We’re at a pretty interesting spot in this market .. We’re coming off a nice squeeze & currently digesting those gains ahead of a Fed meeting next week where everyone is looking for a dove parade, not to mention a potential Trump/Xi meeting at the G20 .. But let’s forget about all that stuff, it’s a waste of time trying to figure it out anyway. Let’s go over our key signals & what they may be trying to tell us here. Starting off with sweepers, unfortunately there haven’t been much as far as notable clues we can take away from flow so far. Order flow has been bullish but nothing to really get excited about. Sweepers haven’t been super aggressive across the board, they actually have been really selective. The last few sessions, as the market has been in breather mode, the top activity has been in under-the-radar or underbelly names. Even in some small caps, hence some outperformance in the Russell 2000. We’ve been seeing buying in names that normally would see rotation if & when the economy slows down. Also some of the smaller names are less reliant on the global economy or affected by a trade war. How long does this last? Well that’s the answer everybody & their mother is trying to figure out right now. The truth of the matter is, nobody has a clue yet. I know personally, the only individual names I feel comfortable having exposure to are these underbelly plays, there’s just way too much headline risk in everything else to swing a size position. Now dont get me wrong, there are still trades out there & the way to combat these risks is by remaining nimble. More importantly, look take the quick singles over shorter timeframes rather than holding for that extra follow through over more time.. Once we see Sweepers open up & show some confidence, then we can do the same. On the flip side we haven’t seen much of anything to signal a bearish set up here. Even though the buying has been somewhat selective, they are still finding things to buy. So we need to continue to look at weakness as an opportunity for long entries until that changes .. Now as far as price action is concerned, we are going to run into a “niner” high on SPY & ES tomorrow. The only good thing is we already have been digesting gains a bit the last few days as opposed to stretching out into a niner high, as you can see on the chart below 👇🏻
SENTIMENT, not much help or any edge their either as it basically has just mirrored price action so far. We need to keep in mind, it can move swiftly, so one little headline & things can turn on a dime.. Currently short-term Trader sentiment sits above neutral but outside of caution territory 👇🏻
Intermediate-term Sentiment remains ok & we do have the “smart money” getting long DJIA, so we are in decent shape.. So to sum things up here, I guess the best way to put it is a line you have likely heard way too often, “GO WITH THE FLOW” .. We’ll take a day by day approach & keep a close eye on our signals daily for any significant changes .. In regards to playing, stay nimble & take advantage of the selective underbelly action (if you can do so) . We stay patient as we wait for Sweepers to either flip the switch & signal its go-time or we get some selling that will set up another squeeze set-up off extreme bearish sentiment. Stay tuned!