Sunday Post - Recap & Week Ahead 4/7/2024
For the week, the Dow Jones sold off by over 2%, while the S&P 500 and the Nasdaq dropped around 1% each. Volatility picked up with the $VIX surging to its highest closing level in more than five months; closed about 23% higher than the previous week. The ES market made a new record high before selling off and moved back inside the upward channel (pink solid lines) from the October 2022 low as shown in the daily chart below. Moreover, the uptrend line from the October 2023 low (blue line) was also broken. Both the uptrend line and the upward channel resistance line were back-tested on Thursday before selling off hard. So, there´s some overhead resistance and the rising daily 50 MA could act as support going into next week.
As usual, I will do a quick recap of this week´s market action, followed by an analysis of the general markets and the different sectors, and finally write about the outlook for next week.
Recap:
The ES market gapped up at the open last Sunday breaking above the 10-Day Balance and the 5332-upside target was achieved (market topped at 5333.50, which was a new record high). However, the Buyers lacked traction and the market sold off hard moving lower to the 5283 level, which was quickly defended. The market then settled at the 5290 level (I talked about this area in my analysis), which coincided with both the uptrend line from the October 2023 low and the back-test of the upward channel from the October 2022 low (see ES daily chart above). In the OVN session on Tuesday, this area was broken and the market sold off to the bottom of the 10-Day balance at the 5237 level. This area was then defended and the market rallied higher the following days moving to the 5310 level. As mentioned above, the uptrend line & the upward channel resistance line were back-tested and the market subsequently sold off hard on Thursday afternoon breaking below the bottom of the 10-Day Balance. The market sold off to the 5197 level, which exceeded all of the downside targets for the week (last target of the week was at the 5225 - 5218 area). On Friday, the market rebounded from the 5190 level and rallied higher to the 5271 level, which was rejected. The Bullish scenario from the plan worked out perfectly. This is what I wrote, “The Buyers have a lot of work to do and must defend the 5208 level (top of prior Balance from late February/early March) for more upside. Once the 5218 - 5225 area is cleared, the targets are at today´s Pivot of 5233 and the bottom of the 10-Day Balance at the 5237 level, which is a strong resistance area and a potential turning point. If the Buyers are able to take out this area, the next target is at the 5250 - 5257 area (daily 20 MA) and then the 5271 level.” The market then moved lower and settled in the 5257 - 5250 area.
General Markets and Sectors:
Check out the updated Charts Page which goes with this section.
The S&P 500 broke below the uptrend line from the October low and the 5175-level acted as support. If this holds, the market could move back to the record highs, if not, next support is at the rising daily 50 MA (5111 level).
The NDX/Nasdaq also broke below the uptrend line from the October 2023 low (blue line) and moved lower to the daily 50 MA (18000 level), which acted as support. Likewise, if this holds, the market could move back to the record highs.
The Dow Jones broke below the 39145 support (now resistance) moving lower to the daily 50 MA/the 38795 level, which acted as support. If this area holds, then could see some upside, if not, next supports at 38220 and 37715.
Small Caps (IWM) broke the upward channel support and sold off towards the daily 50 MA. Let´s see if this area holds, if not, next big support is at 200.
The FFTY index sold off to the daily 50 MA and continues to trade inside the upward channel. For now, it has been rangebound since early March.
The $VIX rallied higher moving towards the February 13 high and is currently Bullish.
Crude Oil rallied higher and broke above the $85 resistance (now support). This market is now quite Bullish. Note the daily 50 MA is about to cross above the 200 MA.
Gold made another all-time record high and remains very Bullish. Support is at 2266.
The US 10-Year yield bounced off the 4.21% support/daily 50 MA (also daily 200 MA) and moved higher to the 4.40% resistance. If this market has legs, next resistance is at 4.57%.
The USDJPY continues to consolidate right below the 152 resistance. If this area is broken, then the next resistances are at 155 and 160. Support is at 150 (daily 50 MA).
Bitcoin is currently consolidating between the 73121 level (resistance) and the 64200 level/daily 50 MA (support).
