Hey Market Pilot,
Last week, we continued to see the market drift lower as it had been heavy all week. It started when the S&P 500 (SPY) could not hold the daily 21 exponential moving average (EMA) as support, so then it was onto the daily 50 simple moving average (SMA) where it got about one day’s worth of support. The bounce of price at that level was then met by overhead resistance with the hourly 50 SMA. Then Friday, on Quad Witching, the markets sold off all day and sent price below the typical support of the daily 50 SMA.
It has been several months since we have seen this level of weakness, so I pointed out to the Moxie Indicator™ members that we are likely to see price drift below the daily 50 SMA like it did last September and March. The screenshot below shows those two occurrences (circled in red) and the one we are at currently (outlined by the red arrow).
While this has been very heavy and bearish, I caution about trying to step in on the short side with the indexes. This is because the market is still generally in an uptrend and this could just be a pause and flag on the higher time frames. I often try to steer traders away from shorting what essentially are just pullbacks in uptrends since they are short-lived and going against the prevailing movement. For now, the SPY could just chop around and so I am not sure about how much meat might be on that short side bone.
Below is a screenshot of price getting rejected by the hourly 50 SMA which is what helped to push price below the daily 50 SMA.
For now, I would stay cautious and keep your eye on the choppy market behavior.
Your Profit Pilot, TG