Another 'Up-Open' in a Bear Tape

A setup I'm not really a fan of.

Technical Edge — 

• NYSE Breadth: 39% Upside Volume 

• NASDAQ Breadth: 29% Upside Volume 

• VIX: ~$31.50

Game Plan: S&P, Nasdaq

Traders are increasingly looking for a bottom. The Fed is hawkish and the PCE inflation reading came in hot last week. It’s my view that the market could or would start to look past these things after it made new lows and tested into some of the key areas we laid out in September. 

However, we now have the growing fear that “something is breaking.” 

The fingers point back to Credit Suisse, although the market doesn’t seem all that worried about it as of 8 a.m. ET. My concern is the volatility we’re seeing in the currencies and bonds — two normally quiet and calm areas of the market. 

Volatility in those areas — alongside a rising rate environment — have the potential to cause some damage. Last week, the UK almost had its “Lehman moment.” Now the weekend chatter is Credit Suisse. 

Whether or not it comes to fruition, these are not positive conversations to be having!

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You all know how I feel about an up-open in a bear tape. Even though bonds are rallying, so is the dollar. As it pertains to the S&P 500, we closed near the lows last week and on Friday, but it was the end-of-quarter. So there are some messy cross-currents to wade through. 

SPY

In our last video from Sept. 15, we talked about the SPY breaking uptrend support and the increasing likelihood that it would break to new lows and test the 200-week moving average. We’re finally seeing that play out, alongside the fifth wave down to the E leg of the ABCDE pattern. 

Now we need to see if the 200-week moving average is enough of a support level to send the SPY higher for more than just a few hours. 

If we bounce, I think it’s fair to wonder whether we can reclaim the prior June low near $362. There’s a lot of supply between $362 and $364, as evidenced by the daily chart below: 

If this thing really gains steam in the next day or two, I think ~$370 and the 10-day is a rally to sell. 

Otherwise, $362 to $364 could be a solid resistance area for now. 

S&P Futures — ES