Week of September 4th, 2023
End of month rally, is it pullback time?
Last week I gave 4439 on $SPX as the pivot for this week and mentioned that if the bulls managed to reclaim this level, we could see a retest of the 50sma at 4459 and I mentioned that since it was the 2nd time, that resistance would likely fall and we could head as high as 4503. Bulls staged a large breakout early in the week taking us from 4414 all the way to 4541 before a pullback on Friday.
Key Levels: 4335 & 4439
There is just chop between those two levels as we have spent 2 weeks now trading in that range. One end of the range must give in to allow the next large leg.
Bullish Trajectory: If bulls reclaim 4439, we can retest the 50sma at 4459.56 which will likely give way since it’s the 2nd time and make way to 4471 to put in a higher high and setup a double bottom while invalidating the H&S. Above 4471 there is room to 4494-4503
The range for the week was 4414 to 4541 and we closed at 4521. As mentioned last week, bears dropped the ball and bulls did a fantastic job this week.
Bulls invalidated the head & shoulders on the daily chart which I warned was a likely possibility if 4439 was taken out to the upside. H&S and bearish patterns in general need impulsiveness, and that requires strong conviction moves. When we put in a higher low, bears lost the battle, and the H&S was gone. From there it formed a double bottom, and we broke out to the upside almost at the island gap into next week. Note how the 8ema (blue line) has crossed above the 50sma (black line), indicating that the short-term momentum has shifted back to bullish. As long as the 8ema remains above the 50sma, BTD will continue to be the trend.
We have gone back to “greed” on the F&I. I will point out that it is unusual for anything to stay so far above the 8ema for too long - so a pullback to it at some point next week is very likely. That sits at 4475 currently.
Both Fear & Greed and AAII survey show plenty of the room on the bull side currently.
On the flip side, September is normally a bearish month and a lot of the October and December flows have continued to be very bearish.
A reminder of the VIX seasonality:
Here is the economic calendar for next week:
For this upcoming week I will be watching the following setups and levels:
Key Level: 4541
Bullish Trajectory: Bulls will need to take out 4541 early in the week to continue to the .786 fib at 4548 and then attempt the gap fill at 4567. This area will be major resistance as this is the island top gap. If this gap is filled, then it’s likely we are going to retest the highs at 4607 and headed to new highs, as high as 4775 is possible.
Bullish but pullback first - Trajectory: If we are under 4541 it is likely that there will be a retracement to 4503 and then the moving averages and fib cluster at 4471.
Bear Trajectory: Bears will need a few closes under 4471 for this to develop a bear case. Bulls are firmly in control here above 4471. If bears manage a few closes under 4471 then this can unravel rapidly to 4399, 4335, 4232.
Here are the two possible scenarios i am watching - the green is the one i think is most likely based on flow and technicals, it suggests a pullback to 4471 and a BTFD back to 4650+ However we must be ready and keep open mind - if 4439 falls its a large sell from there.Weekly chart shows an inside bar and further consolidation in this downtrending channel. We have not yet retested the original channel breakdown (orange one) since we fell out.
Key level for the week is 453.78. Below this level sets up a dip to the 8ema at 446.97 / fib at 446.23 and 50sma at 445.84.
Bull case: Above 453.78 can see move to 455.49 for gap fill. Above that can setup a climactic move to new highs over 459.44.
Bear case: Below 453.78 bears get a chance to drop us back to 449.34 then 446.23, 445.84.
**Notice volume declining on the uptrend**
Expecting major resistance to come in between 190-192.61 for a pullback to 50sma at 186.71 and 8ema at 184.33 to setup the handle. This allows time for the 8ema and 50sma to converge and for the 8ema to crossover - setting the reversal. If this does happen, AAPL is headed to new highs. If the crossover fails - we sell.
Needs to overcome the resistance from the prior channel - so needs to clear 502 next week for a fast swift move into 528 then 556-564. If it falls back below 470 it will sell to 446.
Keep reading with a 7-day free trial