Daily Commentary: June 17, 2024

Auto Post1Option Commentary

Short Trading Week and Triple Witch

Posted by Pete Stolcers on June 17

We are headed into a news vacuum for a couple of weeks. Here’s what to keep an eye on.

PRE-OPEN MARKET COMMENTS MONDAY – Last week the market rallied to a new all-time high on a lighter than expected CPI. It will try to add to those gains this week.

Juneteenth bisects the week. Holidays typically result in light trading the day before and the day after so this could be a slow week. The one possible savior is triple witching. It will result in a directional move one day this week. Institutions will be rolling from June futures to September futures this week. We are likely to see some “window dressing” next week. Then we will prepare for the 4th of July holiday.

Retail sales will be released tomorrow and there is some Fed speak. I am not expecting either to produce movement.

A light news environment favors the current trend. However, on these breakouts we need immediate follow through. The longer we sit at the high, the greater the odds are of a dip. If you look at the May 15th breakout, the market was not able to advance. Then on May 23rd we had a gap up to a new all-time high that resulted in a gap reversal. That resulted in a giant bearish engulfing candle and we saw a few days of selling pressure after that.

The volume during the last leg of this rally has been light. That means the conviction is fairly light and that we could see a dip. The highest odds trade right now it to wait for a bearish engulfing candle or a bearish hammer off of a new high. There will be some money to be made on the short side, but that is not the prize. Don’t take your eye off of the ball. The prize is waiting for that dip so that we can buy. Buy the dip… buy the dip… buy the dip. That is all you should be thinking. When you get a stalled bounce off of those dips, take gains.

Buying dips has been effective for day trading the last week. Each day we test the bid. Sometimes it takes 30 minutes and sometimes a couple of hours. Once that support is confirmed, the market grinds higher. That is a good set-up, but you have to patiently wait for your window.

I am also noticing much better (sustained) price action on shorts. Once a stock gets nailed, the selling pressure builds. This is particularly true once technical support has been breached. On the flip side, longs have been more difficult to trade. Each move higher is tested and challenged and there is plenty of retracement. This is another sign that the market is due for a dip.

If you are going to try and grind out a little money this week, keep it light. You must wait for the bid check and you must make sure that support has been confirmed. Only then should you try longs.

If you are willing to stay sidelined for a week or two, your best pattern will come on a bearish engulfing candle off of a new all-time high. That move will set up the dip and then you will know we are close to a buy setting up.

Support is at $539.60 and resistance is the all-time high.

Live Trading

Open an Account

Paper Trading