Welcome to the month of October, we had a very nasty month of September and many will be wondering if there will be a rebound in the month of October. Follow me daily as I use technical analysis to help you understand the movements of the stock market.
So far the S&P 500 is behaving as it should be at old highs. When an index is at old highs sometimes they can trade sideways. Right now I do not see any weakness yet. Despite AAPL reported not that well and techs will be gapping down today.
SPX is trading sideways in the 2 hour chart. Watch the channel. If SPX breaks below the channel then more correction could come. But if it breaks out higher then SPX can continue its upwards move.
November and December are usually good months for techs and the stock market. So perhaps that is why the market is not correcting very deep when it reaches the old highs. If history repeats itself we could see the general market breakout higher in the next month.
Yesterday the QQQ formed another topping tail. Altogether, there are 2 topping tails right at resistance. This could be a hint of reversal but what we should be looking for is whether there could be a follow through or not.
If QQQ ignores the double topping tail signal, this could be very bullish. Topping tails are normal at resistance areas. So one should be cautious when you see them happening.
But there is a consolidation support below which I have drawn a box. As long as QQQ stays above this, then I think we should continue to have a bullish bias. QQQ is quite likely to move higher if the support holds.
Yesterday the markets moved higher but quickly close lower which bring some fear into traders. Actually the S&P and the other indexes are quite overbought. So we ought to be a bit cautious here.
The 60 min chart above shows that the SPY is still trading above the 60 min 20 MA. Therefore we should continue to remain cautiously bullish on the SPY. There is some price support on the left which I have drawn a box. As long as SPY stays above the top of this box then I think the SPY is still alright for the short term.
When the SPX hit the old high area, there was not much correction. Just some slight sideways trading producing 2 dojis. This told us that the market is very very bullish right now. As the S&P 500 climbs higher, the old highs area will become a new support area.
As long as the SPX stays above the green area, I think we will be moving higher towards the end of the year where November and December are very good months for techs and small caps.
One thing you should take note is that there could be a possible bullish cross in the S&P 500. The last time it did that was 1 year ago in October 2020. From there the SPX went up by about 33%. So if history repeats itself and the bullish cross happens, then we could be looking at a very impressive bull run.
The smart money were already in as the market bottomed and those who bought stocks near the bottom are now in a very nice profit. But I believe there is still quite a lot of money to be made in this rising market.
So do be on the lookout for continuation patterns in your stocks.
The Nasdaq 100 has already gone back up above its 50 day moving average. This is a positive thing. What Nasdaq 100 may be trying to do is to make a bullish flag. This is where the price had a rapid rise and then a consolidation breakout.
The consolidation has already happened and the Nasdaq 100 is breaking out of the flag. If we take a textbook target, the Nasdaq 100 could be in for some serious gains. The target which I have highlighted in blue points to a possible target north of 16200.
As long as Nasdaq 100 stays above the green support area which I have drawn on the chart, then we could really see the target being met. The question is whether it will be very fast or chugging higher.
I think good earnings from the likes of Apple and the rest important tech stocks will help to power Nasdaq 100 higher.
For those of you who study fundamentals and the data from the FED, you will realize that the data points to an economic expansion. There is no weakness in the long term bullishness of the stock market. And if we are correct, then the stock market may be in for a massive bull run in the future.
The next chart I want to show you is the daily chart of the NYSE Composite Index. The index broke into new highs and it also broke out of a long sideways consolidation.
Technical analysis will tell you that when an index or stock breaks out of a very long consolidation, the bullish move can be very massive. The top of the box or sideways consolidation will be a new support area and as long as NYSE Composite stays above the top of this channel, then I think the stock market will be moving higher and higher.
A bullish cross that is happening as the NYSE Composite break out higher also adds to another layer of positivity to the index. The rising 200 day moving average also points to bullishness in this index for the long term.
One of the leading indicators of the market is non other than the consumer discretionary sector. This sector consists of stocks of companies whose products people do not really need to have. They can do without them in a bad economy. So if you see this sector rising, it means that people have a lot of money to buy unnecessary (sometimes) things.
