Weekly Market Prep For 10/15 $SPY $QQQ $IWM $COMPQX #trading #stocks #markets #indices

MARKET GAUGE- Market In Correction 

OVERVIEW: Indices finally got their overdue bounce on Friday in what was a see-saw session however, we should not draw to many conclusions from Fridays action. Although it was good to see markets stabilize, many times traders are hesitant to go into a weekend short after such a precipitous decline, so it will be interesting to see if we get any follow buying on Monday when trading resumes. Traders should continue to honor what should already be tightened stops on existing long positions that are still working and continue to raise cash waiting for only the best opportunities. Traders should also be paying close attention to those stocks and industries groups that are acting relatively better than the others during times of turmoil. Stocks and sectors that had been strong leaders during the last bull move may not be the leaders of the next confirmed rally. My advice would be to turn off the TV and shut out all of the opinions and market analysis floating around and watch what individual stocks and the indices are telling you. Markets may continue to new highs after what appears to be a sharp correction, but are not obligated to do so. Many of the hard earned gains in the indices have melted away, in fact, the Russell 2000 is now virtually flat for the year after being up over 13% in August. Now let’s take our weekly look at the charts, where due to being in official correction territory, all distribution days are wiped away and we now are on watch for a new confirmed rally like the one we saw back in April that led to a nearly six month bull trend higher.

SPY- After knifing thru the 200 day EMA on Thursday the ETF was able to reclaim the level with a 1.39% rally on Friday. We will be watching the summer breakout area near $280 to provide some potential resistance on any move higher. Traders should be prepared for excessive volatility like we saw back in the February-April period after markets corrected.

NASDAQ- The Nasdaq Composite was able to pull off the same trick Friday with a 2.29% rally. The index was able to attract some buyers as it cut thru the May 2018 consolidation area that proceeded a breakout that led to all-time highs. We will be watching this area for further support on subsequent declines.

QQQ- Its pretty much the same look for the Nasdaq 100 with possible support near the prior breakout area near $170. The index was the best performer on Friday jumping 2.78% closing well above the 200 day EMA.

IWM- The small caps continue to be the worst performer of the group as the index is now flat for the year after having been up over 13% in late August after reaching all-time highs. We have to go back to the November 2017 breakout area near $150 to find the next line of meaningful support. The index is now nearly 5% below its 200 day EMA. We had been warning here of the excessive build up in distribution days in the index well before the large decline.

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Weekly Market Prep For 10/8 $SPY $QQQ $IWM $COMPQX #trading #market #stocks #indices

MARKET GAUGE- Uptrend Under Pressure

  • Tighten Stops
  • Slow Trading Activity
  • Lower Risk

OVERVIEW: The technical breakdown in the indices that began on Thursday continued on Friday with the tech sector again taking the brunt of the selling. The only good news was that volume receded somewhat from Thursdays turnover, but this is not much solace as plenty of distribution days can be found, particularly in the small cap and tech area. The Russell 2000 and S&P 500 ETF have come down to some possible support areas, but caution remains the word of the day as some of the underpinnings in the market continue to flash some warning signs including a narrowing of market leadership, as evidenced by the contraction of new highs versus new lows, recent mounting distribution and the breaking of the 50 day lines. We don’t know what kind of correction may be in store, or if another quick buy the dip turn around in this bull market is in store, but the lowering of risk at the present is supported by what we have been seeing in the indices and individual leading stocks. Let’s take our weekly look a the index charts to gain some perspective.

SPY- The ETF we use here to track the S&P 500 has definitely behaved better than the Nasdaq and Russell 2000, but it also has finally succumbed to the selling pressure. While still in a longer term uptrend, evidenced by the pretty channel the ETF has carved out, this weeks late selling has quickly brought the ETF down to an area of bi-lateral support at the 50 day EMA as well as the previous breakout support level near 286. If this area on the chart does not hold up, we can look to the six month uptrend line as the next area of support. Beyond this, the July breakout area around $280 could be the next line of defense and this would represent just about a 5% decline from the September all-time high. While this is not a large correction in the general scheme of things, a lot of damage can be done to a traders account in the interim if one is not managing the current market risks properly.

