Here we go? Or...Here we go again?
Midweek Market Update May 24, 2023
Four trading sessions ago the SP 500 traded above $4200, the level that everyone has been watching. It was enticing, but many were skeptical. We’ve seen this movie before. In fact, this is about the eighth rerun. So no one is surprised that it is back below that level now. Right?
So far it looks like, “Here we go again.” We’ll dig into some potential support levels in the charts below. First, a couple of key names that may provide some clues.
AAPL - Apple has the look of a rising wedge with the apex coming right at a previous resistance level. The pattern isn’t perfect (when are they ever?) and prices have moved below it before and recovered just fine. So maybe it’s nothing. But a breakdown from here is a possibility worth considering. As the largest constituent of SPY and the second largest in QQQ, it will have an impact on those indexes.
NVDA - Nvidia has moved 200% from its low of last October. To say it has been a market leader is a drastic understatement. It has been the face of this rally. Now it’s facing earnings this evening; the results of which will be out by the time you are reading this.
Who knows if they hit or miss; the options market is pricing in about a $20 move. The real takeaway could be the implications for the overall market. If NVDA continues to do well that will have a positive impact on market psychology. If not, buyers and investors could become a bit more pessimistic.
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SPY has gone from ‘breakout’ mode to trading beneath the 8 and 21-day MAs in four trading sessions. The 50-day MA is just under $408. Below that, it will need to stay above $404 it is to continue the pattern of putting in ‘higher lows.’
QQQ has lost some momentum and is below the 8-day MA and has room lower to the $318-$322 area. Today’s doji candle shows indecision so it could easily go either direction tomorrow.
IWM was making nice progress until it ticked the 200-day MA. Now it’s in damage control mode while trying to stay above the 21 and 50-day MAs.
DIA closed on its 200-day MA today and really needs to stay above to remain stable and healthy. The shorter-term 8 and 21 MAs are in a bearish stance so a move below this level could send prices to the lower end of the shaded area ($316) pretty quickly.
DXY We haven’t had good reason to check on the US Dollar much lately as its effect as a headwind was diminished. That effect is returning a bit now as it gathers strength while stock indexes and Bitcoin move lower.
VIX Volatility is elevated but still not in a ‘problem’ area.
The Closing Bell
Stocks have had a great run for the past month. This selling isn’t surprising. QQQ retesting the breakout is normal behavior. As is IWM finding sellers at the 100 and 200-day MAs. So the alarm bells aren’t ringing yet.
The next 4 or 5 days should be more telling than the last. Prices are being tested.
Can support levels hold? Do we continue to see a series of higher lows?
Those are a couple of important questions to answer.
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
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May 24, 2023, 4:00 PM
Long: GOOGL, META
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike