We're Starting Off the Week With Pain
Or at least, the bulls are starting off the week with pain
On Friday, I pointed out that the S&P 500 and Nasdaq were testing down into some key trend marks. Even though we had a premarket pop, that rally was sold into as the indices bled lower throughout the day.
There was some negative divergence on the charts coming into Friday and that had us cautious - although not panicked. It doesn’t mean we’re heading for a 20% correction, but some sort of dip is reasonable at this point in the rally.
So now what?
Trading the SPY
Above is a look at the SPY ETF, but feel free to extrapolate a similar pattern to the SPX if you trade the options or the ES if you trade the futures. All of them have a similar setup.
It looks like we will like open below the 21-day moving average and closer to that prior resistance trend measure. We have a bearish engulfing candle from Friday that we need to keep in mind, too.
I wouldn’t be surprised if we see some sort of bounce in the opening hour. The question will be, how sustainable is that bounce and can the indices hold that first hour low?
If we see further selling pressure — either today or later this week — the $422 to $424 area could be on the table. There the SPY finds the 10-week moving average, 50-day moving average and the daily VWAP measure.
On the upside, keep an eye on the 21-day moving average and the $430 level.
Cheers!
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.