ST trend: neutral (pullback to ML likely)
Yesterday we were noting that the ST trend was neutral as FGSI was showing that neither side was in control. Buyers had won ML, but were not able to put some distance to it and with bearish EE on FGSI, there was no clarity to the resume of the up trend. We also noted that "On the sellers' side, they want to break below ML and macro-ML. Yesterday's lows are the last resort defense for buyers, if those are broken, then we likely sell-off directly and could potentially see much lower lows". Sellers did manage to step in hard just prior to RTH open and once macro-ML was lost we sold directly to test the prior day lows. That is where sellers lost the battle. They tested those lows and came within half a point to break them, but failed. Buyers stepped in and launched a rocket never looking back and after winning back ML and macro-ML then proceeded to break the prior day highs. Truly impressive reversal from the edge of the cliff.
The o/n saw the usual pattern that follows an up squeeze set up on FGSI. Price moved sideways consolidating, then when FGSI flashed warning signals that buyers are inefficient, we saw a larger drop which is likely targeting a ML back-test. That is where things will get decided again. So on the downside ML and macro-ML are the lines to watch, while on the upside, buyers would need to win back danny and 400bar MA to signal a resume of the up trend.
As a side note: on the big picture view, as discussed extensively in the members chat room, the EWT and cycle turn dates suggest an important high is close. On EWT terms the current move off the 4070ish lows looks like 3 waves up so far. So the normal expectation is that the current retrace is wave 4, which will then be reversed to new highs. Wave 4 cannot overlap wave 1, so macro-ML becomes important also from an EWT point of view as it is very close to that high. After this 5 waves complete (if that plays out), the danger for buyers would increase exponentially as it is possible the entire rally off 3811 low is done and we could revisit those lows soon.
ST trend: up
On Friday we were noting that the o/n ST trend was up, however we did warn that "So for now things look bullish, however I still believe this could be a bull trap, caused by OPEX. Buyers have the edge now, but to confirm the change in trend they would need to sustain a breakout above macro-ML. That would also breakout the upper side of the bear flag. On the downside, sellers need to break down below ML. IF that happens, the danger to the buyers grows exponentially as I believe there is a real chance that we break yesterday's o/n low and potentially go much lower. So if ML is lost, buyers need to be VERY careful.". Buyers weren't able to break above macro-ML and the upper side of the bear flag and we dropped in the "usual" slow grind lower manner until the last 2.5h of the RTH session. The market did break the lows from the prior weak and went about 45 points lower, before finding a bottom. The huge short squeeze in the last 2.5h could be also an OPEX squeeze, as many big names were oversold and the max pain price was higher than where it was then.
Sunday and today saw the market continue the bounce started late on Friday, however it stalled and chopped between macro-ML and ML. Where price goes from here will be important. Same as Friday, this bounce could be only an OPEX short squeeze from Market Makers and now that options expired, we will see if there are genuine buyers here or not, once RTH opens. It is a bit of a coin toss here, I still suspect that this is bull trap though. If buyers can break the o/n highs and sustain a breakout above macro-ML, then we could see a multi-day bounce. However if ML is lost then we could erase the entire late Friday ramp. Compression between the 2 MLs for now, the breakout/down will be large.
ST trend: down
Yesterday the sellers showed the true nature of this market as they dropped SPX a whooping 4% and we had a gap 'n go with relentless selling all day. As I have shared in the members' chat room, I have been bearish on these bounces and I think what was published in the daily update 2 days ago pretty much sums it up:
"the target for this bounce is 4080-4100. That zone was reached already, but because of the shape of the waves, I do not think it's complete. I would expect a pullback here to solve the overbought status, then another push higher towards the upper end of the target zone before a larger drop occurs. Just to mention - if my read is correct, it is possible that once this push higher completes, the market can drop below last week's lows. So this is not the place to chase higher for the last 20-30 points, as downside potential is 10x that."
Well, we did get close to 4100 in the AH sessions on Tuesday and early on Wed, before we dropped to last weeks' low today in the am. So that call was eerly accurate.
The question now becomes: what now. Immediate term, buyers are trying to bounce off an unconfirmed low on FGSI and IGSI, while MGSI almost made it to extreme pessimism. Which does put that low as a potential important ST low. Buyers would need to defend those lows for dear life to avoid another repeat of yesterday and potentially a capitulatory crash. On the upside, buyers need to sustain a breakout above 400bar MA and danny and attempt to win back ML. If ML is won back (big IF), then that would aleviate the pressure from the buyers and potentially start a larger short squeeze.
