Tech Selling Should End Today – Q2 Window Dressing In Play

June 27, 2017
Author: Peter Stolcers, Founder of OneOption

Posted 9:20 AM ET - Yesterday the market opened higher on the back of tech stocks. Minutes after the bell we saw a sharp reversal in the QQQ and it closed on the low of the day. Tech stocks are in for another nasty round of selling, but it should end today. Asset Managers are "window dressing". This is the end of Q2 and they are selling the leaders and buying the laggards. Settlement is T+3 and Friday is the last day of the month. Consequently, I believe tech stocks will find support after today. Oil is up slightly and banks performed well yesterday. We are seeing sector rotation and day traders can lean on that momentum. The news is very light this week and trading volume will decline with each passing day. Next week the 4th of July falls on Tuesday and that means Monday will be one of the slowest days of the year. ISM manufacturing is the only release. Wednesday will also be very slow as we muddle through a holiday hangover. The FOMC minutes might provide a little action that afternoon. ADP will be released on Thursday along with ISM services and the jobs report will be released Friday. We won't see much action until the back half of next week. We've been planning for this. Swing traders should have a nice portfolio of out of the money bullish put spreads. Those positions are generating income each day as time decay whittles away at option premiums. If the stock breaks technical support, buy back the put spread. This is a nice income generating strategy and it is ideal for quiet markets. Day traders need to tread cautiously. In yesterday's comments I mentioned waiting for market direction. The early rally failed and the first hour low was breached. That means you should have focused on the short side. If you only like trading from the long side in this upward trending market (my preference) you should have stayed sidelined. Look for another wave of selling in tech stocks today. Focus on strength in other sectors. I'm going to wait for QQQ support before I take any trades. The early selling will help me identify relative strength. I will set passive targets and I will trim my activity/size. The market will chop around as it treads water near the all-time high. Support is at SPY $243, $242 and $240. Support on the QQQ is $139.50 and $138. . . image

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