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Is the SPY Due for a Pullback?


An accelerated channel is building, but it could last a long time.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

I have been expecting a pullback, and I have made it very clear per my posts on the Buzz & Banter.

However, because I have increased the percentage of cash in my firm's portfolios, my outperformance into quarter end has taken a dip --  a big "no, no!" in the relative performance world in which I play.

Today, I'm behind the eight-ball again. If you track my holdings, you know that most of what I own is doing well today; however, when you have 25% cash, it is very hard to outperform in a green market. So, I face a crossroads:

1. Admit that I am wrong and do the "unthinkable" and buy into an overbought market.

2. Dig in my heels and sell more.

3. Sit on my position and wait patiently.

Decisions, decisions. At this point, as the Fourth of July weekend approaches, and the Relative Strength Index (RSI) is back over 70, I will delay the decision and choose option three. This means watching more of the world cup and less of the markets.

The SPDR S&P 500 ETF (NYSEARCA:SPY) came back into 193ish as a secondary support, or better yet, simply 195ish as first support. If you recall my sell, then you know 193ish is basically a wash, and 195 would be buying higher.

This is very frustrating, but if I see 198 on the SPY, that would be even more frustrating! An accelerated channel is beginning to form, which often ends these bullish moves, but can last a long time. So, I may just buy the lower channel and "rent" some indexes.

I'll keep you updated as I figure it out, but I wanted to share my thoughts.

Click to enlarge

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