SPX Review and Outlook

EOW Stats
High: 6,699.52
Low: 6,569.22
Close: 6,643.71
Weekly Change: -0.31%

ATH: 6,699.52 (Sep 23)

Last week SPX set another ATH on Monday, then continued to play out this first forecasted path from last week:

A pullback that takes us toward ~6,550, which lines up with the May uptrend line, the rising 20 EMA, and last Wednesday’s shakeout. SPX has tested the 20 EMA several times this year, sometimes briefly undercutting it before buyers step back in.

SPX broke the short-term daily uptrend trajectory line I had charted, so I just went ahead and removed it. The index is still respecting the May uptrend line, and I adjusted that slightly to include the bottom of Thursday’s shakeout.

I also shaded the zone between about 6,550 and 6,625. There’s been enough price action there that it makes sense to keep an eye on it.

A few paths I see from here:

• September’s run has been sharp coming off the September 2 shakeout, so some digestive action wouldn’t surprise me. Maybe chopping in and out of our shaded box.

• Last week’s three-day dip to the May uptrend line and 20 EMA could have been all the reset we needed, setting us up to drift higher along the 10 EMA.

• Or, if the market does push lower, I’d still expect support not too far below the 20 EMA. That’s been the rhythm all year, dip just under, then reverse, which puts 6,550 or 6,482 in play.

Right now, I don’t see signs of deeper weakness, though the week overall ended in indecision. It could have been another quick pullback, digesting on the way up…or we could enter a bit of chop. Because some stocks are extended, I can see the index being choppy between some names digesting and some just getting started.

Follow Up on AVGO

The last thing I want to talk about today is AVGO. It just wasn’t ready for an options play when I entered, and I got crushed. That’s the thing with short-term options, you don’t have much room to sit through two or three days of pullback or sideways drift. With a stock play you can wait it out if you’re confident it’ll recover, but with options you’ve got to be right right away or you’re out.

Below I’ve got AVGO on my other layout here, thus the white-background, anddd I also found this cool indicator on TradingView that plots the daily 10 and 20 EMA directly onto intraday charts (the two blue horizontal lines you see on the right - you can change the color and inputs to suit you). So when I’m on the 15-minute or hourly, I can immediately see if price is near reclaiming those daily levels (my trade chart).

Daily chart
I was premature in calling that September 19th gap retest as “done.” The stock had gapped up, came back to retest, and I thought it was stabilizing. Instead, it needed more time. I kept thinking the bottom was set around 341, then 338, but it slipped lower. Now the SRSI has reset, and price is right around the gap line and daily 20EMA (~334-335).

Hourly chart
In retrospect, you can see clearly how every bounce was rejected at the hourly 10 and 20 EMAs. It was riding down smoothly, just retesting the moving averages. When I look for a breakout from digestion or a pullback, I want to see my smaller charts start trending, and holding, in the direction I want my daily trade chart to go in. I got into AVGO convinced that being near the gap retest area and the daily 20 EMA was enough support, but AVGO needed more digestion. I get in early sometimes which is within my discretionary rules, BUT that means I need to cut it if it doesn’t work out right away.

Now I want to see price push back toward 340 and stay above it, because that clears the hourly 10 and 20 EMA and starts to take on the declining 50 SMA. If it gets to the hourly 50 SMA and stalls, fine, but I’d want it to be a quick rejection, not another breakdown.

15-minute chart
We’re finally seeing some higher lows again. The moving averages are tightening up, and there was a little burst of volume into Friday’s close. That could be something, or it could be nothing. For now, I like the shape of the action better than before, but I need to see follow through.

Levels I’m watching

• Support: 334–336 zone (daily 20 EMA inside it)

• Pivot: 340 — I want to see price rise toward and stay above this (entry would be before this around 336 on the hourly chart, but I want to see this level broken quickly)

• Resistance: 355.8 and 365.4, recent rejection areas

Trading Update

I’ve still been struggling to get back on track (since August) even though three weeks ago I revamped my risk management sheet, sized down significantly, and started gaining real traction. When I started to see real progress, I put on a few oversized positions to “catch up”, and when they didn’t work out, I froze, didn’t cut them right away, and compounded major losses.

So this week my only only goal is to follow my rules and risk management to a T, taking it day by day and week by week, rebuilding trust and patience with myself. I saw how easy it was to make progress even with smaller position sizes and sharper risk rules, so I know I will get back on track, it’s just a matter of staying patient.

I hope you are doing well and look forward to hearing from you, the good, the bad, the ugly and the awesome.

‘Til next time!