Looking at the ES/SPY going into the week of Jan 10-14. Last week the ES met resistance at the 1.13/1.27 fib extension zone. I watch this area closely because failed breakouts often happen in that zone. Above the 1.27 the odds of trend continuation increase. It is not uncommon for price to come back an retest a breakout zone, but in this case price fell back into the range closing right at the 55 SMA.
Going into this week price needs to push back above the 55 SMA and reclaim the 236 Fib for the upward trend to continue. Many market watchers are already calling a market top citing Fed tightening and higher interest rates as cause for a sell off. At this point, however the ES remains in a strong up trend and can continue higher with sector rotation.
Right now upside resistance is the ATH high. To the downside look for support at the ascending trendline and then the top of the neutral. If the ES breaks below the top of the neutral the Dec 3rd low around 4500 will be in play and then the bottom of the neutral at 4461. Holding the neutral is key. Below 4460 level a deeper sell off is possible.
Weekly Events
Wednesday... US CPI and Crude inventories
Thursday... US initial Jobless claims
Friday... US Retail Sales, US industrial production, Un.Michican Sentiment
Bull notes...
ES sitting on the 55 SMA
10 year yield is at resistance and may pull back
Potential softening of tone from Fed to quell fears
Earnings on horizon may provide catalyst
Sector rotation supports indexes.
Bear notes...
10 year yields breakout above 1.75%
Talk of accelerated Fed tapering
Mega caps sell off
Covid new cycle worsens
Negative inflation data
Supply chain worsen with continued global shut downs and labor shortages
