SPY hit all time highs last week. Can we get one more leg up from here?

Originally published in our Market Focus Report complementary eNewsletter, August 24, 2020 at 08:02 AM

Market Cycle Trend = Up

Market Cycle Trend:

Up / Bullish

SPY Market Cycle (click on image to enlarge)

Bulls out pace the bears last week as price action ends up on the week with the broad markets gaining ground from a 337.94 Monday open to a 339.48 Friday close for a 1.54 point rise in the SPY.

Last week, we started off Monday where we saw the broad markets opening near the prior Fridays close, with the bulls closing the market higher 3 out of 5 days last week, with two down days where the close < open. By Friday, we were up on the week, only slightly again however as the prior week, to close 1.54 points higher than Mondays open.

Technically speaking, not much seems to have changed from the prior week. As we can see from the chart above, the broad markets have been melting up week over week now since our market cycle trend indicated an up / green market cycle back on July 1st.

Let's take a look in more detail last week action to put together a solid game plan for this week shall we?

Take note of this current market trend, and any shifts in momentum as they develop to stay on track with where we may be headed next. Be prepared to act as necessary, if you want to stay in the game.

The chart above (click on image to enlarge) is the momentum of the broad markets snap shot from two Fridays ago. Last week I wrote:

"Underneath the hood, notice the momentum has slowed, for now at least last week from prior week, as bulls out pace the bears last week, and price action ends higher on the week, but only slightly."

The question now becomes, where will the markets go from here?

As a trader, one of the challenges that is continually with us is to figure out how to be comfortable with this uncertainty of the markets, morose to actually embrace it. How do we do that?

Currently, what we see, based upon what we see the market currently doing is that we are more bullish, with lower volatility on a day over day basis from July 1st, as we have continued to remain in a green / up state market cycle - coming up on nearly 2 months now.

How much higher can we go? Where is the momentum of the SPY broad markets now, and what might be our game plan for the coming week?

Intraday SPY momentum as of August 21st, 2020

Underneath the hood, on an intraday basis, as self directed traders, we want to take note as to how the market reacts when we see yellow price bars, and to take action accordingly.

In the prior week, as you can see from the image above (click on image to enlarge) there were three yellow price bars on an intraday basis. This week we had 6 yellow price bars, 2 times than last week. As you recall yellow price bars signify a more neutral / transitioning phase of the underlying when they appear.

With 2 times more yellow intraday price bars than last week, a smaller gain on the week than the week prior, and with the intraday momentum indicator in a down trend, we have three factors that lead us to believe that momentum has slowed last week from the prior week.

Fastly daily chart as of 8/21/2020 market close.

As you can see from the image above (click on image to enlarge).

Fastly closes at 85.05 Friday up 8.20 points on the week from Mondays open of 76.85.

Update on Fastly - trading above its 50 SMA, with strong bullish volume on Thursday, can it go higher from here?

Last week Fastly saw some really nice bullish volume come in on Thursday, pushing it higher, now once again above its 50 period simple moving average.

Two weeks ago I wrote:

"I opened a new position on it on Friday, prior to market close, with an outlook to hold it perhaps a month or two, thinking that as long as long as it can hold support here where we are now, it may work out to be a really nice trade."

Last week I wrote:

"Perhaps buyers will find it attractive at these levels to push it slightly higher in another week or two would be nice. We shall see."

How is the trade working out?

With two weeks now in the books, and several adjustments to my position, I am currently up overall on this trade. I have also adjusted out the risk to actually a negative .2%. How can this be you may ask? I have an option spread on the underlying where I am long the October 16th 90 strikes (meaning I have the right, but not the obligation to sell FSLY at $90. Additionally, I am short the 89.50 strikes that expire this week coming up (which creates an obligation for me to have to buy FSLY at $89.50, but only those options were to be exercised.)

Where will it go from here? Did I get in too early?

So far, the trade is working out pretty good, and it appears that the timing of my entry could not have been better. My goal is to earn at least a 1% gain, if not more on the trade. I am just shy of this goal currently. I believe if Fastly continues to stay sideways to slightly bullish from here, my position may reach my initial profit goal of 1% or more in the coming week. We shall see!

What are my final thoughts on how I am planning to work the markets in the coming week ahead?

Just like in life, the markets are dynamic, and ever changing. As a self directed financial trader, you have to bring a fresh but prepared mind to the game every day.

Last week, I trimmed back a few of my holdings that weren't working out with the type of trading that I primarily do for whatever reason, but added some new ones as well that looked compelling.

I am best when I act on what I am seeing it doing. and with current market action as of Fridays close, is that right now the market cycle trend, is telling me that we are in a lower volatility up trend based on recent market behavior, with slightly slowing momentum last week from the week prior.

Assuming we have more of the same, I will be looking for new trading opportunities in the coming week that takes advantage of current market conditions, which is a lower volatile up trending market.

My current holdings include:

AMD
CLX
COST
DE
DHI
EXPI
FSLY
LOW
MA
SE
SQ
TGT

Thanks for reading...

Today, I wrote about the current state of the markets, including the market cycle trend using my proprietary trading tools, provided an update on a current trade I am working, discussed a game plan for the upcoming week, and shared my current holdings.

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Until next time ... Stay safe, and happy trading!

Disclaimer: I either recently had positions in these names, currently have positions in these names, or may be taking positions in any of the proceeding names within the comin