Is Santa coming?

Good morning!

The $SPY and $QQQ finished green yesterday and they showed signs of relative strength all the way through closing time. We did not have a sell-off into the finish nor did we have any trees shaken, as there are not many over-ripened oranges left. We were oversold after an aggressive week of selling and most of the bad news is close to being priced in. The fear index, the volatility, gave way and dropped more than 10% yesterday, and did not creep up during the tape. You would think that technically and theoretically we are out of the woods, but I recommend taking care and positioning yourselves slowly into positions. I did some tactical moves yesterday for some cash flow, but I did not get overly invested in anything overnight. In fact I preferred to take my money and just buy some call options in case the market decides to take the upward trajectory. I am looking to do a similar thing today, unless the $SPY or the $QQQ prove they are robust, and then maybe I’ll get into some overnight positions.

$SPY Chart

The $SPY created a significant green bar yesterday, and it did not make a new low, however, when it reached the 21 day EMA it was rejected. The good news is that it closed above the 8 day EMA, which is at $458.54. Due to the lack of potency to close above all moving averages, and the 21 and 8 days being reversed I did not get overly bullish. I trimmed some call option leaps I mentioned yesterday, but I left the largest portion of them on the table for a move higher. Should the $SPY get and stay above $460.56 I may start adding positions to my portfolio. This morning the futures are up, but not extremely so.

$QQQ Chart

The $QQQ was not so impressive yesterday, as it danced around the 50 day EMA and closed above it, but nowhere near the 8 or 21 day EMA of $390-391. Should the $QQQ get above one of these levels I may look to get into $MSFT, $AAPL or $FB, for a move higher. I took some trades yesterday in all three of these but I was surgical and tactical, made my money and left no trailers. This morning the tech futures are stronger than the S&P500 but until the market opens and we get a price discovery I am not prepared to get involved in stocks, I just hold very small positions in some call options, for a possible gap up. I am following the trend as usual and for now the trend is wavering between the bulls and the bears, and I do not wish to participate in this tug war.

I am still presenting only these two charts in the Daily Charts as I believe they are the most important tools for you to get a feel of the situation and to help you make good decisions. Until we see a clear reversal from this downtrend I am staying out of the way, and I just picking quick trades for some cash flow, nothing more. Should the situation change for the better I can be flexible enough to switch gears and put risk on, but for now the risk is higher than the reward. We always have uncertainty in the markets, and when it is combined with wavering moves from two of the most important ETFs there is no motivation for me to jump the gun either way. Pick 2 or 3 oranges along the way and move on. The picking season is not here yet, but Santa may bring presents later, until then cash is a position and being careful is better than being hurt.

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