Everything I suggested yesterday about the current compression in the S&P 500 (NYSEARCA: SPY) and Nasdaq (QQQ) setting them up for a big move is still true today, because…
The squeeze is still on. The rules I outlined for playing the breakout still apply.
One key point I’ll add is that the breakout will be most compelling if it happens in the Russell 2000 (NYSEARCA: IWM), QQQ, and SPY all on the same day.
Today was a consolidation day. Let’s review the levels:
S&P 500 ETF (SPY) Consolidation day. 285 is key level to hold. 284 Should be a support area, 282 is pivotal support. 286.63 is the all-time high.
Russell 2000 ETF (IWM) Lots of resistance near 169. Look for support around 166.50 and 166.
Dow Jones Industrials ETF (DIA) Weak consolidation day, but closed under prior day low. 258 is the next swing high. 254 is support to hold.
Nasdaq ETF (QQQ) 4 days of consolidation at 182 level which is resistance. 182.93 is the all-time high, and the key support is at 179 then 177.75 then the 50 DMA at 175.62
For most of the sectors, today was just a consolidation day, but there were there are few notable patterns.
1. The Semiconductors (SMH) and Transports (IYT) closed lower than their prior day’s low. If they continue lower tomorrow this is a bearish development in two important sectors.
2. The Treasury Bond ETF (TLT) had a strong day today, and the strength was persistent all day. This is could easily be explained as a reaction to the lower than expect PPI data today, however, if it continues higher, stocks my follow suit. It can also be explained by the fact that the TLT loves to rally on Thursday! (read below)
Since the most notable price action today seemed to be pretty quiet, I thought I’d share a few fun facts about Friday’s.
I’m believe that the day of the week often impacts the mood of the market. This is, in part, because I see the proof in the data.
Here are some interesting facts about how a stocks and bonds have performed based on the day of the week since the beginning of the year:
The SPY has closed up 56% of the time this year, but on Fridays its been up 63% of the time (its best performing day). Wednesdays are it lowest percentage up day at 48%. This may be related to the bonds as you’ll learn shortly.
The QQQ’s best day in this regard is Monday at 64%.
The TLT’s favorite day is Thursday by a wide margin as it’s been up 61% on Thursdays and its next best day is Friday at 52%. Wednesday have only been up 38% of the time!
However, the percentage of times a market closes up is not the only way to judge a day’s performance.
Consider this…
The SPY has earned about 19 points this year, but…
If you were only in the market on Fridays and Wednesdays, you could have earned about 16 of those points!
So 84% of the gains this year in the SPY came on Wednesdays and Fridays with Friday earning only slightly more than Wednesday (even though Wednesday were not up as often).
If we look at the TLT in the same way, it’s lost 7 points this year and every single day of the week has been a net loser except Thursday!
Yes, this means that Thursday has made about 6.5 points and every other day has been negative.
So if you’ve ever found yourself think that you trade better or worse on a particular day of the week, it may not be your fault!
Best wishes for your trading.
Geoff is filling in for Mish until Aug. 20th.
Twitter: @marketminute
The authors may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
