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Tuesday, June 23, 2020

Resistance 6/23

The SPY chart shows an unusual pattern over the last few days.

The blue line is at at the 6/11 mini crash day high.  SPY opened above the line four times in the last six days and closed below the open each day.  SPY opened downed below that line twice in the last six days, but buyers showed up immediately.  An upside resolution of this kind of pattern usually happens with a big gap up above the recent highs that causes shorts to cover.  It is not clear that is going to happen here.  The island gap reversal created on 6/11 can be a very powerful pattern.

The red count worked off the oversold condition, but has been rising the last two days.  The bulls are buying the same big cap stocks which is holding the indexes up.  However, internally the market is not particularly strong and may succumb to selling pressure.

There is talk of a considerable amount of selling in equities from pension fund rebalancing before month end.  I don't know if they have to wait until month end or not.  I don't know any pension fund managers.  They may be responsible for the selling into the upside gaps.  It may be tough for the bulls to break this out on the upside before that selling is over.  The question is whether that selling will be enough to cause another pullback.  I don't know the answer to that, but I will be watching closely in case another short trade is in order.


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