Here is the weekend look for the ES/SPY Nov 29-Dec3. After making another ATH on Monday the ES reversed sharply at the 1.618 fib extension identified last week in tandem with the other indexes. Price chopped on Tuesday and Wed then finished with a big down day on Friday. The move on Friday, due to covid news, was significant. Price broke the previous 3 week's lows on higher than average volume which was notable given that Friday was a shortened trading day. Price now sits below the 21 ema, but still above the longer term neutral.
Going into this week a lot will depend on how the ES futures react. Last week's close left a large red outside candle that cannot be ignored and on a relative basis ES was weaker than the NAS. The move happened on day with low liquidity likely dominated by algos that may have over reacted to the covid headline. Most market watchers were in agreement that price was extended and breadth was weakening. This is how technicals often lead news events. Essentially the market was waiting for an excuse to sell. The question now is whether or not this event will play out as a short term flash crash or the beginning of deeper correction.
If the ES sells off this evening I will be looking for support to hold at the top of the neutral zone. If price bounces quickly I will be watching the resistance zone(red box) for a rejection. A break back above the red box would be bullish. A break below the top of the neutral would be bearish and would put a move down to the 55 SMA in play. A deeper correction could take the ES to the bottom of the neutral. From a longer term perspective if price holds in and above the longer term neutral the up trend would remain intact. Below the longer term neutral things get a little more scary.
Given the relative weakness of both the ES and the DOW we may see a rotation from the reflation/reopening plays back into some stay a homes stocks. This rotation favours the technology names and will apply pressure to transport, travel, energy ect. Also, look for growth stocks to outperform again if the 10 year remains subdued.
Weekly events...
Mon/Tues... Fed heads & Yellen speak
Wed... Manufacturing PMI & Crude inventories + OPEC
Thurs... Jobless claims
Friday... Non Farm Payrolls & Factory orders.
Bullish notes
10y yield dropped significantly
Strong seasonal period continues
Covid news may turn positive
Covid fears mean lower for longer
Bearish notes
Market still extended
High % of money still concentrated in a few names
Omicron is a serious variant
Buyers dry up as they expect lower prices.
Going into this week a lot will depend on how the ES futures react. Last week's close left a large red outside candle that cannot be ignored and on a relative basis ES was weaker than the NAS. The move happened on day with low liquidity likely dominated by algos that may have over reacted to the covid headline. Most market watchers were in agreement that price was extended and breadth was weakening. This is how technicals often lead news events. Essentially the market was waiting for an excuse to sell. The question now is whether or not this event will play out as a short term flash crash or the beginning of deeper correction.
If the ES sells off this evening I will be looking for support to hold at the top of the neutral zone. If price bounces quickly I will be watching the resistance zone(red box) for a rejection. A break back above the red box would be bullish. A break below the top of the neutral would be bearish and would put a move down to the 55 SMA in play. A deeper correction could take the ES to the bottom of the neutral. From a longer term perspective if price holds in and above the longer term neutral the up trend would remain intact. Below the longer term neutral things get a little more scary.
Given the relative weakness of both the ES and the DOW we may see a rotation from the reflation/reopening plays back into some stay a homes stocks. This rotation favours the technology names and will apply pressure to transport, travel, energy ect. Also, look for growth stocks to outperform again if the 10 year remains subdued.
Weekly events...
Mon/Tues... Fed heads & Yellen speak
Wed... Manufacturing PMI & Crude inventories + OPEC
Thurs... Jobless claims
Friday... Non Farm Payrolls & Factory orders.
Bullish notes
10y yield dropped significantly
Strong seasonal period continues
Covid news may turn positive
Covid fears mean lower for longer
Bearish notes
Market still extended
High % of money still concentrated in a few names
Omicron is a serious variant
Buyers dry up as they expect lower prices.
Comment:
Identical corrective move as the NAS pushing up into the red resistance box. Expect heavier resistance at the top of the box where the compound move completes. Still high risk of a roll over until price bases above red box.
Comment:
Resistance came in a the top of the red box as described above. Price rolled over dropping to the top of the neutral (to the tick). Has found support there in the overnight session. Keep an eye on the 55 SMA as it may still act as lower target drawing price down.
Comment:
Another lower low today with price finding its way down to the 55 sma. As you can see price simply moves between my levels either up or down. The target to the down side is now the bottom of the neutral (tan box). Resistance is the red box above. Sentiment is now negative. Shorts should be take from bounces into resistance and longs should be taken off my lower levels. The bull party does not resume until price can break back above the red box.
