The Whole World is Watching

Mid-Week Market Review January 18, 2023

Jan 18

The Whole World is Watching

It isn't easy to find a piece of market commentary these days that doesn't mention the downtrend line in the SP 500. It has been referred to on the charts included here, and elsewhere countless times.

The whole world seems to be watching this one, particular line. Everyone is a technical analyst. At least some of the time.

Many watching for a break will be quick to announce the birth of a new bull market if or when it happens. There could be a large degree of FOMO buying as a result. It’s not as simple as declaring a label. And ultimately the designation of a bull or bear market isn’t important.

What is important is building a case.

What does the weight of the evidence show?
What is the path of least resistance for prices?

That downtrend line is a key component of resistance, if for no other reason than the fact that everyone is watching. If prices can move beyond the resistance, then the path to higher prices gets easier.

On the spot

Now, like an embarrassed teenager suddenly put on the spot, prices have sunken back into the corner, trying to avoid eye contact and the unwanted attention.

Will they continue to hide if we stare too long?

Or will they try to sneak up through the levels above with an overnight gap, moving in darkness while no one is looking?

From Walter Deemer — "The market will do whatever it has to do to embarrass the greatest number of people to the greatest extent possible." -- Deemer's Law Of Pervesity

While the intra-day levels are exciting and fun to watch, keeping the bigger picture context in mind is important. If you didn't see the weekly charts over the weekend, you may want to review these first.

click to open

Andrew Moss, CMT @Andy__Moss

Good Saturday Morning! You know what time it is. Grab some coffee and settle in as we take a look at the #WeeklyCharts. A lot has changed since last week, perhaps nothing more than mood. Is the renewed optimism showing up in the prices? Or maybe it's the other way around?

Resistance is still resistance.

SPY hasn't passed the downtrend test. But it hasn't failed either. After a strong move up and over the 200-day MA, it's not surprising to see some selling. And I hesitate to call it a failed breakout just because it's now back below the 200-day.

There are many layers of potential support that could help prices higher. Though it closed beneath the 8-day EMA today, the 21 and 50-day MAs are close at hand. The volume-weighted average prices anchored to the December 13 pivot high and the October 13 pivot low are there as well.

If prices can stay above these levels, the bullish sequence is still in place.

Thank you for reading Trading Adventures. This post is public so feel free to share it.

QQQ is in a similar situation and has potential support in all the same forms.

IWM has found resistance in the 186-191 area, as expected.

DIA is worth keeping a close eye on here. It has been leading higher for a while. Now it is leading lower as the first to tread below its 8/21/50-day moving averages and the Dec. 13 AVWAP. This could be a red flag. Continue to watch this for clues.

VIX is being a little bit tricky as it pokes back up into the range.

Here's a different view of $DXY. The price is inverted and is being shown next to the SP 500 futures $ES_F. The relationship here is changing as the 1/DXY chart has broken the pattern. The question is, will futures follow suit and make a higher high?

Once again we have inconsistent messages from the short, medium, and long time frames. But with prices tucked so tightly between resistance overhead and support underneath, something will give way soon.

The direction of that move will tell us where to look next.