NASDAQ- The Nasdaq Composite broke a tri-lateral area of support on Thursday on extremely heavy turnover and that selling followed thru on Friday with the index losing an additional 1.16%. We now have seven distribution days on the books for the index which is more than enough over the last 25 sessions, when coupled with the aforementioned technical violations, to warrant caution. The index reached a 5% correction from the September high during Fridays session and we can now look to 7640 as the next area of possible support should the index continue its decline. Look for the 50 day EMA and the shaded area near 7950 to provide some possible resistance on any rally attempt. The tech area continues to be a high risk area of the market heading into next week, even on a snap back rally, so we suggest continued caution and some patience here before getting too involved.

QQQ- The Nasdaq 100s violation of support was similar to that of the Composite, but it was the only index to rack up a distribution day on Friday as volume continues to swell. We have not seen back to back volume days of this magnitude here since February of this year when the index had bottomed and distribution days now sit at an elevated level of eight over the last 25 session period. We can look to the 175-176 area as the next line of possible support and the 182-183 area shade on the chart as possible resistance on any advance.

IWM- The Russell 2000 ETFs decline was well out in front of the other indices, just as it was on the breakout to new highs back in the spring. The decline here from the top in late August is now over 7% but the possible good news here is that index caught at a bi-lateral area of support Friday afternoon at the 200 day EMA as well as the previous breakout level back in May near $160. This spot may provide the impetus for a sharp snap back rally early next week, but beyond that things are still in question as the index has accumulated a whopping 10 distribution days since the calendar hit September.

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Weekly Market Prep For 10/1 $SPY $QQQ $IWM $COMPQX #trading #stocks #markets #nasdaq #indices

MARKET GAUGE: Confirmed Uptrend

OVERVIEW: We now move into October with the end of the quarter and quarterly options expiration behind us, and thus, I think we may get a clearer picture of where the indices are headed without any artificial underpinnings. While we had some intra-day volatility, there was not a dramatic change in index prices for the week. The Nasdaq 100 led the pack in performance, while the Russell 2000 brought up the rear. With the Nasdaq Composite closing back above its prior breakout level and the S&P 500 continuing its steady trend higher with little signs of distribution, we have removed the cautionary note we have been carrying within Market Gauge. However, we should still note that the small cap area and the Nasdaq Composite itself still carry enough distribution days over the last 20 sessions or so to warrant our attention. Now, let’s take our weekly look at the four indices we track here as we head into the fourth quarter.

SPY- The S&P 500 ETF that we like to use here to track the index continues to carve out a beautiful up trending channel that dates back to late spring. Distribution days are still contained to a manageable three over the last 25 sessions and the index seems fairly immune to all the trade and tariff news if you take a step back and simply look at the chart. I will keep the commentary brief here because I think the picture accurately tells the story for this index.

NASDAQ- The Nasdaq Composite violated its August breakout in early September and had been playing ping pong with that support/resistance area since. It was able to withstand another test of this area this past Monday and rebounded to finish above that level for the week. We closed the week above the 50 day EMA, trend and the aforementioned breakout support, but we do have six distribution days on the books if we count the option expiration session on 9/21. What bulls would like to see is a definitive move away from these support levels climbing back higher into the up trending channel.

QQQ- The 100 had a good week moving up by 1.13% and it too reclaimed the prior August breakout level. Like the Composite it also sits above the 50 day EMA, but has not been able to climb back into the six month channel. After a flurry of distribution days to start the month of September which led to the failure of the August breakout, distribution days have become scarce. It would be nice to see the index climb back above the longer term trendline however, we do put more emphasis on horizontal and moving average support and the index looks good in this regard.

IWM- The small caps have been the main area of concern recently for the markets. An August breakout failed to gain much traction and after three weeks of testing that breakout support near $170 the index gave way this week violating all three areas of support. We alerted members this week to not get aggressive on the short side of this index just yet. We feel that end of the quarter option hedging may have had something to do with the recent weakness and the risk of a near term fading of this breakdown is a possibility. Fridays action was a positive for the index as it out performed its peers. We would like to see how this index begins the new quarter this week before drawing too many conclusions. Like the Nasdaq, we do have six distribution days on the books when accounting for the options expiration day, although we must take this day in context.

