The S&P 500 (/ES) rallied to the weekly 21 exponential moving average (EMA) on Friday but closed the week below the weekly mean. Keep in mind that it’s completely normal to see a reversion to the weekly mean in a bearish market, just as we’ve seen flushes to the weekly mean in bullish markets.
What this means for the short term is things could appear more bullish. So long as the market closes below the weekly mean, we can use these rallies to the weekly 21 EMA as opportunities to get short.
For now, we’ll patiently wait for the Volatility Index (VIX) to rise and trigger more downside momentum before we enter short positions on the indexes.
In the video above, we’ll lay out scenarios we could see with our line in the sand, trend/structure, and volatility.
Stay Focused!