Rejected

SPY

After nearly a 1% gap at the open, SPY came back to Earth late in the day and ended up closing in the red below the 1 month (21) EMA.  Even with a head start, bulls failed to overcome this repeated region of resistance for the third time in this correction.  In addition, prices were also thwarted right around 111, much like they were on 5/27, 5/28 and 6/3.  Clearly a range is being hammered out between 105 and 111…and it’s eventually going to break.  I suppose a silver lining was that prices were able to make it back to 111 instead of stalling and making a lower correction high.  With that news, even if prices are to decline again, by the time we get to 105, chances are the market will be oversold and bears will have great difficulty pushing prices much lower.

Even though I went “short” the market today via SDS and VXX, I’m not completely convinced that this market is going to reverse.  As I hypothesized last week, I was preparing for a feeble attempt at price moving above the 21 EMA and eventually falling below the average on weak volume.  That scenario played out this afternoon, so I decided to put my money where my mouth is.  Additionally, the setups I saw for both trades looked good, thus strengthening my conviction.  Nevertheless, I will be keeping those positions on a very short leash.  If there is any evidence of momentum pushing prices above the 111 region on SPY, I will not hesitate to liquidate them.

In other news, both mid-caps and emerging markets were able to close above their 1 month EMA’s…all is not lost.  Right now, MDY and EEM are the strongest of the ETF’s I’m following.  If my short scenario does not work out, I may look to start building a position in either one of those two.

MDY

EEM

I feel good about my risk/reward on both trades (SDS and VXX), so it’s nice to actually have some active capital back in the market after being in cash for a bit.