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Is the stock market poised to break its bad luck?

Not that I believe in good or bad luck of the stock market as it is purely driven by participant state of mind and mostly their irrational behavior. By “its bad luck” I refer to already infamous “iron ceiling” as some people called it. We are once again dwelling near the all-time highs and investors and traders are now in eager expectations of what’s coming next week.

Will we break the resistance or will we bounce back down? We saw all this for more than 6 months again and again when the $SPX went literally nowhere. And it is very frustrating.

From the hind side view, it may seem easy trading such market. Trade Iron Condors and you will be fine. Unfortunately, it is not that easy. The swings of the market were so wide, that it was difficult to stay on a safe side of the trend. The swings from bearish to bullish side were so violent that it was very difficult to stay calm and ride thru them. The market played investors nerves and mine very well. One misstep and you are chasing the price tape like a fox chasing a rabbit.

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I know what I am talking about as this happened to me again a few weeks ago. And that mistake is still chasing me. Although the trade looks OK now, it still can turn into a nightmare.

An original bearish trade suddenly turned bullish. I had a bear call spread with the lower strike at 2115. One hour before the close the market was attacking 2114 price and I panicked. It looked like that at that time it would be different and the market would go higher. End of choppiness, new all-time highs. I already raised my spread higher once and I couldn’t do it again.

So I reversed the trade into a bull put spread.

Then 15 minutes before close the market tanked and closed at 2108. It fell 6 points in 15 minutes.

I still have modifications of that trade alive trying to navigate it thru this market managing it to expiration trying to let it expire worthless. Have I stayed the course of the original trade, I would be out of the trade that day and enjoyed nice profits. But who could tell the market would crash 15 minutes before the close?

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Last Thursday and Friday price action of the market was promising. Without any catalyst or good news, the market moved up by about a 1% leap. On Friday a morning selling was quickly offset and the market ended in green. Not too much, but green anyway. Some investors see this as a good sign.

We are again near the all time highs. Will the market have the strength this time? Or will it repeat the same trap which happened a few weeks ago to me?

Market expectation for May 18

All technical indicators I watch are pointing up. MACD is rising in all time frames I watch. Heiken Ashi chart is green, positive, pointing up, and above 21 day MA. Also a parabolic SAR turned positive, see two charts below indicating those changes.

SPX move

The chart above indicates the market wants to get higher. It shows a buy signal. It turned up after a small pullback and MACD is also pointing up.

SPX expected move

Because of the technicals I expect the market to continue higher on Monday. As there is still a battle between bulls and bears we may see bears taking action on Monday, but it looks like they may lose the power and the market may actually move higher.

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