Today's Trading Plan: Losing Momentum -

Today’s Trading Plan: Losing Momentum

Apr 06, 2016Jeremy ParkinsonFinance0

Technical Outlook:

Biggest sell-off yesterday since March 8th, as price in one swoop dropped below the 5-day and 10-day moving averages.

Two key price levels to watch today – 1) The Friday lows from last week. 2) The lows from March 24th. Particularly, if the latter should break, it would put in a lower-low into the downtrend.

Between 2040 and the all-time highs the price action is very congested with plenty ofresistance.

A break of the March 24th lows would also result in a break of the 20-day moving average which would be something the market hasn’t seen since February 12th.

With yesterday’s decline, the market essentially hasn’t declined since March 18th.

Should the morning strength begin to fade, it may offer an opportunity to try a starter position to the short-side.

However, it is worth remembering just how resilient the bulls have been of late, buying up every dip in sight.

Double top has formed on SPX 30 minute chart.

Significant bounce in the VIX yesterday rallying 9.2% and breaking the downtrend off of the February highs.

T2108 (% of stocks trading above their 40-day moving averages) saw a bigger decline than usual by dropping 5.9% down to 77.5%.

Yesterday, SPX closed below the 10-day moving average which was the first that has happened since the rally started on February 12th.

Even if the market can rebound after yesterday’s sell-off, the technical damage that was incurred suggests that stocks are losing momentum at these current levels.

SPY volume picked up a good bit from the previous trading day, but still below recent averages.

The market has hardly seen any correction over the last seven weeks – with only one of the weeks resulting in a lower close from the opening price.

The downtrend off of the July highs becomes the next testing point for this market as it seeks push through its resistance at 2095 an back into the 2100’s.

2100 is also significant because a close above this level potentially jeopardizes the two-year long standing head and shoulders pattern that the market has had in development. A close above 2116 absolutely destroys the pattern.

April has been bullish in nine of the last ten years.

Yellen’s dovish outlook as it pertains to rate hikes has been, in large part, the reason for the massive rally off of the February lows.