the names you should be focusing on in the following week whether selling puts, buying shares, whatever it is you choose to do. The way I like to scan for this stuff is to see what names are showing emerging strength, then I like to dig inside those elf’s one by one and look at charts. This week it happened the pockets of strength came from the XLV(healthcare), XLY (consumer discretionary), XLC( Communications), and XLP( Consumer Staples). Step one in the discovery process is finding the ETF’s leading the charge, and then further discovery is warranted within. Along with the charts I’ve attached the unusual option flows from my database because someone asked me to start doing so last week and I figured more of you would want them to guide you as well