Hey Market Pilot,
The market took a big spill a few weeks ago which was a clear sign something had changed. It was such a big drop that price got seriously oversold and has since been crawling up from the abyss. But what does the bigger picture say?
We have been seeing many “darling,” or at least formerly darling, stocks fall apart in ways that should be getting our attention. These aren’t just pullbacks or stiff corrections. These falling stocks are blood baths. Price has been decimated. Maybe some fell apart because they were covid specials and that era is coming to an end. But this bleeding could also be a sign of the Federal Reserve (Fed) spigot getting turned off since we are seeing this across many sectors.
Pictured below is a weekly chart of Carvana (CVNA). Aside from the huge downturn, I want to call your attention to how this stock fell apart. Take a close look at when price was at its weekly 50 simple moving average (SMA). We saw price drop to that level, then sit on it, chewing away at the strength of that moving average. Finally, price sank below and started the cascade. You can also see the Moxie Indicator™ Price Trigger firing which was an excellent signal to not be in this stock anymore, or consider shorting it.
Now take a look at the S&P 500 (SPY, pictured below) weekly and you can see the similarity. You can also see that the weekly Moxie Indicator™ is very close to zero and will most likely cross below it soon.
My question is, “What happens when or if the SPY falls off its weekly 50 SMA like CVNA did?” Hopefully the SPY doesn’t retreat to its weekly 200 SMA like CVNA, but losing the 50 SMA support is going to be really painful for those who can’t exit or can’t short.
This is an important level I am watching and I think it will have significant meaning to the condition of the market at large. So keep an eye on this dynamic yourself, and be prepared if the SPY goes the way of CVNA.
Your Profit Pilot, TG
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