Stocks are in a downhill slide with everyone loaded on the bear bandwagon. China's failed zero-covid strategy increases their lockdown problems and trouble for the global economy. One Wall Street trader left his job and now walks the streets donning a sandwich board that reads 'the end is nigh'. Another trader could not take the pressure or handle the irate clients so he jumped out the window; fortunately he was on the ground floor.
The previous charts discussed the short-term top approaching with the SPX 2-hour and daily charts and here is an update. The SPX 2-hour displays a head and shoulders pattern with the neck at 4125-ish and head at 4320 a 195-point difference. The failure of the neckline occurs at 4130-ish so the 3935 neighborhood is the downside target to satisfy the H&S.
The current 3955 price is close, almost close enough for government work, but the SPX daily chart remains weak and bleak so more downside is needed so the 3935 will likely be touched. S&P futures are down -26 points as this is written so that would ring the H&S bell at 3935 at the opening bell about 2 hours away.
You can see by the possie d (green lines) that the 2-hour chart is ready to bounce. The money flow is a bit soggy over the last couple hours so stocks may begin weak, like the futures show, but will likely rally as the day proceeds. Stocks are usually higher the 2 days before a 3-day holiday weekend and the Labor Day holiday is on Monday with markets closed. It is time to par-tay in Party Town.
New money also floats into the stock market as the new months begin creating buoyancy in prices. The SPX violates the lower standard deviation band (pink) so a move back up to the middle band, at 4062 and dropping sharply, is on the table. The RSI and stochastics are also oversold agreeable to a bounce. The falling wedge patterns are also bullish for the 2-hour time frame. The 2-hour time frame is set to pop despite the negative futures. Now that the 2-hour chart is officially turned into a bowl of spaghetti, a look at the daily chart is in order.
On the daily chart, you can see the top-tick due to the neggie d (red lines). The top was choppy and sloppy due to the prior jobs report, inflation data, and the Jackson Hole circus.
Note to anyone visiting the great outdoors like the Wall Street bankers in Wyoming. At least stop at Walmart and buy yourselves a flannel shirt and a pair of jeans. The grasslands never saw so many Gucci loafers. When in Rome, do like the Romans. If in Manhattan, a $4K custom-tailored Armani suit is the order of the day but if in the wilds of nature, boots and rugged clothing will do you better.
The SPX daily also topped-out at the 200-day MA now at 4297 which acts as a resistance ceiling. Price violated the upper band so a move to the middle band occurs and also the lower band, which is now violated so a move back up to the middle band, which is also the 20-day MA at 4164, is on the table. The SPX lost support at the 50-day MA at 4014 which now becomes resistance and is an upside target when price begins rallying again.
The chart indicators on the daily are weak and bleak (red lines) except for the stochastics that are already in the cellar, oversold, and agreeable to a bounce in price. Thus, the stoch's on the daily basis will likely conspire with the positive divergence in play on the 2-hour time basis and create a rally likely starting today.
The other daily chart indicators are weak and bleak, however, so after a day or few of fun, stocks will drop again in the daily time frame. The timing is odd again because the Monthly Jobs Report is tomorrow morning and the Labor Day holiday is at hand with markets closed on Monday. The downside on the daily basis should resume after the 2-hour time frame has its fun to the upside (probably for a couple trading days or so). The daily chart is likely several days away from bottoming.
If you bring up the SPX weekly chart, it has turned ugly with 3 black crows for candlesticks but the week is not over and the weekly chart did not top out with complete neggie d. The SPX weekly chart was long and strong when the daily and 2-hour topped-out creating the ongoing selling pressure which hints that after the weakness finishes on the daily basis, say over the next week or two, stocks will rally on the weekly basis, but the charts can be assessed at that time.
What does it all mean? The US stock market, despite the -26 point loss in futures, will likely bottom today in the 2-hour time frame and rally probably into the weekend. The jobs report may be a nothing burger but it remains a wild card that can delay the game.
