EB Daily Market Report - Quick Update - Friday, June 9, 2023
I just wanted to let everyone know that I've taken profits in TNA and am proceeding a bit more cautiously near-term. I want to sit back and see how the stock market performs short-term based on a few key obstacles that lie directly ahead.
S&P 500 Has Big Challenge
In my opinion, the S&P 500 has no bigger challenge than clearing overhead price resistance at 4305 (closing) and 4322 (intraday). After touching 4322 this morning, the S&P 500's initial reaction has been to sell a bit. We could make a MAJOR breakout today, although I believe the odds favor selling this afternoon. The reason? Well, actually there are two. Options expire next Friday - just a week away and we've seen a nice run to the upside. That will likely leave quite a bit of net in-the-money call premium. That, all by itself, tells us to be careful. Second, 4305 is the final straw for those who believe we remain in a bear market. I would expect heavy shorting around this level.
Here's the S&P 500 longer-term weekly chart:
Do we get through? Eventually, yes. Today? Hhhhmmmm, not sure. It's going to take strength from those large cap NASDAQ stocks.
QQQ Also Nearing A Wall
The NASDAQ 100 has big time resistance of its own approaching on the weekly chart:
The QQQ is also beginning to print a daily negative divergence. It set a new recent price high, but the PPO has begun to roll over.
After looking at these two major index charts, doesn't it just make some sense to be a little cautious here? We have options expiration week coming up, so I think it's a reasonable time to take some TNA (leveraged ETF tracking IWM) profits. It's possible that the money rotating out of SPY and QQQ, if it occurs, might continue to rotate into the IWM, sending the TNA higher. So holding could result in bigger gains. But I believe the risk is also growing. Taking profits on the TNA doesn't have to mean getting out of the market. I'm in favor of moving those TNA proceeds into the IWM. If the IWM goes up from here, you still make money. But if all stocks retreat for a bit, there might be a better entry back into the TNA at some point.
Obviously, it's up to each individual, but I'm playing it on the safe side for now.
Happy trading!
Tom