Friday, August 23, 2019

Short Covering Rallies & Capitulation Tops

For key support/ resistance, and breakout targets, on the $SPX, and the $VIX, see yesterdays Market Update. I'm seeing futures down only slightly, at the moment - on some of the worse news to come out of China in a long time - but it seems like squeezing the short sellers, into the Labor Day Holiday, is what's really on traders minds.

The DOW broke out yesterday, but there is a red flag, where we closed on a reversal candle, just above support. See my word of warning in yesterday's blog, but also keep in mind, things probably won't be different this time, as I wrote about last week.



This is what routinely happens going into a Holiday:

1. First, get everybody bearish, by pulling the rug out on fake news, and that's easy when Wall Street owns every network. 

2. Then drive stocks up into every OPEX, and Holiday short covering. We've seen this story before. Short-covering explains the low volume, and many sellers are already on vacation.

The 2018 Dec. Swoon, was the exception to the rule, but you can see what happened to anyone foolish enough to sell on light holiday volume. The subsequent rally was not only massive short covering, but money being put to work at the beginning of the new year, and all with the help of the Plunge Protection Team, just like we saw in '09.  

Mnuchin Calls Plunge Protection Team; Stocks Soar One Day Later (Forbes)


Of course that story was quickly buried by the financial fake news media, who wants us to believe the fake recovery remains intact, and technically it does, and the powers that be have no choice, but to hold the market up.

..

Capitulation Tops


We've only seen a couple so far, that I'm aware of.

1. Cypress Semiconductor - This is what capitulation looks like. Are you sure you want to be a short seller? I would buy Puts years out, on this one. This is a funny looking chart, but I didn't have time to update it.



2. Target - Low volume short squeeze, beyond any upside target. Karen Finerman owns this one, but smart enough to buy some Puts, but probably not far enough out.



Wow, it's 10 min before the opening bell!
 Looks like we're going to at least get another pullback, and I'll be charting the open in real time, in my Public Charts area.


Catch you later, and have great weekend.
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