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Weekly Market Prep For 9/24 $SPY $IWM $QQQ $COMPQX #trading #stocks #markets #indices

MARKET GAUGE: Confirmed Uptrend, Caution Still Warranted

OVERVIEW: It was a busy week with option expiration and index rebalancing adding to normal volume levels, but in the end we ended up with only a modest week to the downside for the four main indices we track here. However, the blue chip stocks separated themselves from the pack this week with the Dow Jones gaining 2%. In the short term we have a bit of a split market with large cap stocks picking up steam while small caps and some techs running in place. These areas have been able to hang around and hold some key technical areas but have not been able to pull away, while in the meantime, the S&P 500 continues its methodical march higher. Some distribution days were registered across the indices on Friday, but as I always preach, we must take things in context. The options expiration and index rebalancing greatly effected the normal volume flow, so while we won’t totally ignore the selling on Friday we will greatly discount it in in the larger scope and I have shaded the arrow in the volume pane in pink to highlight this event. You can see that our Market Gauge is still in confirmed uptrend mode, but I still feel some caution is warranted in our trading activities. This means having a bit more patience in waiting for quality set ups, and perhaps keeping a bit more cash on hand in your account. Now, let’s take a look at the index charts and see where we are heading into next week.

SPY- This area continues to act better than its counterparts as the slow and steady uptrend from the confirmed rally that began in the spring continues to unfold. The two prior breakout levels that were tested in the summer have held and the index has not threatened its 50 day EMA for nearly three months. Distribution days have been scarce for the ETF with only two in the books discounting Fridays inflated volume figure, so there are no present concerns in this regard. I will remind you again however, that a sharp correction in the markets do not have to announce themselves in the form of mounting distribution days, so always honor you stops and trade responsibly. Traders should be prepared for a pullback should the ETF rally into the upper end of the channel.

NASDAQ- The Nasdaq Composite successfully tested a three month trendline early in the week, reclaimed its August breakout level on Thursday with a nice rally and was able to close above that level to end the week despite the 0.51% loss on Friday. I have redrawn the trendlines this week shortening up the timeframe a bit which may show the very slightest appearance of a possible rising wedge formation. Remember however, as much as trendlines can be a great aid in technical analysis, we feel that horizontal support, the 50 day EMA and the tracking of distribution days hold the most weight with our index analysis. We can see here that we have four distribution days on the books discounting Fridays inflated figure, shy of the 5-7 days over the course of 20-25 sessions that would raise caution flags for us.

QQQ- For the Nasdaq 100 we have left the longer term trendlines in place to show the resistance that has formed on the underneath of the nearly five month up trending channel. The index was able to reclaim the August breakout this week, but we do have five distribution days, plus the contextual day of selling Friday, spanning only the last 14 sessions. Another distribution day early next week would start to raise some caution flags for the 100.

IWM- The small cap Russell 2000 has been trying hard to hold the key $170 level which marks the point of the August breakout, but just hasn’t been able to pull away, and the more time it spends hugging and testing that support the more precarious the situation will get. We can see a huge spike in volume from the index rebalancing on Friday and we have four distribution days in the count for the month of September with one week to go. Should the $170 area give way we will be watching to see if the 50 day EMA, which sits close below, contains the selling.

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Weekly Market Prep For 9/17 $SPY $QQQ $IWM $COMPQX #markets #stocks #trading #indices #nasdaq

MARKET GAUGE: Confirmed Uptrend, But Caution Still Warranted

OVERVIEW: I was tempted to remove the cautionary note from our Market Gauge this weekend as some distribution days have dropped off the indices due to time, the Nasdaq Composite and Russell 2000 closed the week back above their prior break levels and the indices held their longer term trend lines for the most part. However, as we saw Friday, the markets are still very vulnerable to trade news and algorithms quickly take over moving markets very quickly. The markets are still very tradable to the upside, but we feel curtailing your activity, or position size may be prudent right now. The Russell 2000, that has been lagging just a bit recently, outperformed on Friday closing back above its prior breakout level. Markets confirmed a new uptrend back in April and those trends remain in place, although the trend in small caps is a bit more tenuous right now. Let’s take our weekly look at the charts and see how we shape up heading into next week.