In the bigger picture, the market is in a very fragile state. We dropped a lot and trapped a lot of buyers which jumped in on Monday-Tuesday happily proclaiming the dip is done. Regardless of the immediate term moves, the correction is likely still not done as we didn't see yet the type of capitulation needed before such a move finishes. I am looking for VIX >40 and SPX somewhere in the 3600 area, possibly lower, as targets. So any bounces should be viewed as counter-trend. If buyers win back ML in a sustained way, then that would need to be re-assessed.
ST trend: neutral
On Friday we were noting that the ST trend was up as buyers had rallied off unconfirmed lows and won back ML, while sellers were very inefficient on pull-backs. We did mention that while the low looked unresolved (3 waves in EWT terminology), the key lvl to break for sellers was ML. They were unable to do that, despite 2 additional attempts and buyers kept the trend intact, also pushing above macro-ML.
Sunday saw new highs being reached, which stayed unconfirmed and had a pretty large pullback (60 points) all the way into another ML back-test. It held again, however so far buyers were unable to push back towards the highs and price keeps hovering in ML vicinity. So for the moment, the trend looks to be up for grabs, neither side being in complete control. FGSI is also showing that both sides are inefficient. ML remains the key lvl to watch, as long as it is below price that should keep buyers afloat.
ST trend: down (with bottoming attempt)
Yesterday we were noting that the ST trend was up as buyers had regained ML and sellers were inefficient on the pullbacks. We did mention that CPI release is "likely to cause some spikes and finally give the direction for at least the 1st part of the day. Overall the market remains weak as any bounce, even large ones, continue to get sold hard. Buyers need to break resistance, then start holding supports on pullbacks to reverse the big trend. Otherwise any bounces are sells.". That played out exactly. The CPI release caused a massive drop erasing all the gains buyers managed to build. The it stopped at the 3950 support lvl and staged an impressive bounce into the 1st hours of the RTH open. After that buyers failed to hold ML and we sold off to new lows.
The o/n continued the bearish character and dropped to lower lows. Buyers are attempting to stick save 3900 and FGSI stubbornly refused to confirm the lows. We now have 3 consecutive unconfirmed lows on FGSI as well as an unconfirmed low on IGSI. So there is at least a bottoming attempt ongoing. Buyers must defend those lows and break the 1st bearish EE lvl to confirm at least a ST low is in. Otherwise the unconfirmed lows set-up can get broken and we continue to sell off.
As a side note - it looks like markets are gripped by extreme fear. It is likely we are going to need a capitulatory action before we find a more meaningful low. As repeated for weeks already, the intermediate target for this down move is, in my opinion, in the 3600 range. That's not even that far anymore as it's "only" 300 points from where we are. Considering that we already dropped from 4600 at the end of March and the brutal sell-off in many stocks, this is likely the initial stage of a bear market. We should get a larger bounce after this capitulatory low, but new ATHs are unlikely to happen for a very long time.
ST trend: neutral
On Friday we had another full-on bearish day, similar to the previous week action on Thursday-Friday. After a gap down, which was never completely filled, buyers were overwhelmed and we sold off for the entire RTH session, dropping a whooping 150+ points from prior day's close.
Sunday made the usual lower low, although it was a minor one, with buyers managing to defend that area 3 more times and bouncing, albeit not very convincingly. FGSI is showing that both sides are inefficient, so the ST trend is up for grabs. Fwiw, the bounce looks rather weak, so it is possible we might need another leg lower before a real bottoming attempt. On the downside the o/n LOD is important as it was unconfirmed on FGSI so if buyers can defend it it could be the start of something. On the upside, ML is the key line in the sand, as usual. 400bar MA and danny are also important and it seems buyers are having a hard time holding price above them, which is a further sign of weakness. Bigger picture we could have a capitulatory low today, so in case we do see another flush, watch for reversals (having a lower low which is unconfirmed on both FGSI and IGSI from which price bounces strongly would be a good indication buyers are trying to find a bottom).
ST trend: down (with bottoming attempt)
On Friday we were noting that the ST trend was down with potential bottoming attempt, as we had the potential for a bottom with FGSI and IGSI showing unconfirmed lows. We warned that "The absolute KEY level for buyers to defend is the o/n low. Below that likely opens up the flood gates again and we could see a repeat of yesterday". Our warning came true, after losing the o/n low, there was no looking back as the flood gates opened again and same type of action as the prior day happened - non-stop selling with little bounce along the way.
Sunday opened even lower (as expected and called out in the chat room on Friday) and we dropped another 40+ points from Friday's close. The o/n today continued even lower. Now we again have the potential for a bottom, as IGSI is not confirming these lows. Price made a double bottom at the o/n low and buyers defended it, staging a bounce, however FGSI is showing buyers are inefficient on this bounce, which is capped by the 400bar MA so far. It looks like we have the same situation as Friday. If the o/n low is broken, then it's possible we will get yet another leg down, similar to Thursday and Friday. If buyers can defend, then we might see a larger bounce, maybe to test ML. Ultimately, it looks like the market has a date with the mid March lows, so the expectation would be for us to see that area before this series of declines stops (at least for a while).
