Stocks Rally As Reversal Warnings Grow Bigger
Michael Kramer | Mar 25, 2022 02:50AM ET
The S&P 500 rose by around 1.4% yesterday, and what seems to have become churning at the top, and should lead to a reversal of a trend. The pattern to this point is looking a lot like that of the end of January. From the big rally off the lows to this churning pattern that is now taking place.
Again, to repeat the upside is very clear and easy to predict, because we all know the next level of resistance comes at 4,580. The problem is all of the patterns suggest that doesn’t happen.
What is sort of strange is that despite the S&P 500 closing slightly higher than it did on Tuesday, the RSI fell by just a touch to 59.28 versus 59.96 on Tuesday. Also, volume levels appear to have eroded as well, which is particularly important, especially in a thin market like this one.
There is also a clear downtrend in the RSI, as well as the 600-hour moving average is acting as resistance. As dumb as the 600-hour moving average with Bollinger bands may sound it has actually been pretty at good a defining trading range.
So if the patterns continue to hold, then they would suggest that a drop is coming. The index continues to also follow the typical options expiration pattern as I noted over the weekend, with the first two days of the week following through and then some consolidation. Additionally, the reserve balances on the Fed balance sheet fell sharply this week, as I expected it would. Reserve balances have acted as a pretty solid leading indicator to stock prices since QE started to get paired back. The balance sheet started to fall last week.
Get The News You Want
So did NVIDIA (NASDAQ:NVDA) find greener pastures, or is it merely in the process of being put out to pasture, that’s the question. The stock rallied on a very apparent gamma squeeze, which was noted by a lot of call activity expiring tomorrow at the $270 and $280 strike prices. It is very easy to see the big drop in the SKEW and the tremendous rise in the call volumes.
Besides, it looks like NVIDIA is merely playing a game of catch-up to its analog with Cisco (NASDAQ:CSCO) from the year 2000.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.