Market Summary – May 7

SPY Daily

I thought I underestimated the positive qualities of the blue bar from May 2 in a previous post. The relatively small body (distance between the open and close) along with the relatively large bottoming tail is sort of like 2 different candles fit into 1 day – a bad day follwed by a good day. Today’s candle is sort of like that except a little worse because of the bigger negative body and relatively less favorable position in the price pattern. Nonetheless the operative term here is probably “worse.”

The price action showed that the legitimacy of the entire April advance has been called into question as SPY hit a low not seen since April 3. The low of 285.81 compares with the downside target of 285.18 set on March 21. The March 21 close of 284.73 is quite close to the 54 day moving average level of 284.65.

However the nickels and dimes turn out, the real question is going to be if SPY can quickly make a higher high than the 294.95 set early in the day of May 1. The last 5 candles are quite interesting with the standard Friday rally unable to make a new high and the sharp drop and remarkable recovery on Monday leaving an impression of weakness rather than strength.

IWM Daily

IWM continues to play the role of class clown among the major index ETFs. The only way to play this thing has been to buy on it’s increasing frequency of day trips to near the 54 day moving average and then sell the following pop.

I usually watch the free weekly recap of the market from and was amused that Peter had taken the IWM trade I discussed last week only to be shaken out. Someone who traded IWM profitably over the last two weeks or so is probably a pretty good trader.

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