SPY double bottom bounce

Hey Market Pilots,

Last week we had an exact double bottom bounce, which also coincided with a bounce off the Daily 50 SMA. This made for a very strong 4-day run into the 4th of July holiday, giving us traders fireworks of our own. The setup was also boosted by good economic numbers that came out Thursday morning, but the charts said price was too extended and therefore faded towards the end of the day. Now, where do we go?

My expected behavior of the market after a bullish holiday run would be a pullback afterward, once all the cheeriness has worn off, but as I look at the futures right now, they are back up where they opened Thursday with the pop on economic news. I certainly won’t be sad about this as I am heavily long, but I had some names I was eager to enter on a pullback. This continuation of the move now throws a question mark of when, if, or how the market will rest before the next major leg up.

Speaking of leg up, that is exactly what I am expecting since the SPY has not only done a double bottom and bounce off the Daily 50, but the slow stochastic has also done a double bottom with a higher low on the daily. This is a great signal of strength and adds to my conviction about this developing new trend. 

I always have to keep in mind that the market may not do the things I want it to do or in the time frame I think it should. This means I still need to stick to my entry rules and if a trade has already left the station, so be it. There is always another train coming. I may have to be patient for that pullback, but that’s okay because I already have significant exposure and need to keep some powder dry for when those ripe opportunities present themselves.

Over and Out,

Your Profit Pilot


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