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I suggested closing the short position on EW yesterday because it did not follow through as I expected. The loss was minimal.
Yesterday, we got a bounce from the serious selling on Monday. With the market being so oversold, this was not really unexpected.
This was because the S & P 500 had dropped under the lower band on the 60 minute chart and the 30 minute chart as well.
As you know, this signifies an oversold condition.
And yesterday, the S & P recouped the lower band on both timeframes.
This suggests we should see a bounce of the oversold condition.
But, it also tells us that we should see a retest of the lower bands at some point. At least there is a high probability of that happening.
The question is how far should this bounce go?
The usual target is back to the midband.
The midband on the 30 minute chart is 2,983.78 and on the 60 minute chart it is 2,966.14.
I am going to be conservative and suggest that the lower price level should be the objective.
That would be around 2,966. And yesterday closed at 2,881.77 or 84 points below that price level.
So, we know we have an objective for the market at higher prices. And we know that there is a very high probability that the market will have another leg down when it hits that objective.
What is interesting about the 2,966 technical level is that is it within 3 points of the major 2,968.80 level.
And with a close today above 2,851.58, that would become the objective.
And with a close yesterday at 93% of the daily bar, there is a high probability that yesterday's high will be taken out. At least before the low.
Pre market, the S & P is trading about 11 points lower. So, watch the support levels from yesterday's daily price bar which is in the 2,866 to 2,871 area.
I had mentioned the down to up volume yesterday and said it was 6.66. When I checked the charts after the close yesterday, the corrected print was 11.92.
So, Monday did qualify as a selling climax.
This does not mean that Monday's low should hold as support. But, it does suggest that we have seen one flush out already.
One selling climax can turn the market. As a point of reference, there were multiple selling climaxes before the December bottom.
BKNG and ROKU report this afernoon after the close. And SWKS reports tomorrow after the close.
Here are the Key Levels for the Markets:
$VIX:
Major level: 28.13
Minor level: 27.35
Minor level: 25.78
Major level: 25.00
Minor level: 24.22
Minor level: 22.66
Major level: 21.88
Minor level: 21.10 **
Minor level: 19.53
Major level: 18.75
Minor level: 17.97
Minor level: 16.41
Major level: 15.63
The VIX dropped 4.42 or 17.97%. It closed at 20.17. This puts it under the minor 21.10 level.
So[, if the VIX closes today under 21.10, it should drop to 18.75.
Resistance should be at 21.88 and 22.66.
The VIX did pullback as we expected.
SPX:
Minor level: 3,164.08
Major level: 3,125.00
Minor level: 3,085.95
Minor level: 3,007.85
Major level: 2,968.80
Minor level: 2,929.73
Minor level: 2,851.58 **
Major level: 2,812.50 <<
Minor level: 2,773.45
Minor level: 2,695.35
Major level: 2,656.30
The S & P did reclaim the minor 2,851.58 level. Watch to see if this level holds today. If it does and the S & P closes above it, look for a move up to 2,968.
2,832 should offer support.
QQQ:
Major level: 196.88
Minor level: 196.10
Minor level: 194.53
Major level: 193.75
Minor level: 192.19
Minor level: 189.06
Major level: 187.50
Minor level: 185.94
Minor level: 182.81 **
Major level: 181.25
Minor level: 179.69
The QQQ closed at 183.26. At this point, if the QQQ can close above 182.81 today, it should test 187.50.
181.25 should be support. I don't see the QQQ breaking under 178. If it does, it should head lower.
IWM:
Major level: 162.50
Minor level: 160.94
Minor level: 157.81
Major level: 156.25
Minor level: 154.69
Minor level: 151.56
Major level: 150.00
Minor level: 148.44 **
Minor level: 145.31
Major level: 143.75
The IWM bounced and closed at 149.36. The IWM will need to hold 148.44 to move higher.
Watch to see if the IWM can hold 148.44. If it can't, it should move lower.
TLT:
Major level: 140.63
Minor level: 139.85
Minor level: 138.28 **
Major level: 137.50 <
Minor level: 136.72
Minor level: 135.16
Major level: 134.38
Minor level: 133.60
Minor level: 132.03
Major level: 131.25
Minor level: 130.47
The TLT closed at 139.98. It closed within one point of the 140.63 level.
A break above 140.63 and the TLT heads higher. 137.50 should be support.
GLD:
Major level: 140.63
Minor level: 139.85
Minor level: 138.28
Major level: 137.50 <
Minor level: 136.72
Minor level: 135.16
Major level: 134.48
Minor level: 133.60
Minor level: 132.03
Major level: 131.25
Minor level: 130.47
Minor level: 128.91
The GLD closed at 138.91. Look for a move to 141.
A break above 139.06 would confirm that the GLD should head higher.
137.50 should be support on a pullback.
XLE:
Major level: 65.63
Minor level: 64.85
Minor level: 63.28
Major level: 62.50 <
Minor level: 61.72 **
Minor level: 60.16
Major level: 59.38 <
Minor level: 58.60
Minor level: 57.03
Major level: 56.25
The XLE closed at 58.53. The 56 area is still the objective. A close today under 58.69 would confirm that.
Resistance should be at 60.94 and 62.50.
AAPL:
Major level: 212.50
Minor level: 209.38
Minor level: 203.13
Major level: 200.00 <
Minor level: 196.88 **
Minor level: 190.63
Major level: 187.50
Minor level: 184.38
Minor level: 178.13
Major level: 175.00
Apple closed at 197.
193.75 is a key short term level. If Apple cannot hold it, I would expect a drop to the 175 area.
192 is the midband and Apple is just above it. Watch to see if this level holds today.
WATCH LIST:
Bullish Stocks: SHOP, MLM, MCO, LHX, WIX, RNG, GLD, VMC
Bearish Stocks: BA, DPZ, DXCM, URI, FIVE, FANG, EOG, LGND, JACK, CXO, GRUB, COP
Be sure to check earnings release dates.