ST trend: down (with potential bottoming attempt)
Yesterday we saw one of the biggest reversal ever recorded. After the RTH open, buyers pushed higher strongly and triggered a BE on TTs which marked the top. After that, markets took the "elevator down" as price just dropped in a steep manner all the way until the RTH close. Pretty unreal price action and HUGE trap for buyers.
The o/n saw the usual "lower low" which was unconfirmed on both FGSI and IGSI and buyers attempted a bounce there. However they stalled at the back-test of the area where a bottom was attempted yesterday near the RTH close. And it looks like they failed there, as now the lost momentum and price is back below both danny and 400bar MA. The absolute KEY level for buyers to defend is the o/n low. Below that likely opens up the flood gates again and we could see a repeat of yesterday. On the upside, buyers would need to overcome the o/n HOD area (4395ish) to have hopes at touching the next inflection area at ML and macro-ML.
ST trend: up (with potential topping pattern)
Yesterday we were noting that the ST trend was neutral, with potential bounce coming, as FGSI had set up both bullish and bearish EE, but was at extreme pessimism, indicating at least a ST bounce. Buyers took full advantage of that though and after the initial failure at ML, rocketed past ML and macro-ML in a giant vertical move. We also had another push into the close, before the market finally gave up and dropped quite strongly to the prior consolidation area.
The o/n didn't bring too many developments. Buyers held the consolidation area where price stayed after the initial rocket launch and then buyers managed to psh back towards yesterday's high. This is now a big inflection point. If buyers can power through we will likely get more immediate upside. If they fail and price comes back below danny, then a consolidation down to 400bar MA or even ML is possible. FGSI did peak again at extreme optimism, so at least a ST pullback would be warranted.
ST trend: up (with correction ongoing)
Yesterday we were noting that the ST trend was neutral as we were still in the prior day's range (from the FOMC minutes spike high and low) and having bearish and bullish EE vs those levels. Sustained breakout/down of those levels was needed to escape the range. Initially we saw a rejection at the upper level, then buyers lost ML and we went down all the way to test the lower end of the range. That held as well and after being marked as an unconfirmed low on both FGSI and IGSI, the buyers stepped in with authority and put in a larger bottom.
The o/n played out well for buyers. We had the usual sideways consolidation from the yesterday's RTH highs, but sellers couldn't even touch ML on the pullback. And then a push to new highs. Now we have an ongoing correction from the higher high, which was marked as unconfirmed on FGSI and IGSI. The pullback again couldn't touch ML, which means buyers are still in good shape. We also had a large bullish EE set up on FGSI. As long as buyers hold price above ML, they are in control of the trend. Yesterday's ramp fixed a lot of the technical damage inflicted in the prior 2 days and if today ML is not lost, it's likely we are dealing with a new found up trend.
ST trend: up
On Friday we were noting that the ST trend was neutral, as both buyers and sellers were inefficient via FGSI. We did mention that "the bounce is a slow grind and is looking more like a bear flag than a change in trend" and warned that losing the bullish EE lvl set up on FGSI and the important ST lines (danny and 400bar MA) would "If those levels break, then another trip to the lows is likely". That is exactly what happened as buyers failed and the market dropped to new lows. The bottoming attempt near 4500 was caught nicely by FGSI which showed a 2nd consecutive unconfirmed low there, before buyers stepped in for the usual late Friday rally.
The o/n showed a decent continuation of the bounce, as the initial pullback was small and more a side-ways consolidation, then we had another push to new highs, then a pullback from extreme optimism on FGSI, but which set up bullish EE that held. Now we are back near those highs (which are testing macro-ML), but with sellers showing inefficiency. ML was won back also and if it continues to act as support, buyers could get a follow through day until the next inflection area - 4580.
ST trend: neutral
Yesterday we were noting that the ST trend was down as buyers were showing inefficiency via FGSI. Additionally they attempted to win back ML, but failed to hold above it. We did mention that "ML remains the key level for the trend and if it continues to reject price, that would point to another leg lower". That is exactly what played out. ML rejected price and we dropped into a macro-ML test. Macro-ML was also lost towards the end of the RTH session leading to another 40 point flush.
The o/n saw the usual bounce off extreme pessimism on FGSI. However the bounce is a slow grind and is looking more like a bear flag than a change in trend. However not all is bad for buyers. Sellers keep showing inefficiency and actually set up bullish EE on FGSI. Buyers also keep holding 400bar MA as support. If buyers can defend those levels and win back ML, that would be a serious warning they are ready to take the lead again. If those levels break, then another trip to the lows is likely.