SPY- The trend in the S&P 500 continues to look solid. After hitting the upper end of its bullish channel in late August, the subsequent pullback seems to have held after having tested the previous breakout level. Distribution days have been pared down to two over the last 25 sessions leaving a healthy look to the index, and as of Fridays close it sits comfortably above the 50 day EMA. I will reiterate however, that corrective action in the indices does not necessarily have to preannounce itself in the form of building distribution days. This market is still vulnerable to trade news and any announcement of failed talks or added tariffs could hit the market in a hard way. It is true there is always something to worry about in the markets so we continue to trade, but we must always remember to respect risk, honor our stops and cut losses short.

NASDAQ- The Nasdaq Composite survived a test of the longer term trend and jumped back above its prior breakout level during Thursdays session and was able to hold there to close the week. Distribution days, which had been somewhat of a concern last week, have been pared down to four and we have not registered a fresh distribution day in over a week. Application and Infrastructure Software names remain hot helping to buoy the index.

QQQ- Late last week the Nasdaq 100 sold off crashing thru the prior breakout level and slicing across the longer term uptrend line. The selling stopped just short of the 50 day EMA early this week and price jumped back above the breakout level. Friday saw some back and forth action with the index holding the breakout level but closing slightly back below the trend line and we did, just by a whisker rack up a distribution day. Its always nice to stay above trend lines, but I feel the 50 day EMA is always a more important support level. We added a distribution day here as quickly as we dropped one on Friday so the count remains at six days over the last 25 sessions, enough to keep our attention.

IWM- The small caps have lagged a bit recently and the index is trying to hold the former breakout level near $170. It would have been nice for the index to pull further away from resistance with the August breakout but we don’t always get what we want in the markets. Perhaps we are building a base right on top of the prior one, only time will tell. A slight adjustment to the trend line this week still shows the index holding tight and distribution days have been dwindled down to only three. Let’s hope Fridays outperformance is a sign of things to come.

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Weekly Market Prep For 9/10 $SPY $QQQ $IWM $COMPQX #trading #stocks #markets #study #indices

MARKET GAUGE: Confirmed Uptrend, However Some Caution is Warranted

As you can see from our Market Gauge we are still in Confirmed Uptrend territory, however, I feel some caution may be warranted at this time. This means to ratchet down your trading activity a bit, keep a bit more cash on hand, and perhaps tighten some of your stops. The indices have come back to test prior breakout support, or longer term trend lines, and in some cases have broken thru these levels. Markets may very well successfully test these levels and bounce back strongly, but a cluster of distribution days, particularly in the Nasdaq and Nasdaq 100 have gotten our attention. Strong bull markets can sometimes withstand six or even seven distribution days over the course over 25 sessions, but in the tech area we have seen five days accumulate in only the last 20 sessions which is enough to raise our antenna. It never hurts to curtail your trading a bit, but one can do serious damage to their account when they ignore possible warning signs, again I say possible. No one knows for sure where we are headed, but we can pay close attention to what’s right in front us and that’s what we do here. So let’s see what the charts may be telling us.

SPY- The S&P 500 ETF has the better look of the four indices we track here with only three distribution days on the books, however it did narrowly escape one on Friday by a whisker as losses stopped just short of the 0.20% requirement. The index is still well within the uptrend channel but has come back down to test the prior breakout support. These pullbacks can be healthy and necessary to sustain a bull run, so hopefully this is all we are seeing here. A break thru this support area around the $286 level can still be contained by the 50 day EMA and longer term five month uptrend line keeping the longer term bull trend in tact, however any new purchases can take a hit on a sharp pullback to these levels stopping traders out with quick losses. We like to use the ETF here, but the S&P 500 index itself has five distribution days on the books so this, as well as the recent distribution we have seen in the tech area, dictates our cautionary stance at this time.

NASDAQ- The Nasdaq Composite doesn’t currently have the margin of error the S&P 500 enjoys. The index has already broken thru previous breakout support and also threatened the five month uptrend line on Friday. Additionally the index doesn’t sit too far from the next line of support at the 50 day EMA. Adding to the dilemma, the index has been hit with a sudden cluster of heavy selling days racking up three day of institutional selling in short order. This now gives the index five distribution days over just the last 20 sessions, enough for us to raise some caution flags. To a lesser concern, the channel that the Nasdaq has carved out is not as clean as the S&P 500’s as it has just the slightest appearance of a more broadening top pattern.