Tesla is a component of this sector. Who needs to buy a Tesla when you can afford public transport? With Tesla hitting new highs this tells us that people have that extra money to splash on something fancy. Tesla is like the Apple of cars. In today's modern world, I wonder if they are a luxury or a necessity.
Anyway, XLY recently broke out of a daily ascending triangle and proceeded to move higher very rapidly. A rising XLY shows consumer confidence is improving, the economy is good and people have a lot of extra money to spend.
This in turn is very good for the general stock market.
The chart above is the chart of Tesla. Yesterday itself, it went up 12.66% after news came out that Hertz will order 100,000 Tesla for its inventory. If a company can order so many cars, many others will follow suit and it is this impact that causes the price of Tesla to skyrocket.
Elon Musk's net worth also increased along with it and ran up north of $280 Billion. A long way ahead from Jeff Bezos or other billionaires. I think the stock market does teach us one thing. If you use technology to create something that makes the lives of people easier and better, then you will be richly rewarded.
The old highs in Tesla has been smashed and overcomed. Technical analysis will tell you that old resistance will now become new support. Therefore, as long as Tesla stays above the green area, then you can be very very certain that Tesla will continue its long term upwards climb.
As the market rises to an area of resistance, the question that is on the mind of many traders and investors are, should we worry about a market top yet?
Will there be a correction soon?
Looking at the chart above, it will not be surprising if there is any correction, but the market looks more bullish than bearish at the moment. As long as SPX stays above the green support area, then we should continue to be bullish.
There are two possibilities here that I can think of at the moment. First is there will be a consolidation which I have drawn in a blue box for you to see and then a breakout higher.
Or there could be a slight correction down to the green area support. Either one of these situation, we should continue to be bullish. Earnings week is very heavy this week so some names like AAPL might affect the market.
We will have to check each day to see what happens next but so far there is no danger of a big decline. Just slightly bullish in bias in the short term and bullish in the mid and long term.
As the S&P 500 reaches the former highs we are getting a slowing down in bullish momentum. That is normal as resistance sets in. The question is what do we do now?
At this moment we need to be cautiously bullish on the stock market. So far, the S&P has not drop below its 60 min 50 MA. Notice how it stayed above the 50 MA for the duration of the nice move up.
As long as it stays above the 50 MA, then we should continue to be bullish on the stock market. But if it falls below the 50 MA, we should start to be cautious as we might have some correction.
The S&P has established support around the green area. That will be the area around 4520. As long as the S&P stays above this area, then we can still be confident of more bull moves to come.
Long term wise and mid term wise we should remain bullish on the market.
The 60 min chart of SPY above shows that it is still above its rising 60 min 20 MA. Therefore there is nothing to worry at the moment. Yesterday it broke above a small consolidation and this is a positive development.
I have often found the 60 min 20 MA to be very accurate in giving us a short term outlook for the stock market. As long as the SPY stays above the 60 min 20 MA, I shall remain bullish on the SPY and the stock market.
The chart above is the 2 hour chart of QQQ.
It has broken higher yesterday and I have highlighted the green area above which will be the new support area for QQQ. As long as QQQ stays above this area, then I think things will still move up for QQQ.
Notice how QQQ is still above the 2 hour 20 MA. Use this as a guide for the QQQ. As long as it stays above this MA, we should continue to remain bullish.
Using MA's as a guide can be very beneficial. Simple as it is they can often keep us on the right side of the trend.
As long as SPY and QQQ are above those MAs I shall continue to enter long trades.
Well we have almost recover most of the losses that the S&P 500 made. The chart of SPY above shows that we are very very near to the previous high. It is very possible that the S&P 500 may make new all time highs. Especially the fact that November and December are usually good months for the stock market.
Since we are reaching the previous highs, this may present a bit of a resistance. It is not unusual for the bullish momentum to slow down. The market may experience a correction. In the event that it happens, we have support below which I have highlighted in green. This is also where the 50 MA support may come in.
At other times the stock market may wish to correct by trading sideways a bit. This is good as it may setup a trading range for the market to breakout higher into. So far, we do not have any slowing momentum yet. The MACD Histogram has not shown any signs of slowing bullish momentum.
