u/OptionStalker

This is a follow up to my post last Friday. I was not able to get a video out, I was too busy adjusting my positions. Traders are data analysts. We assimilate all of the information before us and based on that data we forecast future market direction. When new data presents itself we incorporate it into our thesis and we adjust accordingly. Every moment, we know when we want to see, what we expect to see and what we don't want to see. When our our expectations no longer align with the actual price action.

I have been bullish for over a year and you have seen that reflected in all of my videos during that time, even during the Q1 decline this year. As a bull, I need constant price confirmation that buyers are aggressive and that comes in the following forms:

Green candles outnumber red candles.
Green candles are nice and long, often stacking consecutively.
The market makes higher lows and higher highs.
Red candles are instantly erased by green candles.
Dips are brief and shallow.
Dips are unorganized with mixed overlapping candles.
There are no stacked red candles during the dips.
Market rebounds are fast and furious easily returning to the recent high.
The market flies off of major moving averages like it touched and electric fence.

That's not what we are seeing. The drop from the high was organized with a series of long red candles. A small bounce was instantly smacked down before the market challenged the high creating a lower high. It did not fly off of the 50-day MA, it lingered around it and closed below it Friday. These are all tells that sellers are gaining control and that buyers are NOT aggressive.

Should you load up on puts? No! We still need technical confirmation and even when we have it, bull markets die hard. Earnings season is approaching and the bid is typically firm ahead of those releases. This is a time to reduce your long exposure and to tread cautiously. I am giving you forewarning so that you can do that. Market conditions are changing.

I recorded a one hour video today that goes through all of my analysis and I gave you a game plan with some picks for the next few weeks.

CLICK HERE TO WATCH THE VIDEO

I hope my analysis has helped you.

Please leave comments and I will try to respond.

I don't have time for a lengthy post, but I will try to do a video this morning. I only post here when it is important and if you follow me, you know my track record. The market has presented new information. Here are my pre-open market comments from the chat room this morning.

PRE-OPEN MARKET COMMENTS FRIDAY - The selling pressure in the US has been steady for the last two weeks. If buyers were excited we would not have tested the 50-day MA a second or third time and now the SPY has closed below it.

Yesterday the back drop was perfect for a short squeeze. The market had tested the 50-day MA a second time and the expectations for a negative reaction to MU earnings was priced in. The stock rallied to a new high and tech stocks bounced. In the last few months, that would have sparked buying. Support would have been confirmed and we would have seen a nice bounce. That's not what happened. The opening gap higher was smacked down like Chris Rock at the Oscars.

Overnight China was down 2% and the FXI made a new 52-week low yesterday. Japan was down 4% overnight. Korea had a 10% drop two days ago and it is down 5% overnight and poised to test that low. European markets were down 1% on average. This is a global market decline and it has spread to the US.

My market bias has shifted to neutral and it won't take much to shift me to bearish. We have a lower high double top. I expected a decent bid as we head into earnings season and that natural buying has not been enough to support the market.

Gold and and software stocks (10% of the S&P 500) have been very weak.

I am not entering any new bullish put spreads. I will manage what I have on. My bullish put spreads expire in three weeks or less and I won't hesitate to take gains if the market starts to drift lower today.

This is a critical juncture for the market. Be defensive. We have new information and we have to adjust to changing conditions. Until we have that information, we have to run with the information we have. We are data analysts.

If you have recently entered bullish put spreads, I would buy them back. The reward is now smaller than the risk. I am not in panic mode, I am just adjusting.

Software stocks have been great shorts.

Support is $722.60 and resistance is the 50-day MA.

Why My Market Bias Shifted!

I AM SHIFTING TO BEARISH - BEWARE!