Bottom Line:
There is an FOMC meeting and policy statement Wednesday. Markets will be on edge going into that meeting, and there is no way to guess what day-to-day trade will be like into next Wednesday.
There is incredibly disparate action among the indices. The NDX was up over 8% from print low to high last week, while the RUT closed Friday at the low extreme of an increasingly mature Balance Area. The SPX and DOW closed near their session lows on Friday and deeply into Thursday’s rally range.
A downside washout is still definitely in play.
It is bullish at least short-term if all four of the US primary trading indices can close above their respective highs of last week.
Details below and in the video.
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Daily KRAs:
SPX
A close above Thursday’s high IF accompanied by similar strength in the other three indices is a bullish signal.
If the indices washout next week the SPX should trade at least to 3838-3767.
NDX
The NDX was up 8%+ last week. That would be “extended” in a strong bull market with broad participation.
Something will have to give; the other indices will begin to show strength or the NDX is likely to give up a large chunk of last week’s rally.
RUT
There is no objective support in the RUT below Friday’s low until the area of the October lows at 1668-1640.
DOW
There is no market based potential support for the DOW until the 30537-30198 area.
Internals
This is discussed fully in the video, but the view of NYSE internal data suggests two things: 1) A washout is likely underway. 2) Timewise, if a washout is underway, a tradable low is likely to form in another week.
VIX
If we see a washout next week VIX is likely to spike into the 30’s or higher. We discussed the various products one can use to trade volatility in our member Webinar last Thursday. No doubt we will have an opportunity to look at potential volatility strategies next week.
US 10-yr. Notes
Notes and other US debt instruments remain historically volatile and that is like to continue through next week.
US Dollar
Choppy and between levels.
Gold
Gold is approaching all-time highs. This is also likely to be a very volatile contract next week.
Crude
Consider favoring shorts in Crude.