Semis, SOX broke below the uptrend line from the October low and back-tested the upward channel. Support is at the rising daily 50 MA.
Consumer Disc, XLY sold off to slightly below the daily 50 MA and could see more lower prices if the 50 MA is not reclaimed.
The Retail sector, XRT broke below the upward channel support and moved to the daily 50 MA, which coincides with the upper limit of the prior rangebound period. Let´s see if this area holds, if not, expect lower prices.
The Tech sector, XLK has been consolidating all month and the daily 50 MA held as support.
Transports, IYT moved back inside the upward channel (purple lines) from the 2022 low and the daily 50 MA held as support.
Financials sector, XLF sold off to the uptrend line as shown and rebounded. If this uptrend line fails, then next support is at the daily 50 MA.
The Materials sector, XLB made a new all-time record high and then quickly sold off. Could see some consolidation.
Industrials, XLI is consolidating near the all-time record highs.
The Health sector, XLV gapped down and broke below the daily 50 MA. If this MA is not reclaimed, could see lower prices.
Consumer Staples, XLP broke below the uptrend line from the October low and moved slightly below the daily 50 MA.
Utilities, XLU broke above the downtrend line last week and has been consolidating for now. Could see higher prices.
The Energy sector, XLE continued to rally higher and is getting closer to the record highs from June 2014.
YEAR-TO-DATE RETURN:
XLE U.S. Energy Sector: +17.9%
SOX Semiconductor Index: +17.5%
XLF U.S. Financial Sector: +11.0%
XLI U.S. Industrials Sector: +10.6%
XLB U.S. Materials Sector: +8.8%
XLK U.S. Technology Sector: +7.4%
IYT Dow Jones Transports: +5.9%
XLV U.S. Health Care Sector: +5.4%
XLP U.S. Consumer Staples Sector: +3.9%
XLU U.S. Utilities Sector: +3.7%
XRT U.S. Retail Industry: +3.5%
XLY U.S. Consumer Disc Sector: +0.2%
Week of 4/8/2024:
United States - inflation rate, FOMC minutes, Michigan consumer confidence, Producer Prices, exports & import prices, and several speeches from Federal Reserve officials.
Interest rate decisions - the Euro Area, Canada, New Zealand, the Philippines, Thailand, and Israel.
China - consumer and producer prices, trade data and new yuan loans.
Inflation rates - Mexico, Brazil, India, and Russia.
Germany - foreign trade and industrial production.
UK - February GDP reading and industrial production.
Australia - NAB business confidence and Westpac Consumer confidence data.
Japan - consumer confidence.
On Friday, the ES market rebounded and moved back inside the 10-Day Balance range, settling at the 5257 - 5250 area (daily 20 MA). It is currently trading between the weekly Pivot of 5259 and tomorrow´s daily Pivot of 5239, which coincides with the bottom of the Balance at the 5237 level. See hourly chart below. The Buyers must therefore defend the bottom of the 10-Day Balance (tomorrow´s Pivot) and the daily 20 MA for more upside. Once the weekly Pivot of 5259 is taken out, the upside targets are at the 5283 - 5290 area, the 5300 level, the 5310 level and the top of the 10-Day Balance at the 5321 level (also prior month high), which are all strong resistances and potential turning points. Note that the upward channel resistance (see ES daily chart above) is located between the 5300 level and the 5310 level for next week. If the Buyers have traction and are able to break above the Balance, then the next targets are at the 5332 level (this week´s high) and the 5355 level, which are also strong resistances and potential turning points. Conversely, the Sellers must defend the weekly Pivot of 5259 and the daily 20 MA for more downside. Once the bottom of the 10-Day Balance at the 5237 level is broken, the downside targets are at the 5225 - 5218 area, the 5208 level, the 5201 - 5197 area and the 5190 level, which are all strong supports and potential turning points. If the Sellers are able to take out the 5190 level, then the next targets are at the 5184 level, the 5175 level, the 5165 level and the 5151 level (daily 50 MA), which again are all strong supports and potential turning points. With that said, I will provide an update with my daily thoughts and game plan in tomorrow’s post before market open with additional clues from the OVN session.
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