If the Market Wants to Rally, This Is the Level to Clear

It's clear as day.

Technical Edge — 

• NYSE Breadth: 40% Upside Volume 

• NASDAQ Breadth: 55% Upside Volume 

• VIX: ~$29

We are due for an oversold bounce, the only question is: Can bulls actually prove they are in the driver’s seat for more than a few sessions?

The S&P 500 (ES) has declined in 10 of the last 11 weeks and in that span it has fallen 992 points from the high to the low. Even from a bearish perspective, that’s due for a bounce at some point. 

The bulls did a good job of buying the opening dip yesterday, even though they couldn’t close it strong. We’ll see if they have what it takes to push the indices higher today, which is Day 2 of the Powell testimony. 

I will just say this: The market is eventually due for a rally and right now, we’re getting one even though it’s modest so far. But it seems like nothing much beyond short-covering. Don’t mistake it though, short-covering rallies can gain some serious steam if shorts get too far offsides. 

Game Plan — S&P 500 (ES & SPY), Nasdaq (NQ & QQQ), Oil

S&P 500 — ES 

The chart above is beautiful. You can see so many key things all at once with just a glance. 

Look at the way the prior low — 3807 — marked the bottom in May, then was cut through like a knife in June and resistance late last week. Now we’re seeing it act as resistance again this week. 

Traders can also see active resistance in the form of the 10-day moving average. 

Bulls want to go on a meaningful bear-market rally? Gladly. They can start their “prove-it campaign” by closing above the 10-day moving average and the 3807 mark. This zone is very key. 

Clearing these two levels puts 3835 to 3845 in play, the two wick-highs from last Wednesday and Thursday. Above that puts last week’s high in play near 3875, followed by the gap-fill at 3896.50.

On the downside, watch the Globex low at 3735. Below that could open the door to yesterday’s low around 3695. 

S&P 500 — SPY