QQQ- The Nasdaq 100 has a bigger issue as it has clearly cut thru the five month uptrend where it had previously found support on four prior occasions and has tallied four straight distribution days, clearly enough to get a traders attention. The 50 day EMA is now in play, and should the index not hold that mark, a move down to the previous breakout level near $175 is possible. This represents potential of 3% to the downside.

IWM- The small caps have also come down to test an important converging area of support at trend and prior breakout near $170. The index has a more spread out pattern of five distribution days spanning a full 25 session period. This means the 8/23 day was removed from the count due to time after Fridays session, in essence leaving the index with four days officially on the books heading into Mondays Session. We will be looking for any further selling here to be contained at the 50 day EMA which sits right near $168.

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Wednesday Wrap Up Freeview $WMT $AGN $SPY $QQQ $COMPQX $IWM

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MARKET RECAP- Some more red numbers for the indices today. Tech stocks and recent momentum plays endured the brunt of the selling with the Nasdaq and Nasdaq 100 losing over 1% each registering back to back distribution days in the process. Traders seemed to hide in the industrials as the Dow was the only index to finish in the green, although barely. Each of the indices we track posted interesting days in their own respect so let’s get right to it tonight and take a look.

SPY- The S&P 500 ETF posted a distribution day of its own, but it was not as ominous as the Nasdaq’s. The percentage loss of 0.27% was not far above the 0.20% level need to technically qualify and the index did finish in the top third of its range for the second straight session showing some resilience from the bulls. We are still in a comfortable zone in regards to distribution days with only three on the books, but it may be a good time to remind you that a sharp decline in the indices doesn’t necessarily have to announce itself with six or seven previous distribution days.

NASDAQ- The Composite printed a more ominous looking day losing nearly 1.2% on a big increase in trade. This is the third distribution day in the last four sessions, which is not a good look however, before we jump to any conclusions we must consider whether todays big volume was a sign of round support near the previous breakout area in late August rather than traders abandoning ship. The next couple days may tell us a lot in this regard.

QQQ- The Nasdaq 100 printed an equally dreary day as volume swelled over Tuesdays session marking a second consecutive distribution day. The loss did stop however at the previous breakout area near $183.00. We now have four distribution days for this index over the last 25 sessions.

IWM- The Russell 2000 was much better behaved today as its modest 0.27% decline was met with a noticeable decrease in volume over yesterdays distribution session. In similar fashion to the other indices, the index also bounced at previous breakout support just above $170.

TRADING RECAP- We sat on our hands again today, and honestly as much as I like, want and need to trade, I don’t have an issue with this. As important as it is to learn how and when to trade, it is equally important to be willing not to trade when things are not matching up with your method and not offering what you feel are good risk/reward metrics. This game is hard enough when things line up just right for your trades, let alone taking stabs at mediocre set ups. No, we are not perfect and have, and will in the future, put on trades that we look at despairingly in hindsight, but that is just being human. Our goal is to eliminate as many of those trade situations as possible. There will be more trades and likely they will come in a wave as is often the case, until then we continue to stalk good set ups. As far as todays trading is concerned, we were able to fight off some of the selling in the general markets closing out WMT for gains and our AGN spread trade went in our favor as well. PENN was the only downer suffering another red day. Let’s take a detailed look starting with the profitable closing of our WMT credit spread trade.

WMT- We decide to close out our September 94/90 credit put spread into strength today as the stock drastically outperformed the market gaining 1.32%. We were tempted to hold on a bit longer to squeeze a bit more out of the spread, but once option prices fall to near $0.25 it takes a lot push them down much further without going right up into expiration with the trade, unless the stock makes a substantial advance which is never a guarantee. In trying to get that last $0.20 or so out of the trade you start to incur much more risk compared to what you have to gain. We like to at least get back a minimum of 50% of the premium we sold, and in this case we were able to capture a touch over 60%. We closed out the trade for the portfolio by buying back the spread that we sold initially for $0.75 for $0.29. Many traders will try to pass this off as a 61% gain however, this is not accurate. As we discussed, you must figure your return on the margin risk, or the max loss you could have sustained which was $1300 in this case (the 4 point wide spread times the four contracts, less the initial premium received). So,  we returned 14.15% on our risk in just nine trading days. Perhaps we take another stab at this stock, but for now we pocket our profits and move on.

