Here is the weekend look at the ES/SPY going into Feb 28 - Mar 4th. Volatility continued last week with a wild 6.7% turn around on Thursday after a 5% drop to start the week. News broke of the Russian invasion of Ukraine on Wednesday night and the market opened deep in the red on Thursday morning. Traders flipped from short to long quickly leading to a massive one day bounce. The reversal came in just above the green zone I identified last week and well above the long term ascending trend line. Price followed through on Friday closing above the broken H&S neckline and above the 9ema.
Going into the is week things are setting up for other mind bending week. Many are saying they think the bottom is in. Although the rally last week was spectacular the ES still has a ton of overhead resistance to break through before I would change my bearish stance. Price still sits just barely over the 382 fib (bottom of neutral), below the 21ema and the 200 sma. The fact that price did not complete the full compound corrective move into the 1.618 fib inversion and the ascending trend line also has me suspicious. I feel that a re-test of the Thursday low at 4101 is possible. That said the market is still heavily short and any change in sentiment due to positive news could lead to an explosive upside move. If price holds the bottom of the Neutral box at 4359 a a move back up to the 200sma and then the top of the neutral at 4500 is possible.
Obviously the Russian/Ukraine war is top of mind, but next week the narrative may turn back to inflation with Powell's testimony on Wed & Thurs and a slew of inflation data. The much anticipated rate decision in March will also be top of mind. There is no way to predict the outcome of all these events so all we can do is watch key levels to see how the market reacts and trade the results.
Weekly Events...
Monday.. Earnings from ZM, LCID, HPQ, ACAD, DDD
Tuesday... ISM Manufacturing PMI... Earnings from BIDU, BNS, CRON, DPZ, SE, TGT, FSLR, GRWG, NIO, PLBY, PLUG, WISH, CRM
Wednesday... Powell Testifies & Crude Inventories... Earnings from DLTR, AEO, PLAN, CHPT, OKTA, SNOW, VEEV, PSTG
Thursday... Jobless Claims, Us Factory Orders, ISM Non-Manufacturing & Powell Testimony Earnings from BBY, BILI, BJ, CNQ, KR, TD, AVGO, COST, ESTC
Friday... Non Farm Payrolls, US Unemployment & Average Earnings
Bullish Notes...
H&S neckline held
Historically high short interest (possible short covering rally)
Potential Russia/Ukraine truce
Dovish comment from Fed Head & Powell
Buy the Dip momentum surge
Bearish Notes...
Potential re-test of recent lows
Russia/Ukraine war worsens
Hawkish comments for Fed Heads & Powell
Data shows increasing inflation
Overhead resistance remains strong
Headline risk is abnormally high
Comment:
Similar to the NAS. Heavy resistance above with the neutral box and 21ema forming a wall. Needs to get above the 21ema to have some upside momentum. Price may still need to re test the recent low. Could drop as low as the green box and longer term ascending trendline that has not been touched yet.
