06/25/2024


Hey Trader,

The market looked super strong to start the week. SPY has been forming bull flag after flag, gapping up, consolidating, gapping up, you know the drill. And then Monday right at the Close we saw a NASTY drop…

Is the Market acting like the Panthers? Up 3-0 and then drops the…puck?!

I don’t trade on emotion. No catching feelings when it comes to my moola.

I DO trade on probability and intuition. And as SPY consolidates drooling for another breakout catalyst ahhem like this Friday’s PCE number…That is telling me we will hit a record high to finish up June.

However, the volume profile loves to humble me. And if SPY breaks specific levels, we will not get our record high on Friday. We will get a pretty nasty multi day sell off until it hits my targets.

To be honest, I don’t mind. I love a good volume profile trade. They are tried and true. As long as we hold my special levels, I’ll be bullish into Friday. But we are approaching some severe levels…circling back to hockey, you could say we’re trading on thin ice…

Here's my quick analysis of SPY, QQQ, and DIA for the latest market insights and predictions!

Mean Reversion: Lessons from the Stanley Cup and Stock Market

By Mark Sebastian

Mean reversion…it's what can let a team from Florida go up 3-0 in the Stanley Cup Finals and then lose 3 in a row only to win.

It also exists in the stock market….when a stock moves too hard too fast…it tends to get the wind take out of its sails quickly:

Thus the quick plummet post split in NVDA. It's not that it won't be 200 dollars a share some day…it might…it's that it got to 140 way too fast from the last earnings.

We see the same thing in broad markets….

As I pointed out last week, the S&P 500 is far outpacing equal weighted S&P 500 and the Dow Jones Industrial Average.

We are starting to see some mean reversion between these two.  It is unlikely that the S&P return will fall below the dow…that would take a major tech sell off…But the return spread tightening 

On Thursday the spread was up 15.31 over the last 6 months for SPY and up 3.67% for the Dow.

That spread has fallen from over 11.5 to under 10 and is climbing. I think we could see DIA outperformance at least though PCE on Thursday and if that number is hot…maybe into next week.