This is the rally we’ve been expecting. After countless fakeouts, it’s a relief to finally see the markets follow through. We were that close to giving up but stuck with it and now the market is finally showing its hand.
Locked in half gains for members on SPY calls
S&P reaching above 2290 and Dow hitting 20,000 with Nasdaq at new highs again.
Our SPY calls (at-the-money calls at the 227-strike – you could think of them as slightly OTM calls) entered at $1.96 are now over $3 – for over 50% or close to $1,200 gain ( we realized half so far at $3.05) for maybe $600 in realized.
Since we gave extra time, the price of these options ($1.96) is slightly higher than what you would typically see with a slightly out of the money call.
Our IWM bull put spread has a very high probability of expiring at max profit next week for another $1,200.
Meanwhile, our TNA position in the Russell is up a few hundred – so even though our timing was off last week as we expected this rally to happen last week either at the Trump inauguration or before — with the move up yesterday and today – we’ve more than made up for the losses from last week.
So combining the $1,200 from SPY calls and the $1,200 from the IWM put spread and say $300 for the TNA position, we should be on track for $2,700 so far.
I just wish the rally happened last week – would’ve been solid without last week’s losses, but I’ll take the rally over no rally any day.
Markets have been consolidating for more than a month and a half.
Today’s S&P500 Hourly Chart
The rally finally happened. If you look at Jan 23 vs Jan 12 — I thought Jan 11 or 12 was going to be that rally – but it failed to follow through that weekend on Sunday night.
That failure lead to an entire extra week and a half of consolidation before we finally moved to the upside.
Given the length of consolidation for the past 1.5 months, there should be enough juice to power this over 2300 tomorrow.
Today’s S&P500 Daily Chart
On the daily chart – we now have 2 consecutive green candles – something we have not had pretty much since the last rally. I think 2300 ES is a realistic possibility for tomorrow.
Previous rallies have had minimum 3 green candles before we see a red one – so I’m expecting at least one more green candle for tomorrow before a red one kicks in.
Today’s Dow Hourly Chart
We hit over 20,000 in the DJIA index as well as in the Dow futures (chart below).
This break of the descending trend line was big clue to the multi-day rally that happened – a good portion of which happened overnight.
in Yesterday’s Dow Chart – we showed the breakout (below). And we got the follow through overnight (above) – indicating this rally has legs.
For tonight, I’m expecting sideways consolidation.
Today’s Russell Hourly Chart
The prior spike highs in 1377 should now serve as support now that we’ve poked above it into the 1380 territory.
While the Dow formed a break of a descending trendline, the Russell completed a textbook ending diagonal – very difficult to spot in the process of forming, but it’s definitely there.
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