The Bottom Line:
- SPY caught sellers off guard with a gap-up open, now buyers need to break above key resistance levels to continue the momentum.
- QQQ had its best day of 2024, but is still struggling to regain the daily no-change level, making the path to recovery challenging.
- Dow Jones set a new daily high, but a reasonable trade zone has emerged for a potential daily higher low.
- IWM popped above key resistance, but the failure to follow through increases the likelihood of a rotation back down to test the lows.
- The US Dollar is consolidating, with buyers needing to clear the daily no-change level to maintain the uptrend.
SPY Gaps Up, Buyers Aim to Conquer Key Resistance
SPY Buyers Aim to Conquer Key Resistance After Gap Up
The recent gap up in SPY caught many sellers off guard, as the previous five sessions had shown significant overlap in their value areas, indicating sideways trading. Despite the gap up, sellers failed to fill the gap entirely, missing it by just 24 cents. This notable failure suggests that buyers are gaining strength, but they still need to break above the key resistance level of $555 to regain control.
Buyers Need to Absorb Supply to Break New Highs
For buyers to push SPY to new highs, they must absorb the supply between $554.50 and $555.83. If they can clear the high-volume area and find more acceptance above $555.83, it would indicate that the excess supply is no longer functioning as resistance. Buyers need to absorb all the supply and then some to overcome this hurdle and break to new highs.
Defensive Levels and Potential Range-Bound Trading
Ideally, buyers should hold above $555.28, the high of the area now acting as demand. If they fail to do so, they can still maintain a defensive position by holding above the value area high at $547.29 and the point of control at $544.72. If SPY pops into the supply zone but fails to follow through, it may lead to a situation where the price balances between the supply and demand zones, resulting in more indecision and range-bound trading.
QQQ Stages Impressive 2024 Rally, Faces Hurdle at No-Change Level
QQQ Faces Hurdle at Daily No-Change Level Despite Impressive Rally
The QQQ experienced its best day of 2024, but the rally has not yet created meaningful change relative to the recent breakdown from the daily no-change level at $473.15. Although the rally is impressive, the QQQ remains under the supply zone and has not closed above the lows of the previous range. The primary objective for buyers is to get back above $488.91, the point of control of the supply area. If they can overcome this level, the odds of the supply zone flipping into demand would improve.
Potential Weekly Higher Low Formation in QQQ and SPY
Despite the recent challenges, both the QQQ and SPY charts appear to be forming potential weekly higher lows. The QQQ may be setting a higher low if the current low is not considered a minor weekly higher low. Similarly, the SPY is potentially forming a higher low as well. On a monthly timeframe, both indices have so far fended off retracements.
Reasonable Trade Zone in the Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA) has set another daily higher high but has not surpassed the previous high of $41,386. The space between the current price and $39,880 is considered a reasonable trade zone for a potential daily higher low. If the price were to drop sharply from the current level, it would likely become oversold on an hourly timeframe as it reaches the demand area. Traders should monitor this zone closely for potential long opportunities.
Dow Jones Hits New Daily High, Consolidation Zone Emerges
SPY Buyers Aim to Conquer Key Resistance After Gap Up
The recent gap up in SPY caught many sellers off guard, as the previous five sessions had shown significant overlap in their value areas, indicating sideways trading. Despite the gap up, sellers failed to fill the gap entirely, missing it by just 24 cents. This notable failure suggests that buyers are gaining strength, but they still need to break above the key resistance level of $555 to regain control.
Buyers Need to Absorb Supply to Break New Highs
For buyers to push SPY to new highs, they must absorb the supply between $554.50 and $555.83. If they can clear the high-volume area and find more acceptance above $555.83, it would indicate that the excess supply is no longer functioning as resistance. Buyers need to absorb all the supply and then some to overcome this hurdle and break to new highs.
Defensive Levels and Potential Range-Bound Trading
Ideally, buyers should hold above $555.28, the high of the area now acting as demand. If they fail to do so, they can still maintain a defensive position by holding above the value area high at $547.29 and the point of control at $544.72. If SPY pops into the supply zone but fails to follow through, it may lead to a situation where the price balances between the supply and demand zones, resulting in more indecision and range-bound trading.
IWM Breaks Above Resistance, Potential for Rotation Looms
IWM Breaks Above Supply Zone, but Fails to Follow Through
IWM recently broke above a key supply zone left behind from 2021, filling a gap that had been present for some time. However, after this initial push higher, the price fell back into the range, creating a “look above and fail” situation. This increases the potential for a rotation back down to test the lows of the range.
Potential Rotation to Range Lows and Key Demand Zone
If IWM fails to hold the lows of the current range, traders will be closely watching the key demand zone that has been reactive throughout 2021 and 2022. This area has been the basis for several successful trades in the past, as it represents a balanced play when price is expected to oscillate between two key reference points.
Dollar Faces Rejection at Daily No-Change Level
The U.S. Dollar Index (DXY) recently formed a daily higher low and higher high but failed to follow through, facing a perfect rejection at the daily no-change level of 104.47. As long as buyers cannot find acceptance above this level, sellers are expected to target the previous supply zone, which now acts as demand. This zone has been responsible for several major lows throughout 2023.
US Dollar Consolidates, Buyers Seek to Maintain Uptrend
Dollar Consolidates as Buyers Attempt to Maintain Uptrend
The U.S. Dollar Index (DXY) has been consolidating recently, with buyers attempting to maintain the overall uptrend. The index faced a perfect rejection at the daily no-change level of 104.47, indicating that this level is a significant resistance for buyers to overcome. As long as the DXY remains below this level, sellers are likely to target the previous supply zone, which has now transformed into a demand area.
Key Demand Zone Supports Dollar’s Uptrend
The demand zone that the sellers are targeting has been a crucial support level for the U.S. Dollar Index throughout 2023. This zone has been responsible for several major lows in the index, demonstrating its importance in maintaining the overall uptrend. If the DXY manages to hold above this demand zone, it could provide a foundation for buyers to stage another attempt at breaking through the 104.47 resistance level.
Potential Scenarios for the U.S. Dollar Index
If the U.S. Dollar Index breaks below the current demand zone, sellers may gain control, potentially leading to a deeper correction in the uptrend. However, if buyers manage to defend this zone and push the index back above the 104.47 level, it could signal a continuation of the uptrend. Traders should monitor the price action around these key levels to gauge the short-term direction of the U.S. Dollar Index.
