Don't Lose Sight of Resistance Despite Bullish Reversal

Technical Edge — 

• NYSE Breadth: 89.6% Upside Volume

• NASDAQ Breadth: 69% Upside Volume

• VIX: ~$24.50

Game Plan: Oil, S&P 500, SPY, Nasdaq, QQQ, Dollar, NFLX

It’s been a roller coaster week — and it’s only Wednesday. 

Tuesday was a great example of needing to be flexible. Yesterday I reminded traders not to be stubborn and watch any short profits they may have had evaporate — and worse, turn to losses. 

This market can work on both sides, but you can’t get married to a position that’s moving in the wrong direction. It’s also a reminder to scale out, even taking ½ the position off when we get a nice move in our direction. 

Don’t lose sight of resistance (we’ll go over it below) despite yesterday’s bullish reversal. Remember, support was key the other day following Monday’s bearish reversal. While support has held, so has resistance. That’s the play until the market proves otherwise!

Oil

Last week, we were looking for a bounce out of the low-$90s and we got it, taking profits near $97, then looking for $100 and the 10-day, which we are getting now. 

Those who prefer to look for more upside can hold their last ¼ to ⅓ position against a break-even stop and look for last week’s high and the declining 10-week moving average near $104. 

S&P 500 — ES (Big Picture)

Yesterday, we said that for a bounce to have any meaning, the ES had to clear the 3865 to 3875 zone, putting 3900 in play, then 3920 to 3925. I did just that and exploded even higher. It was incredibly impressive given the bearish action we had on Monday. 

There’s been a “change in tune” with the market, certainly. Support has held near 3740 for several weeks now and yesterday was an impressive reaction. 

But let’s not forget that resistance has held for weeks now too. The ES is in a key spot right now, as it collides with the 10-week and 50-day moving averages and sits in the middle of its 50% to 61.8% retracement zone and several weeks worth of highs/resistance. 

We have said for a bit now that 3920 to 3950 is a key area on the upside. Tuesday’s high is 3948 and I don’t think that’s a coincidence. Above 3950 could put 3987 then 4000 in play. 

On the downside, 3900 to 3920 is a key support area. Below that and traders must be more cautious. 

Trading the S&P 500 Futures