Capital Wave: Profit Taking Territory Approaches

With the jobs report and overbought levels on the S&P 500 RSI, don't be shocked if we see profit taking in the next week that retests the 20-day EMA.

Good Morning:

I don’t want to overload you with information this morning. We’re at extremely strong levels for S&P 500 momentum, as evident in the daily RSI and MFI readings (Relative Strength Index and Money Flow Index) on the S&P 500 SPDR ETF (SPY).

The last two periods of this strength level coincided with some small profit taking and a retest of the SPY’s 20-day moving average. While I foresee some strength and am bullish about the ongoing expansion of liquidity in the system, I think it’s time to be a little cautious about chasing momentum from here.

This is where we tend to recommend selling calls on long-term positions at whatever price would be appealing to you. It acts as a hedge, and if you’re going to sell and take profits, why not do it at levels that would be quite appealing to exit?

Make the market take the stock from you. The purpose of the market is to sell…

Trader’s Focus

This market just won’t quit.

Our gauge kicks off at +28, up from yesterday’s +21 close, and there are s…