Looking at the open this morning, S&P up 22, NASDAQ up 77, and Dow future showing a gain of 220 points. Stocks have been quite volatile in the last few weeks due to rising interest rates in the U.S., but also around the works, especially in Europe. The S&P has seen some damage on the charts falling below key moving averages and has been a nice sell, the rip(rally) type of trade. Often, when markets fall or rally above key moving average, often you can use those “levels “as key support and resistance levels when markets try to retest them. I certainly wouldn’t advise using this study alone, but it often helps identify where markets may stop when retesting important levels on the chart.
Markets are strong today due to good results from bank earnings that came out prior to the open of trade today. Investors should not be fooled in “buying the rally” today because there are still headwinds that the indices have going against them. Rising rates and deteriorating economic news, coupled with Italy being in a difficult situation in Europe has led to a bleak outlook. My advice to traders presently is to watch the bond market closely and monitor rates and if we see another big uptick in yields, expect more downside activity in the S&P, and on flip side if rates have tipped for the time being, we may start to build a base around current levels and eventually test higher levels.
E-Mini S&P 500 Dec ’18 Daily Chart