Perhaps in a day or two it might shorten to show us a slowing of momentum. Anyway we shall see what happens but for now just be aware that we are reaching a resistance area.
We can use the 60 min chart of SPY as a guide to know when things are turning negative. I like to use the 60 min 20 MA. That will be the red line in the chart above. So far so good. As you can see, the SPY is still trading above the 60 min 20 MA.
Do be careful if the SPY goes below the red line. Also be careful if the red line starts to flatten or roll over. That will show that the bullish momentum is slowing down.
So far we do not know what SPY may do at the resistance. Perhaps a correction or perhaps a sideways trading movement which is what I prefer to see it set up for a breakout higher.
The weekly chart of XLV or the healthcare sector tells us that it recently found support at the trading range support on the left. A doji pattern formed indicating slowing down of bearish momentum. The next candle bar that formed is a bottoming tail showing us that the XLV refuses to go any lower and wants to go higher.
Yes, the sector can often tell us what it wants to do through candlestick analysis.
Stochastics are oversold and it is giving a buy signal right now. So this could be bullish for healthcare stocks. If you are playing healthcare stocks this is a plus sign for you.
The other positive thing is that the XLV is in the 20/50 zone. This is where price drops to in between the rising 20 MA and 50 MA. From experience, this could set up for a nice bullish move up.
The MACD Histogram has shorten in this weekly chart showing us a slowing down of bearish momentum. So things look pretty good for the healthcare sector and if all goes well it could be chugging higher.
Staples are doing well but not as well as techs of the SPX. It found support at the 200 day moving average and looks like it is forming a reverse head and shoulders as well. It has gone back above the 20 MA which is a positive thing but is struggling to go back above the 50 MA. The 50 MA acted as a resistance a few days ago.
Staples not doing so well is expected since when the general markets and techs are doing well, consumer staples tend to underperform. But if XLP can move back above the 50 MA then I think a reverse head and shoulders will do its job to help it go back to the old highs area.
The last sector I want to show you is the Utilities sector or the XLU. This sector also found support at its 200 MA and the MACD issued a buy signal. This is positive for the sector.
Today it broke out of an ascending triangle pattern. This is bullish and I want you watch the top of the pattern carefully as this will be a support area. Remember resistance once broken becomes support.
As long as XLU stays above the top of the ascending triangle then it is very likely that XLU can move higher and meet its old high.
Well, in just a short period of time the stock market seem to have recovered from the nasty losses it made some weeks ago. The SPX above have already broken out of a downtrend line. It can be said that the reverse head and shoulders pattern have also worked.
The good thing is it has also traded back above the 20 MA and 50 MA. Now we just want to see the 20 MA cross back above the 50 MA and this will be good for the stock market.
Sometime ago I told you that the smart money were already in. When the public is most pessimistic this is where the professionals will come in to scoop up things in the market. Truly, the stock market is one of the greatest wealth generating and wealth transfer machine in the world.
I have highlighted a possible new area of support in the chart above. That will be the green area. If SPX manages to stay above this level then we could be making new all time highs soon.
The tech sector seems to agree that a new high in the stock market can happen. XLK itself formed a bullish reverse head and shoulders. If you can see, it also formed an ascending triangle to mark the bottom. XLK also broke a downtrend line and went back above the 20 MA and 50 MA.
If there could be a bullish cross where the 20 MA crosses back above the 50 MA, then we could really see a big rally in techs. If techs rally then this will be good for the entire stock market.
The last time the XLK had a bullish cross, it had a really really nice run up that propelled the XLK higher from June to September. Perhaps this time history might repeat itself.
Tesla is about to report earnings tomorrow. It is currently in a very strong uptrend and I think the long grinding up has already absorbed whatever supply or resistance that is on the left.
If you take a look at TSLA's moving average, the 20 MA is above the 50 MA and both of them are above the rising 200 MA. All three are rising and this combination is a very bullish combination for the stock.
Since the stock is in an uptrend, it is possible for it to make new highs. If the earnings are good tomorrow it will lift the stock and this will in turn help the stock market to move higher. Since TSLA is a component of the major indexes then a rising Tesla is good for the markets.
Good day and its another brand new week for us to make money in the stock market.
