Last week we highlighted the big picture in SPY (S&P500) and QQQ (NASDAQ100). We spoke about a flag formation that was developing. A beak below would have led to a move to the demand zone at 172, from where earlier rally of June 2019 originated.
However towards the end of last week, that pattern failed and we saw a clear rally above the flag levels. Both SPY and QQQ opened on Thursday significantly gapping above and ending the day with a pinbar shaped candle having long tail. A pinbar suggests that the bears tried to push the market down. From as far as the bears could take the market, bulls entered and ran over the bears to the market higher. Higher than average volume on the breakout confirms commitment of the market players.
Technically we expect the bulls to run the show for some time. The market will try to test the recently posted all time high, possibly trying break above. It is possible that we may see a little pullback to the breakout line and then the market will continue rally. We shall post the specific trade calls shortly.
Among the fundamental numbers this week- important ones are Oil Inventories, CPI and Retail sales. While the inflation is very low in the last cycle at 0.3%, it is expected to drop to 0.1%. The retail sales show seasonal pattern, showing slowdown in sales in August after usually better prior month. In the previous release (data for July) we saw a surprise increase of 0.7%. However for August we are expecting that increase to be just 0.2%. Any surprise in that could move the market.
With this outlook, one should trade with caution, with proper trade plan and risk management. We shall post an article on that soon.