Weekly-Down to Start the Week?

Bears come out swinging on this early week.

Technical Edge — 

• NYSE Breadth: 36% Upside Volume

• Advance/Decline: 41% Advance 

• VIX: ~$20

It was not technically an inside week, but it may as well have been. Despite some weakness late in the week, the S&P continues to hold above its trend. 

The question marks are starting to pile up, though. Inflation data — as viewed via the CPI and PPI reports — came in hot. While the Fed said it will look for a slower pace in regards to rate hikes, it’s still raising rates going forward. 

I’m surprised the markets are not under more pressure here, as the hot jobs reports from a few weeks ago coupled with the inflation report last week should be enough to put the Fed in a tough spot. So far though, the bulls aren’t blinking. We’re now seeing some early weakness with the potential for a weekly down rotation in play this morning. 

This week: I want to keep an eye on yields (TNX) and the dollar (DXY). S&P bulls need to see continued weakness in these assets to help buoy stock prices. If they rally instead, more pressure could lay ahead. 

Let’s look at the S&P, bonds, AAPL and more.

S&P 500 — ES 

Friday was fun. We were watching the prior week’s low near 4060 to see if we could “test/crack this level and reclaim it for a bounce” and that’s exactly what happened, as the ES bottomed at 4055.75 and closed higher by more than 30 points from that point. 

So far though, the charts remain largely the same. That is to say, trapped between 4050 on the downside and 4175 on the upside.

More specifically:

Let’s see who takes control right off the bat. If it’s the bears, a clean break of last week’s low at ~4056 is the goal. So far this morning, that level is flirting with a break. That would also put the ES below several weeks of lows. 

On the upside, the key levels are 4096, then 4110. Above the 10-day ema puts 4120 and 4135 are in play. 

Here’s one more look at the weekly: 

A break of 4056 that’s not reclaimed puts the 10-week ema + uptrend support combo in play for dip buyers (near 4035 currently). 

Below that and of course 4000 + the 50-day is screaming out for a test. 

SPY