So far so good. I like the development in the SPY. It has broken above a downtrend line and also broken above the 50 day moving average. There might be correction today but if the SPY stays above the 50 MA then we are still on the way to move higher.
If on the other hand it corrects more, then we want to see it stay above the downtrend line. Corrections usually happen after some nice run up but if the market does not drop that much then we know that this week will probably be another nice move up. I am also alright with some nice sideways consolidation.
Just a rest before moving higher.
The above shows the 60 min chart of the QQQ. The green area is the top of an ascending triangle and this is a support area for the QQQ. As long as QQQ stays above this area, then it is very likely that the markets will continue to move up these next few days.
You should also take a look at the lower uptrend line. We want to see QQQ stay above this uptrend line. If QQQ breaks below it then there could be some nasty correction.
So far everything is still good and we also have a 60 min bullish cross. Hopefully this will help to propel it higher.
One thing I want to point to you is the breakout higher in Consumer Discretionaries. The XLY broke into new highs and also broke above an ascending triangle type pattern. The top of the pattern will be a support area.
You can do the same ascending triangle analysis on XLY as well. Watch the lower uptrend line as well. XLY shows that people are confident enough to spend more money buying things they don't really need. This is good for the economy and since it is breaking into new highs it is some good news for the stock market.
The smart money is pouring in if the data are correct. From a chart perspective, we can see that it is trying to form a reverse head and shoulders. This is a bullish reversal pattern with a possible target. And if the SPX breaks above the downtrend line there is a high possibility that the stock market will rise.
Of course not all reverse head and shoulders work. Which in this case, if SPX drops below the head of the pattern, then it is possible for SPX to go lower and hit the rising 200 MA.
I think the break above the downtrend line will be very good for the markets. We are entering a period where there could be a possible run up to the end of the year. Seasonally, the stock market tends to go up around October to December. What one can do is to buy the breakout above the downtrend line and have a stop loss below the head of the head and shoulders.
Or better, you can start to look for bullish setup in stocks which will most certainly go up more than the major indices. Remember we are trading the odds. There are no certainties but there are good probabilities.
The declining 20 MA in the SPX did its job as a resistance and thus the SPX fell. Whether that is a bad thing or not is still open to debate because at the moment what I am seeing is a probable potential reverse head and shoulders in the SPX.
That my friends is a bullish reversal pattern. In addition to the fact that there is a downtrend line for the SPX to breakout off, then this could setup to be a nice bullish move. Well that is the textbook theory.
What we want to see is for the SPX's right shoulder to be the same or slightly above the shoulder on the left. This will make it to be a nice reverse head and shoulders. If the SPX drops below the left shoulder then this will be a pattern failure and could send the SPX down even more.
It is time once again to have a look at the weekly chart of the S&P 500. Last week the main index made a doji like pattern in the weekly chart. As you can see above, the doji like pattern is where the body is small and the top wick and bottom wick are almost equally long.
This kind of pattern in the candlestick chart signals indecision in the part of market participants. And that is quite true for last week. We did experience some volatility in trading from Monday to Friday.
Although the doji signals indecision, we have something positive in the weekly chart. The SPX is still finding support at the weekly 20 MA. In the past, the SPX manage to find support at the rising weekly 20 MA. Perhaps this time it might also find support at the rising weekly 20 MA. For the most part of 2021, the SPX was trading above the rising weekly 20 MA.
Taking a look at the daily chart of the SPX we can see that it is struggling to go back above the 20 MA. This is a test of whether the bounce back up is worthy of a sustainable bullish reversal. A weak bounce will never go back above the 20 MA. So watch the 20 MA carefully.
I will tell you what I am anticipating. I anticipate that perhaps the SPX will drop a bit more and form what we call a reverse head and shoulders. This is a bullish pattern typical of many great bullish reversal back up. If that happens I want to see it trade back above the downtrend line that I have drawn.
If SPX manages to break back above the downtrend line then I have more confidence that it will win back the old high areas and then proceed to make new all time highs. November and December can be great times for the stock market.
We have a strong support area below which I have highlighted. The price congestion on the left is good support. I think this is also where price might meet the 200 day moving average. Although I hope we do not need to drop to the rising 200 MA. That will be quite a drop from the current price.
