With such a strong rally on Thursday, I said on Thursday night that if the market could close at or above Thursday’s close on Friday, it would be very bullish and odds would favor higher prices this week. Well, that did not happen. Instead of closing the week firm, Friday saw a reversal. We closed well below Thursday’s close and quite near Thursday’s low. A very poor performance.
What’s Next?
So higher prices are unlikely in the next few days, and given the market’s structure, maybe longer.
With Friday’s poor price action on sustained volume (slightly higher volume) and last week’s volume increasing on a poor weekly close, lower prices are likely.
Key Levels
We can see on the accompanying charts where key levels are. First support comes in at 1352.50 in the futures market (ES). This was Tuesday’s low. Will the market simply test this low and then rally higher? Given Friday’s price and volume action, that seems less likely.
If the market pushes down below Tuesday’s low, the next level is the 1332.75 low painted March 6th in the futures (ES), or 1340.03 in the cash index. Should we get there towards the end of this week, we will be hitting an oversold level. It would be a logical level from which the market would bounce, as longer term, we remain in an uptrend – but that is getting ahead of ourselves. Let watch closely and see how the market handles the 1352.50 support. At the moment, I see lower odds of holding, but it all depends on how the market approaches and acts at that level.
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