DailyPlay Updates – May 19, 2023

Investment Rationale

The market flew yesterday, marking new a new 2023 high close for the SPX just shy of 4200.  The AI-related tech buying of the mega cap names continues, and with renewed thoughts of a debt ceiling agreement likely to be met in time, buyers completely controlled the day.  The biggest effect on us is that the rally will now also knock us out of the remaining two SPY $412 and $413 (vs. $385) put spreads we were long.  Mr. Market has spoken, and he’s not saying he wants to go down. (The next SPX tactical target is the unfilled gap from 4203 to 4219, which could easily get filled today.)

I have espoused to you that one should do what has worked in the past until it no longer works, and in this case, with the SPX looking like it will breach the 4155 top of weekly cloud resistance (after last week’s down close relative to the week before) – and the move being “qualified” – it sets next week up to confirm the upside breakout to still potentially push the market higher (despite the still unknown debt ceiling result and upcoming early-June FOMC rate announcement).  Price action like this does neutralize the 2022 decline to no longer be a structural bearish picture.

NYSE market breadth is still not bullish, and its chart shows two prior highs right at the top of its weekly cloud.  Watch this going forward to see if it can break above its cloud top, to at least then potentially test its major downtrend line.

NYAD – Daily