By the way, a rising 200 day moving average tells us that the S&P 500 is still bullish in the long term. The bull market is very much alive it is just having a correction.
Moving down to the 60 min chart of the SPX we can see that it is once again in correction mode after a rapid rise. It is finding support at the top of the previous highs. It just had a bearish cross where the 60 min 20 MA cross below the 50 MA but as long as support holds, we are still alright.
However, if the SPX drops below the support area, then we will once again challenge the lows. Watch for the break above the down trend line that I have drawn. If SPX manages to do so, then it means we will have a nice chance to move higher.
One sector that is very encouraging right now is the Industrials sector or the XLI. First of all the XLI found support at the rising 200 day moving average. It formed a double bottom and has also broken above a downtrend line. Notice there is also bullish divergence in the stochastics and the MACD Histogram.
There is also a MACD buy signal that happen recently. All these are bullish technical developments and you should take note of it. So far I do not see any failure of the double bottom pattern. As long as XLI stays above the downtrend line that I have drawn, then I think it will be great for this sector and the stocks in this sector.
Which brings us to another point. If the XLI is doing well, then perhaps you should go through the stocks in this sector to find some buying opportunities.
The next sector that I want to show you is the energy sector or the XLE. It found support from the rising 200 MA and it also formed a reverse head and shoulder. I believe that it has more than met the target of the reverse head and shoulders. Right now it is challenging the previous high which I think there is a good chance for it to break above.
It is still above the rising 20 MA and as long as it stays above the area that I highlighted above, then it should continue to trade higher. If it does so, then it will be good for energy stocks. Many energy stocks have been rising a lot recently and a breakout higher in the XLE will help them to continue to trend higher.
The last chart I want to show you today is the chart of XLF or the financials. There have been numerous attempts by the financials to break higher in the past. But they have failed. At this moment, the XLF is once again trying to break higher. I think this time there might be a good chance for them to break higher.
It had a nasty gap down but quickly recover the losses and after some consolidation it broke higher. This can be called a flag pattern or a measured move pattern and I think that as long as XLF stays above the are around 37.50, I think the measured move can bring XLF up to 40.50 which will be a good thing for financial stocks.
Have a great week trading ahead and I will see you in tomorrow's analysis. Shalom.
The USO or United States Oil Fund is in a very bullish mode right now. With it trading above its rising 20 MA and 50 MA it is in an uptrend and more possible upside is possible. Today USO is breaking higher and the odds of it going higher is good. I have drawn the minor support and also the large support.
If in the case that USO falls below the 20 MA, then these areas as the support areas to watch. But so far there is still no weakness in the USO. We should remain bullish in the USO as long as it is above the rising 20 MA. This is just a simple trend following method to help us catch the trend.
XES or the Oil & Gas Equipment and Services etf recently broke out of a reverse head and shoulders pattern. This is considered a bullish pattern and a target is where the resistance area will be. It recently had a bullish cross and is still trading above the rising 20 MA. I think XES will likely go up to meet the resistance area.
Still do not know if it will break above the resistance area but that will be a short term target and when and if it reaches there then we will analyze it again and see how it performs.
A very bright spot in oil sectors is the XOP or the Oil & Gas Exploration and Production sector. XOP broke above a heavy resistance area and this will now be a strong support area for XOP. This is good news for stocks in the XOP as they are very likely to go higher with support below. As long as XOP stays above the green area, then we can be confident that XOP stocks are likely to continue to climb up.
Continue to remain bullish in the XOP as long as it stays above the rising 20 MA. This is a short term trend following method and as long as XOP stays above the 20 MA then it is likely to make more bullish moves.
SPY is doing quite well and in this 60 min chart currently it is still trading above the gap. If SPY manages to stay above the gap then I think it is very likely to move up next week. If today it closes the gap, the line there which I have drawn will be the support area to watch.
The daily chart of the XLK shows that things are improving for the tech sector. This is because XLK gap from a congestion low area but it is encountering some resistance at the 20 MA. It is quite common for a declining 20 MA to act as a resistance. The XLK might even fall a bit because of the 20 MA but I do suspect a reverse head and shoulders can form.
