It's Best To Wait For A Dip

Prices rose yesterday but volume was muted. If you were smart enough to buy the SPY in the 132-133 area, then continue to hold. Otherwise, there are just no advantages today, this Thursday in front of tomorrow's options expiration.

Near term sentiment has turned bullish, so a dip that threatens to retest recent lows is likely. Considering the fact that long term sentiment is extremely bearish, buying the next dip would be the wise move. Today the wise move is to sit on one's hands and wait for the dip.

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Explanation:

Near term sentiment flipped back to bullish yesterday. However, volume on the upswing was weak across the board. Prices could theoretically keep moving higher without a pullback, but the odds support a strong likelihood that prices will pull back and build a better base before a true rally gets underway.

Outlook:

The rebound rally back up to the 40- and 50-week averages we have been discussing will likely occur sooner rather than later. Until prices regress back to their mean, risk of whip saw will remain high and position sizes should be kept small.