After a few new highs and a lot of back and forth action this week, the markets showed some potential signs (see charts below) of setting up for a pullback to the daily 21 exponential moving average (EMA).
The Nasdaq (NQ) and S&P 500 (ES), the QQQ and SPY futures respectively, closed underneath their daily 8 EMA today. This type of action opens the door for a potential reversion to the mean (at the 21 EMA). That’s going to be our major focus next week, as a dip to the 21 EMA would be the market’s first healthy “reset” in weeks.
Should we dip to the 21 EMA, patience will still be warranted. The reversion to the mean is the first step. The second step is for the markets to confirm support at that level. The third step is to start looking for entries in the cleanest setups possible.
At the top of our watchlist are the technology and semiconductor sectors. Technology has been the clear leader as of late, and a dip to the 21 EMA could serve as a good spot to look for new entries for any potential last-minute move higher into earnings. As for the semiconductors, that weekly squeeze is one of our favorites right now (see chart below).
Any downside here could serve as a great opportunity to get long in the areas of the market we are stalking, but we won’t rush into entries right away. In this Sunday’s video, we’ll cover a few of the technology and semiconductor setups to keep an eye on and prepare for the week ahead.
Stay Focused!