Still Trading Opportunities Despite Big Two-Day Bounce
The CPI report is on everyone's radar today.
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Technical Breakdown — Strong Breadth Continuation Day
NYSE Breadth: 84.5% downside volume
NASDAQ Breadth: 76.7% downside volume
Monday was a bullish reversal and Tuesday was a strong breadth continuation day, with the NYSE clocking in with an 80%+ upside day and the S&P 500 going out at the session high.
Tuesday’s action was good because they sold the gap-up open, giving bulls a chance to get long.
These quick and strong reversals are tough to navigate in many ways because if you miss the initial move, the risk becomes too wide and it’s hard to get long. Then the market moves on without you, creating a sense of FOMO.
If you have been able to make money in this environment — or hell, even just not lose money — then kudos. It hasn’t been easy sledding.
Game Plan
The question now becomes, do we get a Day 3 — that is, a third follow-through day — or will there be some chop?
Today’s CPI report could play a big role in how the market behaves today. Out-of-control inflation is
Not what traders want to hear from an economic standpoint, and
Strengths the Fed’s case for additional rate hikes.
S&P 500
The S&P 500 index traded down through the 50-day, but once again found its footing at the 21-week moving average and uptrend support (blue line).
As we’ve talked about before, this is a balancing act of juggling the current pullback amid what is still a longer-term uptrend. The market is still putting in a series of higher lows and higher highs. The action is moving from the lower left to the upper right and while the downside action is fast, furious and painful, we must keep the “bigger picture” trends in mind.
While the S&P seemed to regain the 50-day with ease, it must now contend with the 4720 area, which has been pretty significant over the last few months. Just look at how it has reacted to this level on the charts.
Additionally, we have the 10-day and 21-day moving averages near this level.
Above these marks is good. Below and we have to remain tactical.
Individual Stocks — ARKK, 10-Year Rates, Energy, GM, BIIB & More
After a monstrous two-day bounce in the market, there are a surprising amount of setups to look at. Some long, some short. Let’s get to work!