As I stated in the alert, I only closed out the short leg of the spread keeping the 90 strike long puts open. I bought the short 94 strike back for $0.36, sacrificing the 7 cents currently left on the long puts. This is something you can occasionally do when the buy leg of your option gets down to nickels. This leaves you with a lottery type play in case the stock, or the general market gets hit with large unexpected losses. I closed the entire spread trade for the portfolio for easy record keeping and tracking purposes a the then market price of $0.29.

AGN- After taking a one day rest from its current advance, the stock rebounded today once again finding support at its two month trend line. The stock added $1.13 in todays session and our October 190/200 bull call spread that we paid $3.20 for climbed to $4.29 leaving us up 34% on the trade so far………To get full access to the premium site where you will receive real time stock and option trading alerts, weekend video watchlist, nightly and weekend updates of the indices, as well as open positions go to http://www.ttptrading.com See you there!

 

Weekly Market Prep For 8/25 $SPY $IWM $QQQ $COMPQX #trading #stocks #markets

MARKET GAUGE: Confirmed Uptrend

OVERVIEW: Three of the four major indices we cover here were able to rally Friday posting new all-time closing highs, while the Nasdaq 100 fell just short despite a gain of nearly 1%. Time has been able to heel some of the distribution wounds the indices suffered in late July thru early August painting a more bullish picture as of late. At the same time, the markets have been able to shrug off the geopolitical headlines, as well as the local political headlines that continue to hit here in the states. The current five month uptrend that was confirmed back in April is still in tact. We were close to changing our Market Gauge from “Confirmed Uptrend” to “Uptrend Under Pressure” back in late July, but the indices quickly caught support. Since then the picture has improved, so let’s take a look at the charts and see where we stand heading into next week.

SPY- After Vacillating across resistance levels at new highs, the S&P 500 ETF was finally able to crack the code on Friday with a gain of 0.60% closing at $287.51, good for an all-time closing high. The gain came on an increase in trading volume over the prior two sessions where the index suffered losses. Any worry over the three consecutive poor closes Tuesday thru Thursday were wiped away as the index closed right near its highs for the week. The index now sits about 2.5% above its 50 day EMA and a little over 3% above the current five month trend line. Despite all the worry and concerns in regards to trade wars and the like, the index ETF is up nearly 7% since the lows hit in late July when the market was flashing some troubling signs. Distribution days have been scarce as of late as they have dwindled down to just three over the last 25 sessions. Volume may be historically thin in August, but those who have stayed away based on this premise have missed some good trading opportunities.

NASDAQ- We have been watching the Nasdaq Composite for a possible bullish resolution of an ascending triangle pattern that has been in the works as the index has climbed along a five month trend line toward new highs, and at least for now that bullish resolution is confirmed. For now things look good with the index as distribution days stand at only four over the last 25 sessions, but as always there are no guarantees the index follows thru on this current technical pattern. Sometimes these patterns suck in traders looking for the bullish breakout, then stage reversals catching the majority off guard, so we must always keep our discipline and stick to proper position sizing with our trades and of course honor our stop areas. Just to clarify, for those looking at the chart wondering why Thursdays volume increase is not marked as a distribution day, the loss of just 0.13% on the day fell short of the technical qualification for a distribution day of at least a 0.20% decline.

IWM- The Russell 2000 which had caused us the most concern in recent months has quickly righted the ship after traders came in supporting prices in late July and mid- August at 50 day EMA and trend support. Time has taken care of a heavy distribution picture that had developed from late June thru July and the quick turnaround pushed price right thru resistance into new high territory this week. Again, this why we must keep up with the index picture on a daily and weekly basis so we are not caught off guard when markets turn. There are currently five distribution days in the current count, but one of those days will be removed due to time after Mondays close.

QQQ- The Nasdaq 100 fell just shy of breaking in to new high territory on Friday, but has set up the same technical pattern of the Nasdaq Composite. The index sits with five distribution days in the current count, but a cluster these days that hit the index in late July will be coming of the count due to time late next week. Perhaps the index joins the party at new highs next week.

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