“Better to stop short than fill to the brim.” – Taoism
One month after I mentioned about toppy area at 190ish for SPY, market has been in correction mode. Now SPY has been stugging below/near its 100-day sma line for three days, QQQ is near its 200-day sma; DIA is also at its 100-day sma line.
Today is April 15th, tax filling due date, Full moon day, Passover, and it’s also two day before the option expiration day Thursday due to the short holiday trading week.
Market has acted wildly as SPY faded oversold bounce as usual while many leaders continue to slice their important moving average lines. Some leaders are having the biggest one-day drop after the prolonged selloff, such as TSLA PCLN GOOG NFLX AMZN BIDU WYNN etc.., usually an indication of short-term capitulation selling.
Note that SPY is almost hit the lower line of its ascending channel, near the support level; also it’s 61.8% fib retracement level. While bearish behavior still dominates, to me, it is prudent to start covering shorts on the way down. SPY is in deeply oversold territory according to all technical indicators I track, and the oscillator reading again hit the recent low. I expect to see consolidation to be formed soon before resuming its downward move. As traders, our job is to know when to exit positions to protect gain. Don’t ignore that today is the third day that SPY has attempted to bounce from recent low of 181.50ish, likely a prelude for further oversold bounce.