Market News 8-24-23
News You Can Trade 📰
The three majors, the DJIA, The Nasdaq and the S&P 500 each held the bid as the trading world waited with hopeful anticipation of the #NVDA earnings.
Football season is almost here, so you’ll see pundits looking at a teams schedule and saying “If they can hold the fort the first six games with a .500 record they will be in good shape for the rest of the season.”
For non-sports fans it means your favorite team has a difficult schedule. And if they come out of a tough stretch without too much damage, they’re in good shape.
Well that’s what the markets did, specifically the Nasdaq.
If you’re familiar with Fibonacci levels, the #QQQ held the minimum drawdown level that shows the longer term trend remains intact.
The deeper the decline the less valid the strength of the previous trend.
It’s something for the bulls to feel good about. It doesn’t mean the 2023 rocket ship has refueled, it means buyers bought the dip. But the dip comes at a level that validated a short-term change of trend from bullish to the initial stages of a bearish tone.
Okay great technical trading mumbo jumbo but what do I do with it?
Once you understand this process, it means everything. It means the lack of 100% bullish clarity forces us to lower initial position size and build positions in multiple stages.
But didn’t you say we held support?
Yes I did. But the big test for the week comes now after two events. The obvious one is the NVIDIA earnings gap. Will it hold today or is the news priced in?
Stay tuned.
The second and less obvious one is the test of the breakdown level. We call this the PCOT, potential change of trend.
When a stock breaks trend, there’s a specific level which confirms this new order flow. So it goes from potential, to validated, and the initial new stage of a reversal.
Classic technical analysis tells you this test should hold, and the new trend should have a new push in the new direction. In this case down. For the #SPY that level is 444-446.
This is the critical test for us to watch this week so we can create our roadmap for the remainder of 2023. Yup, it’s that important.
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