Bulls On Their Heels as Momentum Shifts Quickly

But the trend is still intact.

Technical Edge — 

• NYSE Breadth: 26% Upside Volume

• Advance/Decline: 26% Advance 

• VIX: ~$22

Yesterday we wrote: 

“We have a gap-up today, but I am just a tad skeptical, as many tech names looked quite tired yesterday (NVDA, MSFT, GOOGL, etc.) Gap-ups above the highs and failure to hold them creates a bit of a “risk-off” trade for active traders.”

That proved to be prudent, as it was a tough tape to navigate. That’s as the S&P had the potential to give us an inside-daily-up rotation and clear a major resistance hurdle (on the ES) and charge higher. It had the potential to be quite bullish in all honesty. 

Now under pressure again, we come into Friday morning with a much different tone than Thursday morning. 

S&P 500 — ES 

The ES closed below the 10-day ema — active support — for the first time since Jan. 19 or about 15 sessions. Under pressure again this morning, it’s hitting the 21-day moving average, which was last support on…wait for it…Jan. 19

However, that also came with a combo test of the 3920 level. 

If this level holds through Globex and into the open, look for a reclaim of Thursday’s low (~4078). A successful reclaim could put 4100 back in play. 

On the downside, let’s see if buyers step in on a break and regain of the Globex low of 4061. Ultimately, bulls will want to hold the 4050 area. I have a hard time thinking last week’s low is in play near 4007 unless the sellers really step in. 

SPY

15-min, SPY Recap

A quick look at yesterday’s action. Look at the way the SPY opened just below Wednesday’s high of $414.53. It tagged it and gave us the “look above and fail,” clearing the high by 4 cents — “looking above” — and reversing lower — “failing.” 

Buyers did step in, but it was ultimately a “sell the rallies” session. 

Now for today. 

SPY 30-min

Set to open the session near the 200-sma on the 30-min chart, let’s see if buyers can step in here and at least fill the a.m. gap.

SPY Daily

Regardless of how the morning gap shapes up, I am keeping a very close eye on the $403 to $404 area. There we find the 21-day moving average and the 78.6% retracement of last week’s range. 

At the very least, I would expect a bounce out of this zone if we see it. Similarly, this location could be a good area to consider a lotto call idea — again, if we see it. 

Down big in just a couple of days amid what is still a bullish trend on a Friday and the R/R would make sense. On the SPX, it would look like this: 

SPX Daily

The key area here would be ~4050. Depending on the time of day, it would likely have me looking at the 4075 to 4100 calls. 

NVDA