Bottom line for this week:
My best guess is sideways to bullish into 2 PM, Wednesday. That is the Fed policy announcement and will create a lot of volatilty. I would not want to see daily closes by all four of the indices below Thursday’s cash lows under any bullish assumption.
Positives:
- VIX closed at a year low
- 10-Day ATR closed at a year low
- The RUT closed above a critical upper KRA
- The NDX closed almost exactly on its upper critical KRAs
- All four primary indices are above their 200-day MA
Concerns:
- The DOW so far has not confirmed the uptrend by being able to breakout above its 1/17 high
- Ths SPX has not closed above its late November, early December double top
- There are divergences in some of the breadth work I keep
- In strong trends ALL FOUR of the primary US trading indices will confirm by making new pivot highs (or lows, in the case of a downtrend) in the general timeframe.This has yet to occur. I think this will be resolved, one way or another, by the end of next week.
Price action next Wednesday afternoon into Thursday’s close has the potential to accelerate an uptrend (assuming we are sideways to up into Wednesday, or be the catalyst for a reversal. Personally, I will be neutral and waiting by some point Wednesday late morning.
Daily KRAs:
SPX
The SPX now has multiple closes above its 200 day MA and the trendline from the Jan. 2022 top that had held all rallies until last week.
Bull trends have an uncanny consistency of holding retracements very near the previous day’s low, or the two day back low. The two day back low as of Friday’s close is 4013.
NDX
There is nothing above Friday’s high that could be potential “resistance” in the NDX until 12753. 11853 is the immediate downside level to watch.
RUT
There is nothing above Friday’s high that could be potential “resistance” in the RUT until 1965. 1882 is the immediate downside level to watch.
DOW
The DOW was the first stock index to exceed its 200 day MA and has stayed persistently above it since last November. Lately it has been mired in a large trading range and remains below the breakout level (34555-34740) of that range. 33635 is the immediate important downside level heading into next week.
Internals
Two weeks ago I pointed out that the 10-day MA of NYSE advancing issues had reached an extreme not seen since Feb. 5, 2021, BUT….also pointed out that from a recent extreme the SPX rallied an additional 5.68% prior to a top of significance. If that were to occur this time, the SPX would rally to the 4200-4210 KRA highlighted on the chart above.
There is a significant divergence forming between the 5-day MA of NYSE advancing issues and price.
Breadth MUST continue to show strength if the current rally is to continue.
The 30m chart of price (ES day session) and breadth suggests caution. We are going to see at least a temporary sharp sell-off early next week or a rather dramatic expansion in breadth.
VIX is again below 20. The market isn’t going to decline by much or for long if VIX remains below 20.
Gold
Gold is in an increasingly tight Balance Area. I would not want to see a close in Gold below 1898 under any immediate bullish assumption.
Crude
Crude is in a choppy Balance Area between 82.64 and 78.13.
US Dollar
The US Dollar has likely put in a long term top. The Dollar is in a tight Balance Area sitting on top of a critical intermediate term KRA.
US 10-yr. Notes
I wouldn’t go near Notes until Thursday, at least.