So even if XLK drops, we want to see it drop to around the area of the left shoulder. If that happens then we will have a bullish reverse head and shoulders which should be bullish for the XLK. What we really want to see is for the XLK to go back above the 20 MA and then go back above the downtrend line. Then we will be more sure that XLK is going to go higher and make new highs once more.
Sometimes in the stock market and in trading, a day can make a big difference. Just when the markets are drifting lower and might about to break lower to meet the 200 MA, a news comes in such as Senator Mitch McConnell agreeing to keep the government from defaulting and raising the debt ceiling.
I think this news helped the market to quickly rally from the lows and if you look at the chart of the S&P above, you can see a bottoming tail formed. Following the bottoming tail, the market rally up more today. The first time the S&P met the 50 MA, it collapsed quickly. This time we might once again meet the 50 MA but since supply might have been absorbed, it is possible for the market to ignore the 50 MA resistance and rise further.
Watch the downtrend line. If the S&P can trade back above it, then this is a real bottom and we might reverse back up to have a bullish last quarter.
The 2 hour chart of the SPY points us to the fact that it is jumping up pre market. An ascending triangle pattern has formed and this makes it easy for us to do an analysis. It is easy because if SPY says above the top of the ascending triangle pattern, then I know that the markets will continue to rise and have a bullish reversal back up.
On the other hand if the top of the ascending triangle does not hold and the SPY breaks below the lower trend line then this rally is just another mini bear rally and more sell off will come in the future.
Also do watch the bigger downtrend line that I have done that coincides with the downtrend line in the daily chart of the SPX if SPY can break above this bigger downtrend line, then it is likely we have found a bottom and will move up from there.
The Nasdaq 100 futures above also hints of a bullish reversal back up. A nice daily bottoming tail formed and as you know the presence of a bottoming tail can mark the lows of a correction. Watch the BT carefully. As long as Nasdaq 100 stays above the lows of this BT then we have indeed found the low.
The chart of the Nasdaq 100 reminds me of a familiar pattern that may form. In fact a reverse head and shoulders pattern is possible where the Nasdaq 100 goes up and meet some resistance only to fall a bit to make the right shoulder and then rise again. This is a bullish reversal pattern. I am just anticipating and letting you know my thoughts.
The market may or may not follow this script and we need to take a look at them as each day goes by and make the appropriate decision.
We had a nice rally yesterday only to see the SPX futures coming down today. I think it is beginning to make a triangle type of pattern which you can see clearly in the 2 hour chart of the SPX. By connecting the highs and lows and drawing 2 trend lines, the upper one and the lower one we can see how a triangle is taking shape.
As you know, with triangles, it either breaks up or breaks down. At the moment it seems that the SPX is hovering at the lower trend line and wants to break below it. If this happens, then we can potentially see more selling in the SPX.
While we are nearing support and important price support in the SPX, I do not like the congestion sideways trading that is happening in the SPX. A strong support should help it bounce up but instead the SPX is trading sideways as if it is absorbing all the support there and weakening the support.
It is like a wave that is slowly eroding the sand wall and with each day, it gets weaker and weaker. Eventually a breakdown will occur and if that happens, then we could see the SPX sell off to the rising 200 MA which is another important area of support that is watch by many institutional investors.
XLI or the Industrials is sitting at the rising 200 MA once again. A potential double bottom that might or might not happen. In this weak market I ideally want to see this double bottom trade above the downtrend line that I have drawn before I am fully confident that the Industrials are making a comback.
If the 200 MA does not hold and if the double bottom cannot materialize then we could see another round of selling down in the XLI.
The QQQ is also at an area of support but a bearish cross has materialize in the QQQ. The support on the left is a small minor support and this could be easily broken. If QQQ breaks below yesterday's low and the low's of the previous day we could see it drift down to the rising 200 MA.
Lastly the XLV is nearing the important price congestion support. It looks quite weak as yesterday it formed a topping tail. This tells us a story of weakness where the XLV tried to find support, bounce up but quickly sold off again. Well, perhaps we might meet the rising 200 MA support after all.