Stocks will rally starting today and move higher until the 2-hour tops out with negative divergence again in a day or few. So if you are a nimble day, scalp or swing trader, playing some longs on this morning's weakness is likely prudent but do not marry the long positions. Exit them when the 2-hour chart tops out with neggie d again because the downside will resume due to the ongoing weakness in the daily time frame. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 8:14 AM EST: S&P futures are down -15. VIX 26.53. Keybot the Quant algorithm remains short and is tracking VIX 25.98 as a key bull/bear line in the sand. Thus, stocks will jump strongly higher if VIX drops below 25.98. If stocks rally as the analysis above indicates, in the VST 2-hour time frame, but the VIX does not fall below 25.98, that tells you the rally in the 2-hour time frame does not have much juice and will likely peter-out faster than would be expected.
Note Added 8:46 AM EST: S&P futures are down -24. VIX 26.73. Futures dip after the Claims data. The sour market mood continues. She should pop at some point today.
Note Added Friday Morning, 9/2/22, at 4:07 AM EST: S&P 500 finishes yesterday up 12 points, +0.3%, to 3967. VIX drops to 25.56 (below the 25.98 bull/bear line in the sand) so stocks rally during the last 3 hours of trading. VIX is trading at 25.37 this morning even lower so the bulls have the upper hand pending the jobs data. Stocks were soggy all morning yesterday then the possie d on the 2-hour chart kicks in at 1:00 PM EST. The SPX rallies from 3906 to 3970, a big 64 points intraday, and closes at 3967. The LOD was 3903 that occurred early in the session. The 2-hour time frame wants more upside in stocks and this would be the path ahead if the Monthly Jobs Report was not in play. Jobs may be a nothing burger so the upside bias in the 2-hour time frame would continue boosted by the expected joy before the holiday weekend. Jobs data is out 8:30 AM EST and will set the tone for today. The above technical analysis is the same and if the jobs report disrupts the markets, the same set-up will likely reestablish itself once the charts price-in the jobs information. Stocks are set to rock and roll higher in the VST (very short term; minutes and hours; a day or few) time frame if the jobs report cooperates but remember, the weakness in the daily time frame will reestablish itself sometime next week (after the 2-hour chart rallies and then displays negative divergence).
Note Added Saturday Morning, 9/3/22: That was a bunch of craziness yesterday. The jobs report was in line with expectations and like a Rorschach test, everyone reads something different into the data. Stocks rally off the possie d on the 2-hour chart running higher to the 50-day MA at 4020, the HOD is 4018, and smack, price is spanked down from there in an ugly 112-point intraday reversal. Technically, there was no reason for price to come back down, it should have kept floating higher. It must be a news event. The bottom fell out exactly at 12 noon straight-up. High noon. Did everyone decide to sell and go to lunch? The US dollar jumped higher. Russia says it is not bringing one of the Nord Stream natural gas pipelines back on line which is more trouble for Europe. The euro plummets as recession fears escalate so the dollar jumps higher and US stocks retreat. The stock markets are also soggy all week long due to China's lingering and worsening COVID-19 problems. The major hubs of Shenzhen and Chengdu are in full or partial lockdowns which stalls the global economy. The SPX drops to a LOD at 3906 testing the prior low and the 2-hour chart indicators remain positively diverged so VST upside is still expected. Call the action jumpiness into the holiday weekend. If the weekend is calm, stocks will likely rally on Tuesday. VIX finishes at 25.47 under the 25.98 bull/bear line in the sand providing a wink to the bulls. The choppiness will likely continue. The analysis is the same. The SPX 2-hour wants to see an up move in stocks for a day or two but the weak daily chart will reexert itself after the VST pop. The SPX finishes the day down 43 points, -1.1%, to 3924. The SPX is down -3.3% on the week with the weekly chart printing 3 black crows. US stocks do not trade again until Tuesday. Happy Labor Day.
Note Added Monday Morning, 9/5/22: Happy Labor Day. It's funny. The business channels are all a flutter about the closing of the Nord Stream pipeline creating a spike in natty gas, drop in the euro and sell-off in stocks. Not one of them recognized it on Friday at noon time when it occurred after European markets closed but this morning it is the major talking point. US stocks were slapped on Friday and European stocks are smacked today down -1% to -3%.
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