There’s breaking a major pivot or moving average intraday, and then there’s breaking those levels on the close.
Today, after our unusual micro analysis of S1 – the point that the S&P 500, NASDAQ and the Dow have not closed below at all this month – is one for the textbooks.
To review: S1 is a pivot point.
A pivot point is calculated as an average of the high, low, and closing price of the performance of an instrument in the prior trading period.
S1 is the first line of support on the daily charts, using 30-minute bars.
DIA did break S1 early on, yet closed above it. Same thing with SPY.
Yet QQQs closed beneath S1 along with Semiconductors (SMH) and Transportation (IYT).
Does that make Nasdaq, Semi’s and Transports anomalies, or harbingers?
As mentioned yesterday, if we go back to January 2nd, SPY has only traded under S1 on a ½ hour close once – on January 10th.
Today makes that twice.
However, SPY and DIA, on a closing basis, keeps the now 17 days without a close below S1 intact.
Thursday, should QQQs remain weak, S1 for the SPY is around 281.80 and for DIA 260.95.
Regardless what happens intraday, should either or both the SPY and DIA close below those levels, I think we can safely say-we have ourselves a bona fide market correction.
Furthermore, the falling dollar and rising rates I have been so obsessed with, continued today in a big way.
UUP, the Dollar ETF, closed beneath a key monthly moving average for the first time since 2014. Even if we get a bounce from here, that is still a major trend reversal and merits considering selling any rallies.
The 20+ Year Long Bonds (TLTs) key monthly moving average is 120.60. TLTs closed at 122.97 so still far enough away from the longer-term trend reversal.
Nevertheless, rates firmed, dollar dropped, metals rallied along with many agricultural commodities and SMH, QQQ and IYT closed below S1.
That’s enough to make traders think they’re trying to navigate between huge skyscrapers while driving on a highway going 80 mph. And, all roads converge in a traffic circle.
