Is a Bounce Brewing? 1 Key Area to Watch

Lower in 4 straight sessions, we have a gap-down on Thursday.

Technical Edge — 

• NYSE Breadth: 33% Upside Volume 

• NASDAQ Breadth: 49% Upside Volume 

• VIX: ~$26.50 

  • Interesting that the VIX fell yesterday. 

Game Plan: S&P, Nasdaq, Individual Stocks 

In each of the last two sessions, the S&P gapped higher at the open. For some of our longer term readers, you may remember that I do not like gap-ups in a downtrend. 

They are just asking to be sold. At the very least, they are cash-flow shorts to fill the gap. At most, they continue to flush to the downside. That’s the problem we have had the last two days as the S&P continues to bleed lower. Today’s a gap-down and at the very least, that lowers the bar for the bulls to hurdle. I’d rather buy into the hole than on a gap-up. 

The Nasdaq and Russell (the risk-on plays) are back to being relative weakness leaders, which doesn’t tell a great tale. 

After four straight down days, let’s look at where some support may come into play. 

Bonds — TLT

I’m not sure how else to be more negative on the bonds. We have been going over it for weeks now and called the bearish action a “warning sign” for equities. 

The TLT is now gapping lower this morning and taking out last week’s low. If they rally off the open, keep an eye on $110.86. That’s last weeks’ low. This level needs to be reclaimed. If not, the 2022 lows could be on deck near $108. 

If this continues to push lower, I can’t see how it will be a positive for the Nasdaq. 

S&P 500 — ES