The bulls have made progress over the last week. In the short term, we could see the S&P 500 (SPX) move toward the 200 simple moving average (SMA) around $4,100. We’ll compare the market now versus in August since that was the last time the market rallied for longer than a few days. We’ll also cover some of the pieces of the puzzle including VIX, HYG, and DXY for a full market breakdown.
The market is playing ping pong between two important levels that will determine the path of least resistance.
The market needs to hold the hourly 200 simple moving average (SMA) in order to stay afloat. Things will get ugly to the downside if SPX breaks the 200 SMA. The dynamic would shift in favor of the bulls if SPX moves above the daily 21 exponential moving average (EMA).
On Friday, SPX moved back and forth between these two levels. The trading decisions we make will come down to how the market breaks down between the 200 SMA and 21 EMA.
In the video above, we’ll lay out key levels on HYG, VIX, DXY, and the overall market. Stay tuned for Sunday’s newsletter to see what the weakness in AAPL means for the market.
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As discussed on Monday, this week was all about the Fed (FOMC) event on Wednesday. On Friday, the last event for the week is Non-Farm Payroll.
After the FOMC event, the S&P 500 (/ES) reacted negatively to Jerome Powell’s comments on if high rates are here to stay in the long term. /ES broke one of this week’s downside targets of $3,850, the 50-day simple moving average (SMA).
If /ES stays under $3,800, my main target is the daily 21 exponential moving average (EMA) near $3,784. See if /ES rolls over to the key zone below at $3,700. From there, my first downside target is the bottom of the zone at $3,669. My second target is at $3,639.
Don’t be afraid to miss out on upside potential while /ES is at levels that bring better short opportunities. However, if /ES gets through $3,784, my only upside target is $3,850.
The Nasdaq-100 futures (/NQ) has been weak after continuous bad tech earnings this week. As it continues to stay vulnerable, we want to keep an eye on how /NQ will impact the market.
Check out the video above to get the breakdown of my critical levels on /ES. I also discuss structure on /NQ and key levels to note.
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