This is also where XLV will be meeting the big price congestion support on the left. A potential area to see if there might be a bullish reversal in this sector. But with this weakness in XLV I would be a bit slow to buy. Only if there is a convincing change in the 60 min chart to show that it is reversing back up will I consider buying.
Yesterday we saw another down day for the S&P 500. Support on the left is still holding but a very feeble attempt to bounce up. If SPX continues to trade below the support area, then we could see more selling ahead.
Unless SPX can trade back above the downtrend line, then we are still in a bearish mode.
Last Friday we saw a bullish green bar appear in the S&P. this is a good sign as the S&P makes a double bottom pattern near support level. Watch the highs and lows of the green bar. If S&P is able to trade above the highs of the green bar then we could be in the start of a bullish reversal. On the other hand, if S&P drops below the low of the green bar today then we could be going down more to touch the green support area.
The blue arrows are the measured move target. The height of the previous sell off is projected downward from the tip of the bounce up to get a projected downward move target. The 4200 area is a good support area and also a potential area where the rising 200 MA will meet price. We must watch this support area carefully to see if there can be a bullish reversal.
The downtrend line that I have drawn is not close to price. Ideally we want to see price go back above the downtrend line to see a good bullish reversal. But in the case right now we are very far from the downtrend line. Which brings into question the strength of a bullish reversal if any.
The 60 min chart of SPY shows us that the market has at least gone above the 60 min 20 MA. This is usually a good sign but we are still not out of the woods yet. What we want to see is for SPY to trade above the highs made in SPY last Friday. That may help to bring in the bulls. The lows which I have marked green are support area.
If SPY drops below this support area, then more selling will be coming.
QQQ is a the support level. Last Friday it made a bottoming tail which in itself is encouraging because it shows that QQQ is resisting to go lower. If QQQ is able to break above the highs of the bottoming tail then we could have a bullish reversal. The measured move target that I have drawn in blue is quite near support levels.
The thing that makes me not so confident is the fact that there might be a bearish 20 MA cross 50 MA soon. The last bearish cross in May, the QQQ ignored it but this time it may or may not ignore. So we should still be on the lookout for a genuine bullish reversal back up.
The last few days had been a very painful trading days for the bulls. But for the sophisticated stock market trader, it is just another trading opportunity as short selling stocks can be quite profitable and fast as well.
The SPX above shows that the market is selling off a lot but about to reach an important area of support. This is where price has a lot of congestion and therefore this support will be a bit stronger that the others as it involve previous lows and previous highs as a support.
Which is why I think that if a bullish reversal were to happen than it could be here. But hold on to your horses if you think of buying now. Just not yet. We need confirmation in the 60 min charts.
QQQ is still selling off with no rebound. It is more stubborn that the S&P but nevertheless the sell off also impacted the tech sector. Next area of support to watch is the line which I have drawn above.
Taking a look at the 60 min chart of SPY we can see that the trend is still bearish. I say so because the SPY is still below the 60 min 20 MA, 50 MA and 200 MA. If one are to focus on long or shorts for the swing trades or momentum you need to look at the 20 MA. While the SPY is still below the 20 MA, most stocks will fall from one day to the other. So best not to long stocks until SPY goes back above the 20 MA.
SPY has also drop below the support area line which is the previous low. I have drawn a line there. If SPY cannot go back above this line then more sell off is about to happen. Ideally we want the SPY to go back above the 20 MA and the 20 MA to eventually go back above the 50 MA.
The IWM or small caps are about to hit a trend line support. The last time the support worked and this time it may work as well. But if the trend line does not support IWM and it continues to drop below it, then more serious selling can happen.
This is because IWM is in a triangle like pattern in the daily chart. With triangle patterns it could either breakout or breakdown. And it seems like IWM is about to break below it quite soon. If that happens this means that small caps would be a serious sell mode since a break below a triangle would incur quite a lot of selling.
The MDY or mid cap is currently at the rising 200 MA support. The last time it hit the 200 MA, it bounce back up. It is also perhaps about to make a double bottom formation. If the pattern appears and it works, then we could see MDY moving higher.
However, if the 200 MA fails and there is no double bottom pattern, then we indeed will be in for more selling.
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